Promo and Price Optimization

The challenge

Most grocers have, until recently, made promotional decisions based on three things: the amount of vendor marketing fees available, history and tradition, and “gut instinct”. These approaches are understandable given the dynamic relationships between products and customers, in addition to the effects of pricing and promotions. It is humanly impossible to understand and leverage all this data.

Promotion decisions are complicated by the Halo Effect, which includes Halo sales, cannibalization, and forward buying. For example, promoting “Brand A” of soda may boost the sales of related products, such as salty snacks. But it’s also likely to cannibalize “Brand B” soda sales that week and probably next week’s “Brand A” soda sales due to forward buying.