Forecasting and prediction, both are based on probabilities of an event occurring. Although the terms might seem similar, there are some differences between prediction and forecasting.
Let’s first understand Prediction.
What is a prediction?
Prediction is an absolute outcome that we give after understanding the data.
For example, a set of 10 people are given information about your product, offers, benefits, and all. Now, based on the responses you get from those 10 people, you can predict who will buy your product or not.
That response can be anything, say redemption of discount coupon. Because they redeemed it, obviously they will now buy your product.
What is Forecasting?
Forecasting is the prediction of an event/ outcome likely to happen in the future. After carefully analyzing the trends in our temporal data, based upon past incidents you predict for the future.
For example, you analyze sales data of all of your products in the past 5 years. Now, you can predict if the sales are expected to grow or fall for a particular product.
Another difference in prediction and forecasting is that of the outcome.
- Prediction gives a stiff outcome, meaning that the outcome is not likely to change.
- Forecasting gives general results based on some factors. If those factors change with time, the results might change as well.
Here’s an example to wrap this up.
Based on blood sugar level and other factors, the doctor can forecast that in near future the patient may have diabetes. But if the patient takes care of himself, it is a possibility that he does not get the disease.
Prediction is for the current moment. Based on the data of his medical report he may or may not have diabetes at the moment.
To conclude, forecasting is about predicting the occurrence of some event in near future.