Variance

Variance is a term in business intelligence and data analytics that tells you how much the numbers in a set differ from the average of that set. It’s like measuring the bumpiness of a road; the higher the variance, the bumpier the road. In business terms, if you’re looking at weekly sales numbers and they jump up and down a lot from week to week, you’d say your sales have high variance. It means your business could be unpredictable, with really good weeks and not-so-good ones.

This idea of variance is super important because it gives businesses a heads up about consistency or, on the flip side, uncertainty. If the variance in customer satisfaction scores is high, for example, it suggests that experiences are all over the place—some customers are super happy while others might be really disappointed. Companies aim for low variance in such cases to ensure that all customers consistently have good experiences.

Knowing the variance helps companies to make smarter decisions. If you know there’s a big variance in how much people spend in your store, you might want to understand why and even it out. Or, if you’re launching a new product, you’ll want to keep an eye on the variance in the early sales data to quickly adjust your strategies if needed. In short, getting a handle on variance can help a business control the “bumps” and plan for a smoother ride ahead.