Weighted averages assign different levels of importance to components to arrive at a definitive answer. This is used in grading models and marketing campaigns, and can be adjusted as more facts emerge.
The use of weighted averages is common in many different applications, especially in the fields of accounting and various tasks involving mathematical analysis and evaluation. In essence, a weighted average involves assigning different levels of importance or weights to various components which are used to arrive at a definitive answer or solution to a question or problem. This is in contrast to the practice of assigning a common average value to each component relevant to the task at hand.
One of the easiest ways to understand the concept of weighted average is to look at a common grading model used in many colleges and universities. At the discretion of the teacher, a value will be assigned to the different types of work carried out by the student which will help determine the final grade achieved for the course. Successful completion of homework may account for a smaller percentage of the total grade, while one or two major tests may carry additional weight in the final grade earned. This concept of proportional relevance means that in the larger scheme of things, the tests have more importance in making a good grade for the course, even though successful completion of both components will ensure that you get the top grade.
The same principle of a weighted average can be applied in other forums as well. Marketing strategists can develop a campaign targeting both primary and secondary consumer markets. While the main thrust of the campaign is directly relevant to the primary market, the same techniques are expected to be less relevant to other markets. The result is a projection of revenue earned primarily by one sector of the consumer market, but still representing smaller percentages of revenue from one or more smaller sectors.
A weighted average is somewhat subjective in that the individual or entity that sets values for each component involved in the average usually does so with some preconceived idea about those values. However, it is possible to adjust the criteria used to calculate the weighted average as more facts emerge that could affect the relative value of each component.
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