Question

You know that sales are greatly influenced by the amount your firm advertises in the local paper. What forecasting technique would you suggest trying?

Short answer

A casual relationship forecasting technique using regression would be suggested to influence the sales to demand positively.

Step-by-step solution

Definition of Casual relationship forecasting

Causal relationship forecasting uses independent variables to predict future demand. As an example, we can expect that an extended period of rain will increase sales of umbrellas and raincoats.

The rain causes the sale of rain gear. This is often a causal relationship, where one occurrence causes another. If the causing element is understood far enough in advance, it will be used as a basis for forecasting.

Explanation

Sales are often positively enhanced byusingcasual relationship forecasting using regression.Linear regressioncould be a commonly used technique in causal forecasting. The prices of the marketer's product will be accurately predicted, and by extension, the ultimate price offered to the customer will be determined.

Casual relationship forecasting using simple regression is helpful for salespersons with controllable activities like short-term promotions, where the result may be anticipated. It must be noted that causal forecasting is not helpful in every situation; however, it works best when the correlation between the dependent and independent variables is strong.