Trend extrapolation - Marketing Strategy

What is trend Extrapolation ?

A simple forecasting technique is trend extrapolation. This technique simply takes a historical trend over time and extrapolates where the trend line will be if extended into the future. The general assumption is that whatever happened in the past will continue in the future. In some areas this may be an entirely suitable way to establish what the situation will be. For instance, demographic trends are slow moving and therefore more predictable. However, trend lines can mislead planners if they fail to understand the underlying nature of a market.

Decision-making pyramid

Car ownership in the UK has been on an upward growth curve for years. The assumption is that this will continue, causing escalating problems in terms of congestion and pollution. However, it is unlikely that these growth estimates will be fulfilled precisely because roads will become more over crowded and less easy to use. Consumers will switch to other forms of transport. Even where trends can provide reasonable forecasts it is usually in areas that are not of major strategic importance. Issues that have a major impact on the organization’s strategy are likely to occur where a development in the future causes the trend line to change. Identifying these discontinuities is a critical activity, which this simple technique ignores.