How do you calculate the probability of getting 1 new customer out of X using Excel?

Question

How do you calculate the probability of getting 1 new customer out of X. I am expecting to come up with 2,3,4...10. I have tried using the probability function, but it doesn't seem to like what I am using for parameters.

=BINOM.DIST(1,500,1/500,TRUE)

Answer 1

The correct syntax is:

BINOM.DIST(number_s,trials,probability_s,cumulative)

• Number_s The number of successes in trials.
• Trials The number of independent trials.
• Probability_s The probability of success on each trial.
• Cumulative A logical value that determines the form of the function. If cumulative is TRUE, then BINOM.DIST returns the cumulative distribution function, which is the probability that there are at most number_s successes; if FALSE, it returns the probability mass function, which is the probability that there are number_s successes.

http://office.microsoft.com/en-us/excel-help/binom-dist-function-HP010335671.aspx

It returns a probability (0< X<1), so a value between 0 and 1. Note that "Probability of success in each trial" is asking what the chances are of getting a new customer EACH time you call (one trial). By entering 1/500, it appears you are assuming a probability of 0.002 for each trial. The resulting answer of 0.736 indicates you have a 73.6% chance of getting 1 new client for each 500 calls, or "trials".

Do you have a number you can enter based on your past experience calling leads?

Answer 2

I don't know in what sense this "doesn't work". Excel is returning exactly what you asked for: the cumulative probability of 1 success out of 500 trials where the probability of success is 1/500 in each independent trial.

Instead of looking at the cumulative distribution, though, consider each possible number of successes separately:

If the probability of getting a customer is 1/500, then if you ask 500 people, there is a 36.8% chance that you will get zero customers. There is also a 36.8% chance that you'll get one new customer, for a cumulative probability of 73.6%. There is a 99.6% chance that you will get 4 or fewer new customers from 500 tries.

To be clear, the formula for the "Prob" column is

=BINOM.DIST(cell_with_success_number,500,1/500,0)