Optimizing Retail Promotions For Leading Beverage Manufacturer

Situation

A leading tea manufacturer was looking to increase promotional effectiveness by optimizing promotion type and schedule as well as minimizing promotion spend with constant volume

Approach

  • Developed Historic Analysis by analyzing category and brand dynamics, historic price, promo and distribution factors
  • Built lift models and checked model fit
  • Analyzed Historic Promo Effectiveness and determined ROI, cumulative lift and cumulative profit by type of promotion
  • Built Optimization Models and selected appropriate methodology; frequently used methodologies include Gradient Descent, step-wise descent, Genetic Algorithms
  • Exhaustive Search
  • Developed Recommendations optimizing actionable results

Results

Determined:

  • Total promo spend could be reduced by 13% without impact on volume
  • Optimized schedule
  • Key Recommendations:
    • Promo Type 1 = BOGO 50% off - reduce frequency by 10%
    • Promo Type 2 = 30% off all - increase frequency by 5%
    • Promo Type 3 = Display + 10% off - increase frequency by 3%
    • Promo Type 4 ...