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Modeling an optimal promotion strategy for FMCG adjusted for cannibalization effects

Mouris, F.S. (2023) Modeling an optimal promotion strategy for FMCG adjusted for cannibalization effects.

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Abstract:This research has developed a model for an optimal promotion strategy for FMCG adjusted for cannibalization effects. A regression model is developed that estimates the cannibalization effects and returns a sales volume forecast based on promotion variables and their lagged value. Subsequently, the regression model is used to define the promotion calendar optimization problem that returns an optimal promotion calendar while maximizing the total sales volume of all products. The logistic regression is evaluated by calculating the MAPE and R² indicating a great deviation in absolute volume while the R² indicates an accurate fit. Therefore, the categorical R² is developed to accurately measure the performance of regression models that deal with clustered data. Results show that the estimated coefficients are not fitting the data. Nevertheless, the sensitivity analysis of the regression coefficients reveals that they do not significantly impact the optimization problem. This indicates that the regression model is suitable for analyzing the promotion calendar optimization problem within the constraints of the business if the cannibalization effects are depicted correctly and do not change drastically. Results show that there exists a promotion plan with an increased sales volume for the FMCG chain and that more promotional weeks do not necessarily result in the highest turnover.
Item Type:Essay (Master)
Clients:
D-Data, 's Hertogenbosch, Netherlands
Faculty:EEMCS: Electrical Engineering, Mathematics and Computer Science
Subject:31 mathematics
Programme:Applied Mathematics MSc (60348)
Link to this item:https://purl.utwente.nl/essays/94865
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