3 Myths about the Weather and Its Impact on Sales
Myth 3: Weather’s influence is obvious! We know how it impacts the business.
Some companies collect and use weather data and forecasts in an effort to explain performance or predict near-term effects. Some even include weather data in their internal reports. However, beyond the basic statements of “the warm weather killed us last month” or “we expect strong sales next week with the drop in temperatures” many companies still fail to truly understand or precisely measure the impacts. Perhaps it is understandable that these companies do not take any decisive actions given the lack of clarity and quantification.
There is also a danger of creating false answers through an oversimplified approach. Without analyzing weather and sales information at market-by-market, week-by-week levels to understand the weather sensitivities (% of sales influences by the weather), weather drivers (e.g. rain, maximum temperatures, etc.), and volume impacts at each time and locations intersection, it is easy to get it wrong. For example, an assumption that every 1 degree temperature increase delivers a 7,500 unit sales increase will be way off track when you look at different locations, different times of the year, and different merchandise.
Weather’s influence on consumers is complex and nuanced. Buying behavior on a cloudy, 14 degree day is different in Chicago than it is in Charlotte. The answer changes again if it is a day in March vs. June vs. September. It depends on the product or service. Is it an in-store or online purchase? There are no single or simple answers.
But there are answers. Demand models developed from multiple years of lower-level sales results and the corresponding historical weather do provide an understanding of when, where, and how much the weather is affecting your customers and your business.
Contact Planalytics today to find out how we can help your company achieve greater profitability and success.