People often speak of the law of averages, but very few fully understand what it means. It’s often misunderstood as chance, or luck, which isn’t the same thing at all. Understanding the law of averages is essential if you’re going to flourish in many different businesses and in many different walks of life. Before we get to how the law of averages can help you succeed in business, let’s explain what it really means.

The law of averages means that if you perform a random action enough times, the results will even out.

Sounds pretty simple, doesn’t it? That simplicity can lead to trouble. It’s easy to misunderstand the concept of results evening out, and it can lead you to make rash decisions. Take this example:

Flip a coin one hundred times. The law of averages states that the coin will land on heads about fifty times, and on tails about fifty times.

That’s true as far as it goes, but where people get into trouble is expecting the coin to land on heads every other time. That’s very unlikely. Results even out over time if the sample size is large enough, but there can be streaks of outcomes that happen during long runs of the same activity. Businesses like casinos and insurance companies understand streaks, and calculate their profit margin on the sample size to guarantee that they make money.

Human Nature Sees Patterns Where They Don’t Exist

If you were to spin a roulette wheel, and you won on your first try, you’d be smart to leave the table. But human nature being what it is, you begin to convince yourself that small sample sizes are enough to determine outcomes. If you kept spinning the wheel, and kept losing, you might make the same mistake in the other direction, and assume that you’re “due” because you’ve lost so many times in a row. The law of averages doesn’t work that way. Your chances on the next spin are the same as on any random spin, and aren’t affected by what’s already happened. The casino has more money than you, so it can afford to wait for you to run out of money before your winning streak returns.

Use the Law of Averages To Stay on Track in Business

In business, if you know the ratio of success for an activity you’re familiar with, you can extrapolate using the law of averages to determine how much work you’ll have to do in the long run to make a quota, for instance. If one person in one hundred that receives a phone call pitch for a sale buys something, and you have to sell ten things, you should expect by the law of averages that you’d have to call a thousand people before you make your quota. If the first three people buy something, that doesn’t mean everyone will.

By using the law of averages, you can keep yourself from getting too depressed when a streak of bad luck comes along, or from getting giddy when you’re on a hot streak. In the long run, you’ll always prevail if you stick to your plan, and the plan was based on sound statistical analysis.

sharing is caring!

Do you remember a time before the Internet? Probably not. The Internet has become a fact of life for everyone worldwide, and it’s a rare business indeed that doesn’t have at least a small web presence.

Businesses did exist before the Internet, and some of them flourished, too. If you’ve got a very limited marketing budget, and don’t have time for labour-intensive SEO strategies to bear fruit, or just like thinking outside the box for your marketing ideas, then you should think about using approaches that worked before there was an Internet at all. While we can’t recommend ignoring the Internet in today’s day and age, it’s possible to make a lot of money outside the Web, and it’s also smart to drive traffic to your web business from outside the web as well. Here are some approaches that worked in the era before the web was born:

Telephone Calls – Depending upon what you’re selling and who you’re calling, phone calls can have a much larger return on effort than almost any other form of customer interaction. If you’re familiar with Internet marketing statistics, conversions of web traffic into paying customers can be a fraction of one per cent and still be profitable. Phone calls to interested parties can convert at many times that rate, because you can persuade people that are talking to you in a way that a website can’t. Smart companies often have limited information on their website, and urge potential customers to call if they want more. It’s a great way to per-qualify customers.

Snail Mail – All mail is junk mail now. With so much being delivered digitally now, people’s mailboxes are almost empty. A mailer with interesting information is more likely to get some attention than just a few years ago when everyone’s mailbox was full every day. Try using regular mail that’s targeted to neighbourhoods that have the right demographic for your business

Newspapers and Flyers – Like mailboxes, print newspapers are getting to be lonely places. Many people read newspapers solely for the advertising. Offbeat print publications are especially good for getting people to read the advertisements.

Point of Sale – Racks of brochures were once stationed next to every checkout counter in the world. Internet marketers use online shopping carts for upsells now, but there’s no reason you can do it the old-fashioned way. If you sell retail, have printed goods for customers to grab on the way out the door, whether they’ve made a purchase or not. If you’re on a tiny shoestring, make a deal with a friendly shopkeeper to display your POS material at their checkouts.

sharing is caring!