An Integrated Approach for Retail Budget Allocations Across Store Labor and Marketing Activities

Posted: 27 Jun 2015

See all articles by Olga Perdikaki

Olga Perdikaki

Texas A&M University - Department of Information & Operations Management

Subodha Kumar

Temple University - Department of Marketing and Supply Chain Management

Chelliah Sriskandarajah

Texas A&M University

Date Written: July 1, 2014

Abstract

The performance of a retail store depends on its ability to attract customer traffic, match labor with incoming traffic, and convert the incoming traffic into sales. Retailers make significant investments in marketing activities (such as advertising to bring customers into their stores) and in store labor (to convert that traffic into sales). In addition to advertising, some retailers offer promotions to shift store traffic within the day from peak to off-peak hours and reduce intra-day traffic variability.Based on prior studies and proprietary data, we establish the relationship between weekly sales performance of a retail store with respect to weekly store traffic, weekly store labor hours, and average intra-day traffic variability within a week. We develop a centralized model to allocate jointly limited store budget across (i) store labor, (ii) marketing efforts to drive traffic into the store, and (iii) marketing efforts to shift store traffic from busy to slow hours within a day, with the objective of maximizing store sales. We also discuss an uncoordinated case where the marketing group and the labor planning group make decisions separately. For this setting, we present different mechanisms that can be employed to achieve the centralized solution. Finally, we provide a framework that incorporates the output of the budget allocation model to facilitate store level sales force scheduling. Based on the results of our model, we present several insights that can help managers in budget allocation and sales force planning.

Keywords: advertising,traffic variability,sales force planning,coordination, retail

JEL Classification: M1

Suggested Citation

Perdikaki, Olga and Kumar, Subodha and Sriskandarajah, Chelliah, An Integrated Approach for Retail Budget Allocations Across Store Labor and Marketing Activities (July 1, 2014). Available at SSRN: https://ssrn.com/abstract=2623234

Olga Perdikaki (Contact Author)

Texas A&M University - Department of Information & Operations Management ( email )

430 Wehner
College Station, TX 77843-4218
United States

Subodha Kumar

Temple University - Department of Marketing and Supply Chain Management ( email )

Philadelphia, PA 19122
United States

Chelliah Sriskandarajah

Texas A&M University ( email )

Langford Building A
798 Ross St.
77843-3137

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