**Simple Averag**eA simple mean is the sum of all the values in the population or sample being measured and is sensitive to extreme values, e.g. I have 100 people in a group:10 have $10,00025 have $1,00015 have $10040 have $1010 have $1The total amount of money they have together is $126,910 and the simple average per person is $1,269.10

**Trimmed Average**A trimmed mean is calculated by excluding extreme values from the average. The drawback here is that the decision on what should be included or excluded is necessarily arbitrary and may create a misleading impression. If we exclude the top 10 values of $10,000 each and bottom values of $1 each:The total amount of money the remaining 80 people have is $26,900 and the trimmed average is $336.25

**Weighted Average**A weighted mean is computed by attributing a weight to each value. If the example above were weighted according to the proportion of people at each value (i.e. 10% have $10,000; 25% have $1,000; 10% have $100; 40% have $10, and 10% have $1):The weighted sum is $16,636, the weighted number is 26.5 and the weighted average is $627.77

**Median**The median value is the middle value in a population or sample. If the population or sample contains an even number of items, the median is the simple average of the two middle values. In the example give above the median is the simple average of the 50th value which is $100 and the 51st value which is $10 = $100 + $10 = $110 / 2 = $55.

**Mode**The mode is the value that occurs with the greatest frequency – in the example given, the mode is $10 because there are 40 people with $10.So now we have five distinct values for the average, depending on how we choose to calculate it:Simple average (mean) $1,269.10Trimmed average (mean) $ 336.25Weighted average (mean) $ 627.77Median $ 55.00Mode $ 10.00If you intend to use and/or rely on averages in planning your business, it is important to know what those averages actually mean. If I create my marketing plan assuming that the average person has $1,269.10 and am not aware that 50% of this group have $10 or less I am inviting disaster.

**Key questions to consider when looking at averages are:**

*1. What kind of average is this?*

*2. Is it based on a population or on a sample?*

*3. How is the population or sample defined?*

*4. How reliable is the data?*I will talk about populations and samples in a later post, highlighting some of the main aspects of each as well as the relative advantages and disadvantages.