Trend Analysis

Document Sample

```					                   Marketing Trend Analysis Checklist

Summary
Trend analysis means to look at how a potential driver of change has developed over time, and
how it is likely to develop in the future. Some of today’s trend analyses include studying changes
in social patterns, in fashion, in technology and in the behaviors of consumers.

Trend analyses calculate the percentage of change for a particular account over a period of time
of two years or more. Rational analysis of development patterns provides a far more reliable
basis for speculation and prediction than reliance on mere intuition.

Several trends can be combined to picture a possible future for the sector of interest, like certain
kinds of apparel, combined with jewelry, cosmetics, etc. Trend analysis does not predict what the
future will look like; it is a powerful tool designed for strategic planning by creating plausible,
detailed pictures of what the future might look like.
The key factors that are used in developing these scenarios includes the large range of trend
analysis possibilities, which makes them major components for developing robust scenarios, all
of which should respond to the following essential criteria:

   Is it challenging?
How does the analysis respond to questioning about fundamental beliefs and
assumptions?
   Is it significant?
Does the analysis highlight the key challenges and the dynamics of the future?

   What is the plausibility?
Are the trends that are being developed logical, consistent and believable?

How do they differ from each other in significant ways that are strategic?

Per c enta ge C ha n ge
To calculate the percentage change between two periods:

1) Calculate the amount of the increase or decrease for the period.
a) Subtract the earlier year from the later year.
b) If the difference is negative, the change is a decrease. If the difference is positive, the
change is an increase.

2)       Divide the change by the earlier year's balance. The result equals the change percentage.

Marketing Trend Analysis Checklist

Calculation of Percentage Change
2009                2008         Increase/(Decrease)       % Change

Cash                     \$8,950              \$8,330                \$620                 7.4%

A/R (net)               \$20,567             \$21,330                (763)               (3.6%)

Sales                   \$139,000           \$103,000              \$36,000                35%

Rent Expense            \$15,000                 0                \$15,000                N/M

Net income (loss)        \$9,140             (\$1,200)             \$10,340                N/M

Calculation notes:
1. 2008 is the earlier year so the amount in the 2009 column is subtracted from the amount
in the 2008 column.

2. The percent change is the increase or decrease divided by the earlier amount (2008 in this
example) times 100. Written as a formula, the percent change is:
2009 amount – 2008 amount
%=               2008 amount
X 100

3. If the earliest year is zero or negative, the percent calculated is not meaningful. N/M is
used in the above table for not meaningful.
4. Most percentages are rounded to one decimal place unless more are meaningful.

5. An absolute dollar item can have a large percentage change; it will be considered

T r end Per c en ta g es
To calculate the change over longer periods of time and to develop a sales trend, follow these
steps below:

2. For each line item, divide the amount in each non base year by the amount in the base
year and multiply by 100.

3. In the following example, 2012 is the base year, so its percentages (see bottom half of the
following table) are all 100.0. The percentages in the other years were calculated by
dividing each amount in a particular year by the corresponding amount in the base year
and multiply by 100.

Marketing Trend Analysis Checklist

Calculation of Trend Percentages
2007                 2008        2009         2010         2012
Historical Data
Cost of goods sold               70,950       59,740      48,100       47,200       45,500
Current liabilities              27,945       30,347      27,670       28,259       26,737
Inventory                       \$ 12,309     \$12,202      \$12,102     \$11,973       \$11,743
Property & equipment             74,422       78,938      64,203       65,239       68,450
Sales                            129,000      97,000      95,000       87,000       81,000
Operating expenses               42,600       38,055      32,990       29,690       27,050
Net income (loss)                 8,130       (1,400)      7,869       5,093         3,812
Trend Percentages
Cost of goods sold                155.9       131.3        105.7       103.7         100.0
Current liabilities               104.5       113.5        103.5       105.7         100.0
Inventory                         104.8       103.9        103.1       102.0         100.0
Property & equipment              108.7       115.3        93.8         95.3         100.0
Sales                             159.3       119.8        117.3       107.4         100.0
Operating expenses                157.5       140.7        122.0       109.8         100.0
Net income (loss)                 213.3       (36.7)       206.4       133.6         100.0

Calculation notes:
1. The base year trend percentage is always 100.0%. A trend percentage of less than 100.0%
means the balance has decreased below the base year level in that particular year. A trend
percentage greater than 100.0% means the balance in that year has increased over the
base year. A negative trend percentage represents a negative number.

2. If the base year is zero or negative, the trend percentage calculated will not be
meaningful.

In this example, the sales have increased 59.3% over the five-year period while the cost
of goods sold has increased only 55.9% and the operating expenses have increased only
57.5%. The trends look different if evaluated after four years. At the end of 2008, the
sales had increased almost 20%, but the cost of goods sold had increased 31%, and the
operating expenses had increased almost 41%. These 2008 trend percentages reflect an
unfavorable impact on net income because costs increased at a faster rate than sales. The
trend percentages for net income appear to be higher because the base year amount is
much smaller than the other balances.