Personalized Sales Targets with Customer Choices

45 Pages Posted: 16 Mar 2020

See all articles by Xiaolong Li

Xiaolong Li

affiliation not provided to SSRN

Ying Rong

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Renyu (Philip) Zhang

New York University Shanghai

Huan Zheng

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Date Written: March 7, 2020

Abstract

Modern firms usually have personalized service/sales targets for different customer segments and products. Such sales target personalization poses additional challenges for firms to optimize their assortment policy. We propose a general modeling framework to study the assortment optimization problem in the presence of personalized sales targets. Our framework integrates both sales target optimization and personalized assortment planning as a two-stage stochastic program. Based on this modeling framework, we develop a family of simple and effective algorithms, the Debt-Weighted Assortment policy, and demonstrate their optimality for assortment planning with personalized sales targets. Our modeling framework is flexible enough to incorporate several important applications that unveil interesting insights. The first application explored in this paper is sales target personalization. In this application, we show that personalized sales targets may require a substantially higher cost to induce the necessary customer traffic. To address this issue, we propose a multi-sourcing strategy that efficiently re-balance customer types and personalized sales targets. Next, we apply our modeling framework to the classic personalized assortment optimization problem with inventory constraints. We propose a family of debt-weighted assortment algorithms that prove to be asymptotically optimal. Furthermore, the proposed algorithms achieve a higher expected revenue and a lower revenue variability than the benchmarks in the existing literature such as choice-based linear program and LP-resolving policies.

Keywords: Online Convex Optimization, Personalized Sales Target, Assortment Optimization

Suggested Citation

Li, Xiaolong and Rong, Ying and Zhang, Renyu and Zheng, Huan, Personalized Sales Targets with Customer Choices (March 7, 2020). Available at SSRN: https://ssrn.com/abstract=3538755 or http://dx.doi.org/10.2139/ssrn.3538755

Xiaolong Li

affiliation not provided to SSRN

Ying Rong

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

No.535 Fahuazhen Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200052
China

Renyu Zhang (Contact Author)

New York University Shanghai ( email )

1555 Century Avenue
Shanghai, 200122
China
86-21-20595135 (Phone)

HOME PAGE: http://www.nyu.edu/projects/rzhang/index.htm

Huan Zheng

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

No.535 Fahuazhen Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200052
China

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
19
Abstract Views
144
PlumX Metrics