By Annica Nesty, senior director of marketing science Elite SEM.
Seasonality isn’t just the change from fall to winter — it’s any pattern that occurs during a fixed period, whether that’s a year, a month, or a day. For instance, annual holidays like Independence Day or Christmas are obvious examples of seasonality, but a regular spike in business at the beginning of each month represents the idea as well.
Thanks to marketing science, your business can leverage time series data to understand seasonality and predict when important fluctuations will occur. As all marketers know, timing is everything — and paying attention to seasonality is a critical element of timing campaigns, product launches, and more.
It doesn’t take a marketing wizard to know that flower shops will experience a spike leading up to Mother’s Day, but not all seasonal patterns might be that obvious. What if a company’s customers prefer to shop on a particular day of the week based on their need for the product? That might not be clear at first glance.
For a company to reap the benefits — and avoid the pitfalls — of seasonality, business leaders must be aware of it. Repeated peaks in sales are a great opportunity to optimize marketing messaging to capitalize on seasonality, and prior knowledge of dips in consumer spending can be used to create accurate budgets and adjust inventory levels.
On the other hand, deseasonalizing data is also an important part of putting together a strategy through investigating trends. For example, most retailers will experience a sales bump in the holiday-packed fourth quarter, but it can be useful to measure changes without including the seasonal factors to determine whether the organization is experiencing sustainable growth.
Being able to both include and exclude the impact of seasonality helps increase the accuracy of machine learning algorithms used to predict the future. With advanced analytics, decision-makers can explore scenarios like budget increases or decreases in a low-stakes environment first.
The effect of seasonality is dictated by three key components: timing, magnitude, and direction. For timing, a pattern could occur annually, monthly, weekly, or even daily. That pattern could range from a small, consistent fluctuation to a large, variable one — that’s magnitude. And direction refers to whether the seasonality produces increases or decreases in the measured area, which could be sales, page visits, customer churn, or other important KPIs.
If you’re a marketing leader or business owner who wants to maximize the information you pull from your seasonal data, follow these three steps:
1. Investigate the impact of seasonality.
After you identify the timing, magnitude, and direction of seasonality in your business, it’s time to analyze your findings. This analysis will provide intelligence about how your business is scaling relative to seasonal patterns. It will be able to answer questions like, “Is my business trending downward in general, or is the slow performance I’m seeing simply indicative of a seasonal trend?” In order to understand your business and to set goals, you need to know where you stand.
2. Forecast future performance.
Seasonality provides opportunities to reduce or leverage seasonal impacts and improve your organization’s future performance. When you understand the impact of seasonal patterns, you can create a robust forecasting model with a high accuracy rate. With a solid predictor at your service, your business will become more agile and competitive: You can optimize spending, improve processes, and be ready to act on potential opportunities as they arise. Take Vineyard Vines, for example: The company is using a seasonal forecasting model to identify customers on its email list who are most likely to unsubscribe and then re-engaging them via direct mail, hoping to use its data to reduce churn.
3. Build a better optimization plan.
Armed with an awareness of the seasonality that directly affects your business, it’s time to test various scenarios to determine the best path forward. Reduce negative seasonal impacts as much as possible. If you sell snow sports equipment, the summer months will inevitably lead to a decline in revenue, but you can create a summer sale to help minimize the impact. At the same time, you can create a plan that magnifies the positive effects of seasonality based on historical performance data.
There is often little you can do to change seasonality — the sale of Christmas trees, for instance, will always be inextricably linked to Christmas. That said, knowing how seasonality affects your business is paramount because it allows you to establish measures that capitalize on the benefits while mitigating the disadvantages. Equipped with information about the ebb and flow of seasonality, marketing or business leaders can create more relevant plans that achieving stunning successes.
About the Author
Annica Nesty is the senior director of marketing science at award-winning online marketing company Elite SEM.