Price sensitivity 

Weather sensitivity

Weather sensitivity analysis 

Weather and price sensitivity analysis

In causal analysis the aim is to analyse the effect of factors which are suspected of causing shifts in sales volume or market share. Such factors might include the weather, relative prices, sales force availability or economic indices. The method used to carry out the investigation is to analyse historical data using specialist software. After carrying out a weather sensitivity or price sensitivity analysis it will be possible to form a more intelligent interpretation of the past and therefore make a better informed forecast of the future. As pricing is a key factor to affect market share in retail markets a price sensitivity analysis can often be a useful adjunct to tactical and strategic review of price positioning.

Weather sensitivity analysis

Of course to reflect changes in the causal factors that are expected in the future it is necessary to make a good forecast of the causal factor before one can make a good forecast of ones own sales volume or market share.

In the case of weather data it is particularly difficult to make a satisfactory forecast of the causal factor, but the weather sensitivity analysis can still improve the forecast through a better interpretation of the past. For example if there has just been an extreme hot spell and we are in the business of selling ice cream, sales will undoubtedly have surged through the hot weather. If we understand the effect of that hot weather, we can avoid ramping up our future forecast erroneously.

Case study on weather sensitivity analysis

Need for expert help

Specialist software is invaluable in carrying out price sensitivity and other causal modelling, but great care is necessary to avoid confusion of the results with natural seasonality or inherent trends in market size or share. The matter cannot be left to an automatic process embedded in a piece of software.

Forecast Solutions will expertly carry out the work, including price sensitivity and weather sensitivity analysis and can help maximise the benefits in terms of an improved sales forecasting process.

• Sales forecasting process improvement
• Forecast accuracy measurement
• Sales forecasting training courses