August 08, 2021

But How Do You Know How "Variable" Next Year Will Be?

"How do you know what will happen?"

That's how some of the interactions start on LinkedIn. Good question!

I have no idea what will happen.

Here's what I do have:

  • I know what happened the past four years. I know average rebuy rates, average spend per repurchaser (and spend per new/reactivated buyer for that matter).
  • I also know "how variable" those results were. If the results were unstable, future predictions will be less certain.
Here's data from a business. Look at the average and standard deviation outcomes.

Two standard deviations tell us how much our estimates might vary (95% of the time). Rebuy rates can vary between +/- 2.6%. Spend per Repurchaser can vary by +/- $11.98 (95% of the time).

Once we guess what the rebuy rate is likely to be ... once we guess what spend per repurchaser is likely to be ... then we apply the variability we've seen over the past four years and we have a forecast.

Tomorrow we'll talk about setting repurchase rates and spending levels ... something you care about.

When you need help with a quick forecasting project, give me a holler ($4,900 ... and we'll get started.

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