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TITLE: When Data Analytics Meets Promotion Planning

SPEAKER:  Georgia Perakis


 In many important settings, promotions are a key instrument for driving sales and profits. Important examples include promotions in grocery retail among others. The Promotion Optimization Problem (POP) is a challenging problem as the retailer needs to decide which products to promote, what is the depth of price discounts, when to schedule the promotions and how to promote the product. In this talk we discuss our ongoing collaboration over the past few years with Oracle RGBU where we introduce and discuss how optimization can play a key role in determining promotion planning and capture several important business requirements for grocery retail.

An important consumer behavior that is a direct consequence of promotions in grocery retail is that consumers stockpile the products on promotion and then experience promotion fatigue after the promotion ends. Therefore, as a first step, we propose and study two general classes of demand functions that capture this effect and can be directly estimated from data. Using these demand functions, we model and study the promotion planning problem. Unfortunately, the underlying formulation even for a single product is NP-hard and highly nonlinear (with neither a concave nor a convex objective). We propose a linear approximation and by showing the integrality of the feasible region in the formulation, we are able to solve the problem efficiently as a linear programming (LP) problem. For the classes of demand we introduce, we develop analytical bounds on the accuracy of the LP relative to the optimal (but intractable) POP solution. We also consider a graphical representation of the problem which allows us to employ a Dynamic Programming (DP) solution approach as an alternative. We discuss the tradeoffs between the two approaches (LP vs DP).

Furthermore, we illustrate how our approach generalizes to consider multiple products within a category that are substitutes and/or complementary. We discuss the tradeoffs when there are cross product effects.

 Together with our industry collaborators from Oracle Retail, our framework allows us to develop a tool which can help supermarket managers to better understand promotions by testing various strategies and business constraints. We show that the formulation we propose solves fast in practice using actual data from a grocery retailer and that the accuracy is high. We calibrate our models using actual data and determine that they can improve profits by 3% just by optimizing the promotion schedule and up to 5% by slightly modifying some business requirements.

Joint work with Lennart Baardman (ORC PhD student), Maxime Cohen, (ORC PhD student), Swati Gupta (ORC PhD student), Jeremy Kalas (EECS Undergraduate), Zachary Leung (recently graduated ORC PhD student), Danny Segev (Visiting Scholar ORC/MIT Sloan from U. Haifa) as well as Kiran Panchamgam (Oracle RGBU) and Anthony Smith (formerly from Oracle RGBU)

BIO: Georgia Perakis is the William F. Pounds Professor at the Sloan School of Management at MIT since 1998. She received an M.S. degree and a PhD in Applied Mathematics from Brown University and a BA from the University of Athens in Greece.  

 Georgia Perakis' research interests include the role of operations  in many areas such as pricing, energy, supply chain management and transportation among others. She has widely published in journals such as Operations Research, Management Science, POM, Mathematics of Operations Research and Mathematical Programming among others. She has received the CAREER award from the National Science Foundation and subsequently, the PECASE award from the office of the President on Science and Technology awarded to the 50 top scientists and engineers in the nation. She has also received an honorable mention in the TSL Best Paper Award, the second prize in 2011 and the first prize in 2012 in the Best Paper competition of the Informs Service Science Section for two of her papers, the Graduate Student Council Teaching Award  as well as the Jamieson Prize for excellence in teaching and the Samuel M. Seegal prize for “inspiring students to pursue and achieve excellence”. Perakis was the recepient of the Sloan Career Development Chair and subsequently of the J. Spencer Standish Career Development Chair. In 2009, Perakis received the William F. Pounds chair that she currently holds. Perakis has passion supervising her students and builds lifelong relationships with them. So far she has graduated sixteen PhD and twenty two Masters students.

Perakis is currently serving as the co-director from the MIT Sloan School side for the Leaders for Global Operations (former LFM) program. She is also currently the group head of the Operations Management Group at MIT Sloan. She serves as an Associate Editor for the journals Management Science, Operations Research and Naval Logistics Research and a senior editor for POM. Perakis has served as a member of the INFORMS Council. She served as the chair of the Pricing and Revenue Management Section of INFORMS and in 2009-2010 as the VP for Meetings of the MSOM Society of INFORMS. She has co-organized the MSOM 2009 conference and served in the organizing committee of the 2010 MSOM conference. She has also been the co-chair and co-organizer of the Annual Conference of the INFORMS Section on Pricing and Revenue Management for several years and the chair of the cluster on the same topics for the annual INFORMS and ISMP conferences for several years.


  • Workflow Status: Published
  • Created By: Anita Race
  • Created: 02/19/2015
  • Modified By: Fletcher Moore
  • Modified: 04/13/2017


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