How To Utilize Weather Data to Drive Business Decisions in 2022 & Beyond

Weather’s impact on businesses is broad. From employees, infrastructure, products, and customers, weather can influence people’s decisions and the products they receive. Although the weather might seem unpredictable, businesses can harness the power of weather data to mitigate the adverse effects of weather, prepare for possible adverse conditions, and take advantage of calm weather conditions.

Researchers at the University of Michigan published a study in 2018 called “Weather and Business: Evidence from Large-Scale Linguistic Analyses.” By reviewing 100,000 annual reports of public companies, researchers found a close link and company performance. For example, companies with a higher weather exposure were more likely to be less profitable and proved to be riskier investments. (1)

Why are Weather and Climate Important to Business?

Every step in a company’s supply chain is vulnerable to changes in the weather and climate. As an example, as the weather shifts, the demand for snow blowers, scarves, pool toys, or resort wear changes. Weather and climate fluctuate, and a business that can pivot seamlessly around these changes or even use the weather to their advantage gets ahead of others. (1)

Business During Normal Weather Conditions

Despite day-to-day changes in the weather, normal weather conditions remain steady over time.  Knowing what weather conditions to expect puts businesses at an advantage because they can utilize the predicted weather to benefit their bottom line. Incorporating weather data into overall decision-making allows businesses to determine the best times to ship goods, advertise to customers, or extend shop hours. The possibilities are endless when it comes to using the information from weather data.

Severe or Abnormal Weather Conditions

It’s not only the expected chilly evenings or the sunny summer season that affects business. About 70% of businesses are affected adversely by abnormal weather, limiting their logistics and performance. When abnormal weather strikes, especially over prolonged periods, it can cause business to plummet and create a financial burden. Abnormal weather is often unexpected, which leaves companies without a plan and unable to respond appropriately. (2)

What is Abnormal Weather?

Although there’s no scientific definition for what constitutes abnormal weather, most people define it as weather outside of the 30-year average value. Unfortunately, the changing climate makes abnormal weather more of the norm. The shift to warmer temperatures and extreme weather events places business at risk and creates a greater need for precise weather data. The ability to determine dangers and circumvent weather-related catastrophes protects businesses.  (2)

How Does Weather Affect Customers?

There’s no denying that weather wields a substantial effect on people. It can dictate a person’s emotions, sense of safety, where they go, and what they buy.  Business owners understand that customer behavior fluctuates throughout the year. For example, the tourism industry is heavily dependent on the weather. A customer’s buying habits can change with the seasons and the weather, shaping manufacturing, purchasing, and inventory. 3, 4,

According to the study of Behavioral Finance – field of Behavioral Economics — psychological influences from the environment can affect the overall response of investors, customers, and businesses. What’s more, research indicates that weather impacts mood —potentially impacting customer purchases and even the rise and fall of stocks.

Significant funds are spent researching customer buying trends, and this research should also include weather data. How the weather impacts customer purchases can optimize production and sales. By using weather data to meet consumer demands and determine pricing, businesses can meet their production and sales goals more effectively. (3, 4, 5, 6)