Sales trend analysis

Timely identification of newly emerging trends is very important to businesses. Sales patterns of customer segments indicate market trends. Upward and downward trends in sales signify new market trends. Time-series predictive modeling can be used to identify market trends embedded in changes of sales revenues. Understanding of sales trends is important for marketing as well as for customer retention. Typical sales trend analysis includes;

  • Which customer segments are having highest growth in dollar terms?
  • which customer segments are having highest revenue decline in dollar terms?
  • Which customer segments are having highest growth rates in percentage terms?
  • Which customer segments are having highest revenue decline rates in percentage terms?
  • How solid the growth (or decline) trend is?
  • Which customer segments are showing exponential growth (or decline)?
  • and so on.

Segmentation for trend analysis

Market segmentation is a process that divides a market into smaller sub-markets called segments. Normally, market is segmented in such as way that customers of a segment have the same attributes. Commonly used attributes in segmentation include the followings;

  • Products.
  • Product and service types (or product categories).
  • Geographical regions: regions, countries, states, zip-codes, counties, etc.
  • Sales channels, branches, and departments.
  • Sales representatives.
  • and so on.

Why customer segmentation? People with similar attributes tend to exhibit similar purchasing patterns. This fact is particularly important in customer relationship management, marketing, and risk management. For example, people with certain life-styles tend to buy certain-types of products. Promoting products particularly targeted towards the demographic group can lead to successful marketing. Customers are segmented along the following demographic and psychographic attributes and time-series trend analysis is performed;

  • Demographics: gender, age, income, education, etc.
  • Psychographics: life style classification.
  • and so on.
PSM: Profile -> Segment -> Monitor Trends

PSM is a simple method to manage your most valuable business resources: customers and markets. Profile your customers and markets as suggested in Customer Profiling. Based on profiling, develop customer and market segments. Finally, monitor the following trends;

  • Sales revenues and volumes
  • Profits and losses
  • Customers: new customers, churns
  • Debts, defaults and delinquencies
  • And so on

Sales forecasting and Regression

Regression is an analytic technique used in developing predictive models for numerical data. It automatically derives mathematical functions that summarize trends embedded in past historical data, in such a way that minimizes the errors between actual input data and predicted values by the models. Regression can be applied to time-series data. A time-series consists of a set of observations which are measured at specific time intervals, say, monthly, quarterly, yearly, etc. Observations we are interested are sales revenues.

Customer (or market) segments have different sales trends. Some segments may be growing, while others are declining. Segment-by-segment sales forecasting can produce very useful information. Forecasting can be short term, mid term and long term. Long term forecasting may not produce accurate predictions. However it is very useful in understanding market trends.

Trend Analysis and Forecasting - The Excel Addin Tool

Rosella Groupby Excel Addin provides powerful simple-to-use tools for trend analysis. It combines groupby aggregation with time-series predictive modeling. It employs powerful non-linear regression. Currently it supports 16 different functions using advanced function fitting algorithm. The following figure shows an example of Rosella Groupby reports with time-series analysis;

Excel Addin - Groupby and Trend Analysis and Forecast Tool.

Columns "MTH1" to "MTH7" indicate recent actual trend values. Columns "Next 1" to "Next 3" show projections for the coming months. The "Chart" column displays them in charts. Notice that charts show that projections are not necessarily linear! The Addin automatically detects a most suitable function for you. Actual function description can be viewed from the notes. Prognostics columns provide information showing fitness and trends. The "Signal" column indicates which row items to pay attentions in three colors: green (for good), red (for bad), and yellow (for warning).

The following figure shows highlighted cells. It is based on column-wise high- and low-values. Red indicates high-values and blue shows low-value cells. Color intensity is based on relative cell-values.

Excel Addin - Groupby and Trend Analysis and Forecast - Highlighted.

For one year free license copy of this Excel Addin, click Download Rosella Groupby Excel Addin. This features groupby aggregation, time-series regression, smoothing, seasonal adjustment, etc.