What is trend analysis?
Trend analysis is the process of comparing business data over a period of time to identify the occurrence of any consistent results or trends. Business strategies can then be developed to respond to these trends in such a manner that they are in line with the company’s business goals. One of the key trend analysis objectives is to look at how a potential driver of change has developed over time and how it will likely develop in the future. Here, due to the creation of a plausible and detailed picture of the future, trend analysis proves to be a powerful tool for strategic planning. Historical data from the company’s database and that of the competitors can be used not only to track the current market trends but also effectively predict future trends.
In business, trend analysis is typically used in two ways:
Revenue and cost analysis
A company’s income statement can be used to extract revenue and cost information. This data can then be arranged in a trend line for multiple reporting periods which helps examine trends and inconsistencies. Trend analysis methods are highly useful for examining preliminary financial statements for inaccuracies and identify if adjustments should be made before the statements are released for general use.
An investor can create a trend line of historical share prices and leverage this data to predict future changes in the price of a stock. The trend line can also be associated with other information for which a cause-and-effect relationship may exist. This determines if a causal relationship between variables can be used as a predictor of future stock prices. Trend analysis can also be used for the entire stock market, to detect signs of an impending change from a bull to a bear market, or vice-versa.
Trend analysis importance
Trend analysis plays a vital role in improving business by:
- Identifying areas where the business’s performance exceeds expectations so that success can be duplicated.
- Identify and analyze areas where the business is underperforming so that necessary and timely action can be undertaken to bring the performance on track.
- Acting as evidence for informed decision making.
Can trend analysis improve customer satisfaction?
Apart from revealing the market trends affecting the business, experts at Infiniti research conduct trend analysis to determine the spike or decline in the satisfaction levels of customers and sub-groups with the company’s customer base. Furthermore, strategic research methods and focus groups or representative samples are examined to analyze and understand the potential increase/decrease in customer satisfaction levels that would result from specific actions including upgrading the customer service or changing distribution methods.