If you want to be more precise in your analysis, you could use Excel’s CORREL function to learn that Data1 and Data2 have a correlation coefficient of -.50. …when you spend less for advertising, your sales rise significantly. …when you spend more for advertising, your sales fall significantly, and,
And suppose that the red Data2 line shows the amount of your sales.Īt first glance, it looks like you REALLY need to change your ad strategy, because… Suppose, for example, that the blue Data1 line in this chart shows what you spend in advertising. ( You can download the example workbook here.) And then you use those leading indicators as the basis of your forecast.īut when you try to make it all work, that simple idea can become a huge challenge. To improve your forecasts of sales or other measures, you simply need to find leading indicators…measures that are highly correlated with your key measures, but with a time lag.
