Trend analysis – What it is, definition and concept

Trend analysis is a statistical technique that allows the study of one or more variables in a period of time, providing information for decision-making in the company.

It is highly demanded to observe the evolution of business variables such as sales or costs. Thus, companies need to know this information to survive in global markets. Ultimately, its objective is to help us know where we are going.

Considerations for doing a trend analysis

When carrying it out, a number of factors must be taken into account. But, above all, we must know the company and the market of interest well.

  1. First of all, if we are going to study the consumer, we must know as much as possible about him. We need to understand your preferences and your priorities. In this way, one way to get to this information is periodic surveys or panels and the internet can be of great help.
  2. On the other hand, we must know the market. Competitors, trends in prices or other factors that affect the product. Ultimately, it is relevant to know where we are moving. Once again, the internet is a great help to search for information and data.
  3. Perhaps one of the most important trend analyzes is cost. Therefore, we must be clear about how variable costs evolve and how they may affect our price. Of course, this information is less relevant if we choose a differentiation strategy.

Reasons for conducting a trend analysis

There are many reasons for wanting to know a trend. In fact, we can say that as much as consumer tastes. Let’s see some of them.

  • The market. Of course, although the center of a company is the customer, he moves and purchases in a market. Therefore, knowing it is essential.
  • Consumers and customers. We must not only obtain information from our own customers, but also from the consumer in general. This can be a potential customer and therefore one of our business goals.
  • The costs. As we mentioned above, this is a variable of interest and it makes the difference between surviving or, at a given moment, having to close.
  • The macroeconomic variables. Companies not only carry out internal analyzes, but also external ones. The reason is that they are immersed in global economies that end up affecting them. Therefore, macro-magnitude trends such as GDP or unemployment are important.
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Trend analysis example

To finish, we are going to see an example made in a spreadsheet. We have opted for Excel due to its functionalities and easy handling. Let’s imagine a company that analyzes the evolution of its monthly sales. Let’s look at the graph and discuss it.

Trend Analysis

The monthly sales curve has high peaks in August and December and somewhat lower sales in March and October. On the other hand, the trend analysis shows a growing line. Furthermore, the coefficient of determination (R squared) indicates that the prediction is quite reliable as it is close to one.

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