← Every exhibit

Table Table 1 Growth that compounds

Why do historically predicted customer tiers fail to match future profitability cohorts?

ObjectQuestionMistake if it is collapsed
Predicted groupWho does the model select at the decision date?A forecast is treated as an observed outcome.
Future groupWho belongs to the value group after the stated horizon?The result is read without its time boundary.
False exclusionWho later belongs in the target group but was not selected?Missed opportunity is hidden.
False inclusionWho is selected but later belongs outside the target group?Treatment cost is hidden.
Profitability objectWhat value, cost, price, and margin inputs are being aggregated?Revenue or activity is treated as profit.

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Reference & Evidence

Source: Table from this essay. Sources and interpretation are given in the article.