Adapting data science to product promotions and, enhancing sales and profits, consistently.
About the customer
A large FMCG player with a portfolio of products that catered to a diversified customer base in all age groups and price points.
Trade Promotion Optimization
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Business Problem
The client desired to explore all data-driven possibilities to sell its products consistently across the year through balanced promotions and ensure that its KPIs were met. The need was a optimization solution that enabled its sales team to push the right products at the right time and with the right promotions. ORMAE’s solution had to ensure that the client’s financial parameters were in line with expectations.
- The product portfolio included a list of promotions available that could be applied as per demands of each time period.
- The promotions were aligned with different lifts. Each affected the KPIs to different degrees.
- A schedule was required to maximize the potential lift of the desired KPI for the planned time period. This had to be done by choosing the best promotion for each product in each time period.
- Different KPIs include Gross Margin, Net Revenue, Market Share, Retailer Margin, and others.
Our Approach
Once ORMAE's team got all the data needed, it went about developing the appropriate optimization algorithm evolved towards the client's objectives. The solution parameters included:
- Rules and policies that the manufacturer has set for retailers and the promotions tied to the product portfolio.
- Constraints on number of promotion weeks, consecutive promotions, and post promotion dip effect.
- Ability to handle non-linear Ko and use of commercial solvers to solve the model to optimality.
- Exploiting sales forecasting to generate potential lift values as well as post event dip and cannibalization factors.
- Exploiting sales forecasting to generate potential lift values as well as post event dip and cannibalization factors.
The Result
ORMAE's optimization algorithm delivered the required results (taking into account factors like cannibalization, post-promotion dip effects and others) to the FMCG client. They included:
- Increase of 2-5% in profits through the time bound promotional events across the year.
- Increase of USD 15 million in gross sales with proportionate increase on other related metrics.
Get in Touch
Have a project in mind?
Looking for collaboration?
Send an email to bd@ormae.com
for availability and enquires.