Business Analytics Blog

Business Analytics Blog

Opinions expressed on this blog reflect the writer’s views and not the position of the Capgemini Group

It could be Advent

Category : Entertainment

It’s Friday again which means yet another national lottery draw on Saturday. We all know the odds of winning are pretty much next to nothing yet we continue to pay £1 a week (or £2 for the hard core hopefuls) for that chance of becoming a millionaire. This week’s Figure It Out compares the value of that lottery ticket against the value of Capgemini’s very own lottery…..Ad:Vent. In order to do this, we are going to compare the Expected Monetary Value (EMV) of each option. EMV is a decision making tool, used to weigh up different scenarios. This takes into consideration the likelihood of each scenario and the potential gain should the scenario occur. The calculation is as follows: EMV = Probability of scenario occurring x monetary gain from scenario occurring Using this method, you can not only compare the EMV between the different scenarios but also look at how the EMV compares against the initially cost of investment. So this takes us onto the analysis: The Million Maker’s Ad:Vent Calendar is a draw that takes place every day in December until Christmas Day. For £5 you have one entry in the draw for 24 days and £10 gets you three entries for 24 days. At the moment, 1025 tickets have been purchased and the average value of the prizes is £150. Unlike a standard raffle, you can win more than once with the same ticket; so you odds of winning remain the same every day. Table1.jpg If we make the simplification of looking at just the jackpot, there is a 1 in 14,000,000 chance of winning the lottery. Assuming the jackpot is £5,000,000, this gives one ticket the value of just 36p. It doesn’t seem an attractive prospect when you pay £1 for the ticket. With Ad:Vent, you can see that the expected return exceed that of the lottery and, in fact, with 3 tickets your expected return in greater than the cost of entering. However, this only works if you had bought your ticket before the 1st December. So how does this change if you buy the calendar in December? Firstly, with additional tickets in the draw the chance of winning is reduced. This will have an effect of the EMV. One extra ticket in the draw will result in a reduction in the ticket value by £0.00014. More importantly, the later you sign up, the few days there are in order to win a prize. The table below indicates the change in the value of 1 ticket, for each day. Table2.jpg So your expected value if you invest in Ad:Vent is greater than if you invest in the lottery, and will be until 12 December. After that your £5 will be better spent on 5 lottery tickets ... or a present for a loved one! Here ends the probably too blatant plug for Ad:Vent. Have a happy, and lucky, advent! www.onlineadvent.co.uk

About the author

Jonathan Chadwick
Jonathan Chadwick
Jon has worked for 18 years as an analytical consultant in the UK, USA and Europe for a diverse range of sectors, most recently Financial, Oil & Gas and Government. Jon has extensive experience in benefits realisation, modelling, business analytics, portfolio management and change management. Jon devised and created Figure It Out.

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