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A System and Method for Evaluating and Forecasting Retail Promotion During Effective Period

IP.com Disclosure Number: IPCOM000236059D
Publication Date: 2014-Apr-04
Document File: 7 page(s) / 270K

Publishing Venue

The IP.com Prior Art Database

Abstract

With this solution,it can help retailers to plan and evaluate their promotion activities much better. Forecast and evaluate a promotion will consider the sales volume during the whole promotion effective period. Whole promotion effective period mentioned here not only includes promotion execution period, but also includes the lead period and lag period of a promotion.A model based on historical data can be built to determine promotion effective period.By comparing forecasted promoted sales data with forecasted regular sales data at different aggregation level, retailers know more precisely about what this promotion will bring to them, such as the total increased sales, the shifting sales, the net-increased sales.Obviously, it will bring more practical business values to retailers than prior solutions.

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A System and Method for Evaluating and Forecasting Retail Promotion During Effective Period

This solution includes two parts. One part is how to determine the effective period for a promotion, another part is how to analysis the forecast results

.


1.1 Determine the effective period of a promotion

A promotion will affect the sales during its effective period. Promotion effective period is made up by three parts: lead period, promotion period and lag period

.

Please see following classic diagram.

Explanation for variables in this diagram is as below:

- ETstart: promotion start effective time

1


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- ETend: promotion end effective time

- Tstart: promotion start time

- Tend: promotion end time

- VOLregular: regular volume

- VOLpeak: peak volume


1.1.1 Lead period

Lead period
(((ET

ETstart --- TTstart

start )

It's the period that from the time customers know a promotion will be executed to the time before this promotion starts

If customers don't know a promotion will be executed, lead period will not exist. The start time of this period is affected by following factors:

1. hasAD: to advertise this promotion or not.

2. adTime:the time that customers receive advertisement.

3. randomeVar(Random Variable): to simulate other uncertain factors and make the result more closer. Following formula can be given:

ETstart= func(hasAD,adTime,randomVar)


1.1.2 Promotion period

Promotion period

(((TTT start --- TTend)

It's the period while the promotion is executing. It's from promotion start time to promotion end time.

.

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1.1.3 Lag Period

Lag Period(

ETend)

It's the period from promotion end time to certain time later.

The end time (ETend) of this period is decided by following factors.

1. Discount(Discount of a promoted product): the higher the discount is, the longer the period is.

2. Service life cycle(Product service life cycle): the longer the life cycle is, the longer the period is.

3. Product attributes:

a) Market maturity index of a product´╝ÜIntroduction/Growth/Maturity/Decline/Withdrawal

b) Promotion sensitivity: customer reaction to this promotion.

c) Product storage period: the longer the product storage period is ,the longer the period is.

4.randomVar (Random Variable): to simulate other uncertain factors and make the result more closer.

For a promoted product, after a promotion is completed, the lag period may be much longer.The end time of a promotion effective period can be determined when sales of such product start to keep stable after that timestamp.

Following formula can be given:

ET end= func(discount, lifecycle, attributes, randomVar)


1.1.4 Create Model and apply model

In order to determine a promotion effective period

                                 , following process can be used:
1. Analysis the factors affect the promotion effective period

((TTend --- ET

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2. Build a mathematical model for calculating the promotion effective period.

3. Use regression analysis algorithm based on historical data to calculate variable values...