What Is Trend Analysis in Business?

Key takeaways

Trend analysis is a method companies use to track how their industry is performing and to forecast future performance.

• Trends can be upward, downward, and horizontal, and analysts typically follow each to determine whether the market is moving up, down, or remaining steady.

• To identify trends in your industry, utilize methods such as surveys and focus groups, trend-tracking tools, and consumer opinions on social media. 

• You can learn to identify trends and begin a career in this field by networking at conferences and events, staying up to date with your industry, and listening to your clients. 

Discover more about trend analysis, including the industries that use it, its benefits, how to identify trends, and more. If you’re ready to enhance your marketing analytics skill set, enroll in the Meta Marketing Analytics Professional Certificate. In as little as seven months, you can learn about business metrics, data analysis, data visualization software, marketing strategies, and more. 

What is trend analysis in business?

Trend analysis is a method companies use to keep track of how their industry is performing and their future outlook. It’s important to look at current market trends to help companies determine their future trends and for them to continue to grow and be profitable. Trend analysts also try to determine if current trends in one business area can lead to a trend in another. 

Analyzing trends can help businesses in many ways, especially financially. By learning what a trend is, businesses can get an idea of where to spend their money to create products and services that will meet future demands. They can also gain knowledge to improve and build upon existing products and services to gain an edge in their marketplace and even enter into new markets.

Read more: 9 Top Marketing Trends

Who analyzes trends and why?

Some companies use an internal team whose main goal is to research, analyze, and stay updated on trends in a specific industry. Financial and business professionals typically use market trend analysis to predict the economic future of a particular market. This information can prove useful when a company is creating business strategies. 

Financial analysts use trends to find any sales patterns to see if there are any changes and what’s causing them. They can also help companies forecast budgets that they can use to raise revenue. Financial advisors often work with accountants, whose work includes reviewing expense reports to ensure market trades are legitimate. This helps financial analysts properly predict and estimate revenue. Other fields that use trend analysis include:

• Health care: Researching a specific disease to recognize any trends or potential outbreaks to help with public health planning

• Education: Studying past student performance information to identify trends on how to achieve educational improvement

• Climate and environment: Following long-term temperatures over decades to study global warming or other environmental patterns

• Supply chain management: Identifying trends in the supply chain to enhance logistics and keep costs down by tracking inventory levels and fulfillment times

Many companies that want to determine business trends and strategies often rely on employees with business, economics, or finance backgrounds who have the knowledge to assess their performance.

Types of trends 

Three types of trends that affect businesses fall into the categories of upward, downward, and horizontal. Analysts typically follow each type to determine whether the market is moving up, declining, or remaining steady to help investors make financial decisions.

1. Upward trend

This indicates that the economy is moving into a positive position. This could be due to many reasons, including the increase in the price of assets and stocks, as well as job growth. Reasons for upward trends include a strong economy and a rise in profits. A strong economy leads to job opportunities and the ability to invest in stocks. It is also a good time to take into account the rising costs of materials you may need, which may increase prices.

2. Downward trend

The opposite of an upward trend, a downward trend occurs when the economy and financial markets are declining. This can negatively impact your business. When the economy is weak, less demand for your product or service may occur, which can reduce profits. When the economy is in a downward trend, businesses may evaluate their model and discontinue a fledgling product line to save money.

3. Horizontal trend 

This type of trend is usually used by companies that have been in business for a long time. This is because horizontal trends take place over long periods, such as years. Analyzing changes over a longer period of time provides information on the company’s financial flow, as well as data patterns it can use as a future example. Horizontal trends don’t offer companies a clear financial direction, which causes investors to question whether or not it is a good time to invest. Because it is difficult to predict the direction during a horizontal trend, it is a good time for businesses to refrain from making any financial decisions during this period.

Benefits of trend analysis

The key benefit of trend analysis is financial gain for your business. It is a great tool that helps not only companies but also investors make informed decisions when it comes to sales and investments. Other benefits include the following:

• Improve your product. Analyzing trends makes it easier to understand the strengths and weaknesses of your business compared to others. This helps you recognize any changes you may need to make to ensure you are performing at your best and creating the best products and services.

• Earn a profit. Trends help your company make educated guesses about where to invest. You can use the information you learn about emerging trends to create products or services for which you foresee future needs.

• Identify what is working for your business. Determine what areas are working well and which areas require improvement. This helps decide what strategies to use in the near future and which ones to scale back on.

• Understand the market. By following the changes in the market, you can gain a better understanding of financial patterns, not just trends. 

How to identify trends in your industry

Trends in industries are identified by analyzing data. Collect the data related to yours by looking at past financial statements, recent market data, and any other sources that will provide useful data. You can then analyze it using different methods, including tracking patterns, calculating statistics, and using charts and graphs to visualize changes. Determine how these results affect your business, and adjust your vision and plans to help your business succeed and grow. 

You can use many methods to gather data, such as the following: 

• Survey and focus groups 

• Feedly is a trend-tracking tool that aggregates trends and news stories into lists.

• Stratfor collects worldwide articles and trends.

• Social media helps collect opinions directly from consumers.

How to start a career in trend analysis 

To work in the trend analysis field, it’s helpful to have an analytical skill set and background. Recognizing trends in real life helps you form ideas or conclusions for your business’s success. Other ways to set you on the best career path include:

• Put yourself out there: Attend conferences and events to gain knowledge by networking with others. Talk to industry peers and exchange thoughts with colleagues and clients to keep an ear out for emerging trends.

• Know your industry: Talk to experts in your field and get their input. Be sure to stay updated on your industry, current research, and emerging trends. Communicate this information with company leaders, but also keep your pulse on the competition and pay attention to their actions.

• Listen to your clients: This is a skill you will want to master to work in trend analysis. Pay attention to what your clients say, as they are the reason trends exist. If they are expressing what they don’t like in a product or service, it’s important that you fix it. If they are asking for a feature or a way to make things easier, add it. 

Discover more with our free resources

Discover fresh insights into your career or learn about trends in your industry by subscribing to our LinkedIn newsletter, Career Chat. Or if you want to keep learning more about marketing and data analytics, check out these free resources:

• Watch on YouTube: Market Research Basics for Smarter Marketing

• Read our Career Chat issue: What are the 4 Ps of Marketing? (+ How to Use Them)

• Hear from an expert: 8 Questions with an Expert: Google Financial Data Analyst

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