Research Topics:

Data Analysis

Content Type:

Glossary

Expected Value Definition

The mean of a probability distribution. It is the value of the probability distribution we would expect in the long run.

Expected value is the mean, or average, of the sample set of a probability distribution, which is a mathematical function that describes the probability of possible values of a variable. In marketing research terms, the expected value is the anticipated value or outcome of a marketing decision or strategy. It quantifies potential gains or losses associated with a variety of choices and is calculated by considering all possible outcomes and their associated probabilities. It's a cornerstone of analytical decision-making in marketing research. Essentially, it assesses the average long-term outcome expected from marketing decisions. It ensures that decisions are not based solely on short-term gains, but also on the overall value they bring.

Who relies on expected value?

Marketing managers, analysts and decision makers calculate expected values to evaluate potential outcomes and their probabilities. With those calculations, marketing professionals compare options for strategies and select the one with the highest expected payoff.

Why should I care about expected value?

Calculating expected value provides a framework for decision making in marketing research. The insights help minimize risks and maximize potential rewards. Expected value accounts for uncertainty and guides marketing professionals towards choices that meet their objectives and risk tolerance.