Brexit shows the danger of trusting averages

How did we (including politicians, pollsters, betting markets and pundits) misread the mood of the nation so spectacularly when it came to Brexit? Whether you’re in the half of the population suffering from post-traumatic ballot disorder, or the other half celebrating in scarcely-concealed wonderment, we all have to confront the question of “how did so many call it so wrong?”

Simplistic analysis since of “why we voted for Brexit” or a “divided nation” gets no nearer to the truth. Old segmentations of right/left or rich/poor have not just been replaced with a new split of leave/remain.  Britain is fast becoming a much more complex, fragmented and diverse place.  Not just those leading a political campaign, but anyone running a national brand or proposition must apply greater scepticism towards aggregated data and demand more precision from their customer insight.

I’ll give just a few examples of the way in which fragmentation and polarisation are occurring, making averages obsolete. First, regional distribution.  Overall, GDP per head is now above its 2007 levels.  However this holds in only two regions – London and the Southeast.  In all other regions, GDP per head still lies below its pre-crisis peak: in Northern Ireland 11% below and in Yorkshire and Humberside, 6% below.

Second, age. Aggregate household wealth has grown by £3 trillion since 2007, but 100% of these gains have been enjoyed by those over the age of 45, and two-thirds by those over the age of 65.  By contrast, those aged 16-34 have seen their wealth decline by 10%.  Inevitably perceptions of satisfaction and confidence differ radically according to age.

Third, housing tenure. Since 2007, home owners have seen their median net income grow three times faster than that of renters.  Almost a quarter of 21-34 year olds now live with their parents, up from 20% in 2007.

Similar fragmentation is evident in other dimensions, including educational attainment and ethnicity.

For those looking at national averages and drawing conclusions about propensity and ability of households to spend, the data can be wholly misleading. In aggregate, a recovery has occurred.  At the micro-level, a sizeable fraction of households have seen no increase in income or wealth.

Media fragmentation isolates us further from reality. For those in London, everybody in your social circle, your news, your Twitter followers, seemed to confirm that “remain” would win comfortably. There’s a danger in only hearing the media which talk to you.

How should you make sure to understand the real picture? Reject any analysis made on “nationally representative samples”, and drill down to the micro segments, regions and demographic cohorts relevant to your business.  Make an effort to widen your media sources and network, including dissonant voices.  Get out more to talk to your communities and ensure that the macro data can be reconciled with personal stories.

And use the reach of your colleagues across the country to feed in different perspectives from the sharp end. He who knows only the armchair statistics knows little of the diversity of the real UK.

This article appeared in Retail Week 29th July 2016

This entry was posted in Economy, Retail, Strategy and tagged , , . Bookmark the permalink.

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