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Aligning Scores

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Past few days, IITs have been in news again. HRD minister Kapil Sibal wants to give weightage to class twelfth performance also for selection.  He wants minimum marks to be eighty percent to qualify for the test.  While this proposal has been topic of hot discussion, I kept thinking about the execution of this proposal from statistical perspective.

The burning question, we all will agree, is that not two board examination is similar in terms of  strictness in awarding marks. While, it’s easier, I mean relatively easier, to get 90% in CBSE and ICSE , it’s next to impossible to get similar marks in a few state boards, like Bihar Intermediate examination.

Now, if we want the screening rule to be unbiased, we need to account for the reality that 80% in one board examination is not 80% in another board examination. This can be done by creating a unbiased methodology to  project all the scores on same axis – that is by aligning the scores of different board examination.

Before getting into the details of approaches to accommodate the bias, let us list down few business scenarios where we might have to do similar task.

Competitor Analysis:

a) An auto finance company gets number of request for refinance of auto loans. In this situation, the company would have data of interest rate charged by previous financier. It would have complete application data and bureau data for the customer. Interest rate charged is function of application data and internally developed risk score based on bureau data.  Now if an auto finance company is able to align its internal risk score with competitors risk score, it certainly has an edge over competitor. The detail will be clear from the paper linked below.

b) A similar problem for insurance company:  Please have a look at this patented method for aligning two scores. It can potentially help company to align the premium it will charge with competitor’s premium. Unfortunately, like all the patent filing document, it’s not very easy to get hold of methodology at one reading. Allow me to digress for a while; but it would be really helpful if law enforces patentee to file an easy- to- understand document along with the usual patent filing. It’s understandable why patentees constructs the claim the way they do, it’s necessary to prove infringement.

There are various examples in competitor analysis domain where we would have to perform similar task. Other scenario could be,  lets say risk team has developed a risk scorecard that is one of the input for pricing. Earlier risk team used traditional FICO score, but in newer model they have used Nextgen score for internal risk scorecard. Pricing team applies rule on FICO score and Internal risk score. With new risk score, pricing team has to apply rule on Nextgen score and internal score, but they don’t have access to Nextgen score of previous customers to reprice them.

Having explained few examples where aligning score is of paramount importance, we have to solve the problem of aligning marks. The details would be there in next post.


Written by SK

October 20, 2009 at 7:05 pm

When to buy flight ticket

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Sometime or other, we all , as customers, have been irritated to know that our friend/neighbour has shelled out less monies than us for same product bought through same channel.

We, as customers, felt cheated. In fact, when dynamic pricing was first introduced, consumers considered it a rogue method of doing business. Consequently, businesses lost business ( Though at that time also airlines were doing dynamic pricing. This could be explained as  a) Double standard of business morality set by consumers. or b) morality based on product (dynamic morality).

Currently, dynamic pricing is prevalent in number of industries. Airlines, hotels, e-business, Insurance, banking all rely on this model. There are different models to calculate the price; most basic of those is inventory based approach. For airlines, at broad level it would be function of seats available and number of days left in journey.

Anyway, the purpose of this entry is to introduce a start-up that came forward to help customer to decide when to buy airline ticket. Though the company is not very new, I came across it recently. A great idea that solves a real life problem and makes profit. The company is Live search farecast/ They have patented their model to predict price. Last year, microsoft acquired farecast, and now it’s Bing Travel.

Written by SK

September 15, 2009 at 6:50 am

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