PROMOTION OPTIMIZATION IN COMPETITIVE ENVIRONMENTS BY CONSIDERING THE CANNIBALIZATION EFFECT

This study proposes a new model to optimize sales promotion in competitive markets and examines the impact of competition on sales promotion planning and business performance in retail chains. The model can be used to determine the best promotional discount for different products with a cannibalization effect when competitors are present in the retail market and offer the same products with different discounts. An integer nonlinear programming problem is proposed to model the above issue. To solve the model, it is reformulated as a mixed-integer linear programming problem. Consequently, a MIP solver can be used to solve the model in a reasonable CPU time. Several examples are solved and a sensitivity analysis of the model parameters is performed. The results of our numerical study show interesting findings that considering different competitors is very important in promotion planning and optimization. Failure to take them into account can lead to loss of profits

Multi-criteria suitability analysis and spatial interaction modeling of retail store locations in Ontario, Canada

GIS-based decision analysis is increasingly used by retailers to address the complexity and cost of investment in retail store location decisions. This study conceptualizes and represents nine criteria in a GIS-based multi-criteria decision analysis of 4.7 million potential retail store locations. From topographic statistics to spatial interaction modelling, the study utilizes criteria of varied complexity to analyze the statistical and spatial distribution of highly suitable locations for a retail store. The study further examines how the spatial representations of criteria based on the Huff model affects the distribution of suitable locations. The results show that although Toronto dominates the retail landscape in Ontario, key regions are found in Guelph, Kitchener-Waterloo and Cambridge. Results show that the incorporation of network-based spatial interaction costs in Huff’s model produces more spatially heterogeneous sales estimates than Euclidean-based spatial interactions. Future research efforts in improving various components of the suitability analysis, as well as the scaling and regional parameterization of spatial interaction models are also discussed