Why is Trend Analysis Important, and How can it be Done?

Trend Analysis is a business technique that is prominently used to predict future events with the help of data analysis. It compares the collected data for a specific amount of time to identify a pattern emerging in the market, known as a trend. This analysis can accurately forecast the performance of a business most of the time. It makes predictions about what may happen, based upon what has already happened. 


It can improve almost every department of a business venture including sales, marketing, R&D, and cost management. The principle is similar to any prediction: you only get out what you put in. It can pinpoint the strengths and weaknesses of any business, so that you can put a strategy in place for a long, long time. 

Why is it important?

There are many benefits and logical reasons to employ trend analysis in any business. Here are some of the best:

Using KPIs: You can use better KPIs or Key Performance Indicators to track your progress against your own set of milestones. Trend Analysis keeps you ahead of the curve, and you can put a target in place even before it starts affecting the market.

Comparison: You can compare your business with your competition, or the industry average. It helps in identifying the areas which need attention, so that you can make changes before your competition does. Website screenshot service is a great tool to have around in this regard, as you can get all the information instantly.

Management of crisis: Trend Analysis can create a flexible and efficient crisis management system. Constant monitoring of the world around us will give you alerts if something is coming up. Even in this pandemic, when many brands were shutting shop, the ones that analyzed trends got the hint, and adapted earlier and survived it better. 

Loyalty: Businesses can only prosper if they’re well received by the customers. When they don’t get what they want, they’ll readily choose another brand. Today, brand loyalty is not easily achieved. And in this regard, trend analysis can let companies be culturally relevant, socially sensitive, and always constructive. 

Profitability and liquidity: Trend analysis can measure ratios of various financial trends to plan the solvency position for any business over a long period of time, and the ideal liquidity position in the short term. Businesses can get indications about the profitability after a set period of time, and can plan ahead with that knowledge. Trend analysis can look into net profit ratio, gross profit ratio and operating ratio to make the ideal plan.

How to do it?

Trend analysis monitors the performance of a business for a long period of time, and then links their progress to useful market trends which can help them do better in future. 

They provide data to implement effective business strategies in three stages: 

  • Preparation- Choosing the set of data and results that would be under examination and compared between. 
  • Threshold- Defining the level at which a trend should be considered. Businesses need honest assessments and targets to ensure a practical threshold.
  • Cause analysis- Analyzing reasons behind sudden variations which will be incorporated for building a future-proof strategy.

Trend analysis also participates in benchmarking. It’s a way of measuring a business by comparing it to similarly sized businesses in that particular sector. Benchmarking every aspect of the business lets a company know where exactly they need improvement. 

Trend Analysis can only be as good as the data that’s been provided. That’s why, for an impactful analysis, a business needs to keep their records precise and essentially informative. To achieve this efficiency, businesses need proper protocols that put the management and the employees on the same page. 

Here are some of the best ways that can provide effective data to Trend Analysis system:

  • Accuracy– Companies need to keep their business records accurate which includes complete financial information, hours clocked by their employees, condition of their stock, and all the marketing campaigns they’ve done.
  • Decision points– Businesses need to analyze the trends in the market on every crucial decision point like staffing criteria, peak sales time, cash flow, and successful marketing tactics.
  • Regularity– Businesses need to gather up information from time to time regularly, where the frequency varies for different sorts of data.
  • Integrity– Companies need to keep the integrity of the data intact by providing clarity on the inclusions and exclusions and their logic for doing so.
  • Formats– All the data should be stored in relevant and usable formats like spreadsheets for accounting purposes.
  • Participation– Every company should encourage employees working as a team so that this recordkeeping becomes a habit and they do it willfully.  


Trend Analysis prepares a business to embrace the future and plan their moves beforehand. They become consistent, much more adaptable, and better responsive to the trends.

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