Section-A, Group 9 ScanPro: Forecasting in Mature Markets Objective: To create a model for estimating promotional effects.

Important features of the model: 1. 2. 3. 4. Model ignores the effect of consumers increasing inventory of the brand for price advantages. Data from all stores pooled, as store differences not crucial to manufacturer. All possible two-way interactions between promotional variables considered 52 weekly indicator variables added as proxies for omitted variables.

Metric used for prediction-Sales index: It is a ratio of unit sales of a week with promotion to the median unit sales during non-promoted weeks, for a particular brand and a particular store. The measure takes into account the change in price of other brands due to their promotion, display and/or feature of both the brand under study and other brands and the effect of seasonal variations. Sources of error-residual analysis: 1. Average residual values vary across stores, which means some of the assumptions regarding variability w.r.t. stores was not true. 2. Comparing average residuals for the weeks show higher than predicted sales index for nonpromoted weeks immediately following promotion. This violates the generally held assumption that consumers increase their inventories during promotional periods. Predictive validity: Results obtained using the proposed model on a test data set have been compared with 2 other models-weekly indicator and naive models and the proposed model has been found superior. Conclusions: 1. There are substantial differences in promotional effects across geographical regions. 2. Interaction between the variables feature and display: The effect of using the two promotional means together was found to be more than using them separately one after the other. 3. Feature and display affect the sales of competitive brands to different extents. Learning: The process of providing reliable quantitative estimates and hence predictions of factors which apparently can only be describes qualitatively.

Describe what you want to estimate in qualitative terms

Decide parameters on which it depends , and the nature of dependence

Establish a quantitative relation among the variables

Evaluate its predictive validity Evaluate its predictive validity

Test the model using data

Estimate the different parameters

Make and state assumptions and approximations