Part 2. MM4XL Tools > 3. Charts and Maps > Smart Mapping > Scatter Chart as a Forecast Tool

Smart Mapping

Scatter Chart as a Forecast Tool

In the picture below, weekly sales are plotted against the number of customers for a hypothetical product:

Bubble Maps Software for Scatter Plot and Circle Charts

Each point shows the level of sales achieved with the corresponding number of customers during a given week. The blue line passing through the dots in the chart was drawn using the Add Trend line option built into Excel. Down on the right side, the equation allows us to evaluate the fit of the curve(trend line). It also makes clear the parameters required when making projectionsbased on the charted data. It was very simple to make projections using the regression equation shown in our example. Click the scatter chart, then Chart in the menu bar, followed by Add Trendline. In the Type section of the window that appears, choose Polynomial of Order 2 (refer to the Excel help file for details) and in the Options section tick display equation on chart and Display R-squaredvalue on chart. Click OK and the trend line and equation are displayed. The trend line was computed using the number of customers as the independent variable and the weekly sales as the dependent one. Given we chose the order 2, the second variable was computed elevating the number of customers to power 2. If, for example, we are going to start an advertising campaign and assume the customers will increase to 1800 in a certain week, we might want to predict the weekly sales using the coefficients given in the regression equation. The formula is:

Bubble Maps Software for Scatter Plot and Circle Charts

Therefore, if the advertising campaign is really going to bring 1800 customers, we can assume that weekly sales will increase to some 29 thousand dollars. The accuracy of the computation is rather high, as shown by the R2, coefficient of correlation, and we can assume the computation is quite reliable. In fact, it yields a much more reliable value (29166 US$) than a computation based on averages (22070 US$):

Bubble Maps Software for Scatter Plot and Circle Charts

The decision to start the campaign can now be based on return on investment, rather than uncertainty of return.

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