Caravenna, L. and Dewynne, J. and Farmer, C. and Jones, O. and Lund, C. O. and Melnik, S. and Pawlowska, B. and Wilson, E. (2014) Customer Focused Price Optimisation. [Study Group Report]
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Abstract
Tesco want to better understand how to set online prices for their general merchandise (i.e. not groceries or clothes) in the UK. Because customers can easily compare prices from different retailers we expect they will be very sensitive to price, so it is important to get it right. There are four aspects of the problem.
• Forecasting: Estimating the customer demand as a function of the price chosen (especially hard for products with no sales history or infrequent sales).
• Objective function: What exactly should Tesco aim to optimise? Sales volume? Profit? Profit margin? Conversion rates?
• Optimisation: How to choose prices for many related products to optimise the chosen objective function.
• Evalution: How to demonstrate that the chosen prices are optimal, especially to people without a mathematical background.
Aggregate sales data was provided for about 400 products over about 2 years so that quantitive approaches could be tested. For some products competitors’ prices were also provided.
| Item Type: | Study Group Report |
|---|---|
| Problem Sectors: | Food and Drink Retail Decision making Data processing |
| Study Groups: | European Study Group with Industry > ESGI 100 (Oxford, UK, Apr 7-11, 2014) UK Study Groups > ESGI 100 (Oxford, UK, Apr 7-11, 2014) |
| Company Name: | Tesco |
| ID Code: | 673 |
| Deposited By: | Stuart Thomson2 |
| Deposited On: | 05 Dec 2014 14:50 |
| Last Modified: | 29 May 2015 20:18 |
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