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Nonlinear Sales Forecasting

Discussion in 'Ask an Excel Question' started by Dokat, Apr 20, 2017.

  1. Dokat

    Dokat Member

    Messages:
    157
    Hi,

    I have a 52 week historical sales data for various price points. The relation between price and demand is non linear. When i ran a regression it returns low RSquare and high P value which indicate regressors are not predictive. Did anyone come across the same issue and work around to build predictive pricing model in Excel.

    Thanks
  2. Hui

    Hui Excel Ninja Staff Member

    Messages:
    10,319
    Is there a Monthly or Quarterly or other cycle that is more regular?
  3. Dokat

    Dokat Member

    Messages:
    157
    no it is not based on historical data but unit sales at various price points. Thanks
  4. r2c2

    r2c2 Member

    Messages:
    73
    Are you sure Price is the only variable in this scenario? Here is how I would approach the problem:
    • Plot price vs. demand (unit sales) and inspect for any visible pattern.
    • Exclude outliers
    • If there is no specific pattern, repeat the exercise with
      • price bands vs. sales
      • price vs. sales split by time of sale (by weekday / month / weeknum / quarter etc. depending on your industry norm)
      • Is there a mixture of patterns? (ie liner relationship up to certain price and then exponential / polynomial after that)
    If you see no obvious pattern, validate your hypothesis that price determines demand. May be the relationship is weak or non-existent. Or it is masked by other variables not present in the data. So either include more columns or conclude that such a prediction is useless.

    If you end up building such a model, share it with us.

    all the best.

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