Based on research by Wagner Kamakura (Rice Business) and Rex Y. Du (Houston)

Key takeaways:

• Spotting trends is indispensable for marketers trying to discern shifts in consumer tastes and behaviors.
• Trendspotting can take two approaches: qualitative, which analyzes large shifts in consumer wants, or quantitative, which tracks multiple indicators such as keyword searches or tweets.
• Researchers who use quantitative methods can identify structural shifts in longitudinal data and distill seasonal from non-seasonal or dynamic trends.

Every business wants to read consumers’ minds: what they love, what they hate. Even more, businesses crave to know about mass trends before they’re visible to the naked eye.

In the past, analysts searching for trends needed to pore over a vast range of sources for marketplace indicators. The internet and social media have changed that: Marketers now have access to an avalanche of real-time indicators, laden with details about the wishes hidden within customers’ hearts and minds. With services such as Trendistic (which tracks individual Twitter terms), Google Insights for Search and BlogPulse, modern marketers are even privy to the real-time conversations surrounding consumers’ desires.

Now, imagine being able to analyze all this data across large panels of time – then distilling it so well that you could identify marketing trends quickly, accurately and quantitatively.  

Rice Business professor Wagner A. Kamakura and Rex Y. Du of the University of Houston set out to create a model that makes this possible. Because both quantitative and qualitative trendspotting are exploratory endeavors, Kamakura notes, both types of research can yield results that are broad but also inaccurate. To remedy this, Kamakura and Du devised a new model for quickly and accurately refining market data into trend patterns.

Kamakura and Du’s model entails taking five simple steps to analyze gathered data using a quantitative method. By following this process of refining the data tens or hundreds of times, then isolating the information into specific seasonal and non-seasonal trends or dynamic trends, researchers can generate steady trend patterns across time panels.

Here’s the process:

• First: Gather indicators from multiple sources, chosen systematically so you don’t miss key signals or overweight irrelevant ones.
• Second: Reduce the raw data to a few common factors, filtering out noise and errors.
• Third: Identify the underlying trends and what’s driving spikes or dips, separating cyclical effects from true shifts.
• Fourth: Validate the trends by comparing them with past patterns and other relevant variables.
• Fifth: Use historical data to project the trend lines forward, so managers can respond early to risks and opportunities.

It’s important to bear in mind that the indicators used for quantitative trendspotting are prone to random and systematic errors, Kamakura writes. The model he devised, however, can filter these errors because it keeps them from appearing across different series of time panels. The result: better ability to identify genuine movements and general trends, free from the influence of seasonal events and from random error.

It goes without saying that the information and persuasiveness offered by the internet are inevitably attended by noise. For marketers, this means that without filtering, some trends show spikes for temporary items – mere viral jolts that can skew market research.

Kamakura and Du’s model helps sidestep this problem by blending available historical data analysis, large time panels and movements while avoiding errors common to more traditional methods. For managers longing to glimpse the next big thing, this analytical model can reveal emerging consumer movements with clarity – just as they’re becoming the future.

Kamakura and Du (2012). “Quantitative Trendspotting,” Journal of Marketing Research.

Rice University’s Jones Graduate School of Business, one of the country’s top-ranked business schools, has launched a new podcast, The Index, which examines the science behind scandals, epiphanies, live performance and other aspects of our lives.

The Index grew out of a collaboration between Texas Monthly and Rice Business at the 2019 South by Southwest music and technology festival, where the two entities co-hosted a pop-up experience in an Austin storefront.

The podcast is hosted by journalist Saul Elbein, a contributor to the New York Times Magazine and the NPR radio show “This American Life,” among other outlets.

Podcast topics include an exploration of epiphanies — the sudden “aha” moments that can spark innovation and shift the course of a career or a life — and why they may be growing rarer. As Rice Business professor Erik Dane explains in the episode, to lay the foundation for epiphanies, people need to alternate between being present and sharply aware of what’s happening around them, then softening that focus and letting their minds wander without a definitive purpose. But with a smartphone in one’s hand — or even in the same room — people are unlikely to do either.

In another episode, Rice Business Professor Anastasiya Zavyalova discusses the science of scandals: how they start, how they end and what to do when you’re caught in one. In another, Rice Business Dean Peter Rodriguez explains the economics behind why it’s so difficult to make a living in the arts.

Other half-hour episodes include insights from Rice Business professors Utpal Dholakia (“Unmarketing: A Guide To Not Buying Anything”) and Douglas Schuler (“The Cantankerous Community Meal”), and a discussion of “modern-day wildcatters” by Rice Business Wisdom Editor Claudia Kolker, Station Houston CEO Gabriella Rowe, Egan Nelson Vice President of Strategy Marc Nathan and Lawson Gow, the CEO and founder of The Cannon — all of whom are working to make Texas a leader in tech innovation.

The Index is the latest way Rice Business is making its professors’ research accessible outside the halls of academia, in hopes that their science-backed, peer-reviewed insights will help spark the innovation needed to solve big problems, Rodriguez said.

To access The Index episodes, go to https://business.rice.edu/wisdom/podcasts/welcome-index-new-podcast-rice-business-wisdom.

For more insights from and information about Rice Business faculty research, visit the school’s Rice Business Wisdom online ideas magazine at https://business.rice.edu/wisdom.

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Follow Rice Business via Twitter @Rice_Biz.

Follow Rice Business Wisdom via Twitter @RiceBizWisdom.

Follow Rice News and Media Relations via Twitter @RiceUNews.