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Harnessing Customers – RFID

Simulation and Beyond

Zeeshan-ul-hassan Usmani
CS PhD Seminar, October 15th 2007
Department of Computer Science
Florida Institute of Technology,
Melbourne, FL
zusmani@fit.edu
Table of Contents
• Supermarkets
• Literature Review
– Influencing Customers
– Trends in Supermarket Optimization
• Impulse Shopping
• Swarm-Moves
– Rationale
– What
– How - Customer Profiles
– How - Database
– On-Sale Factor
– Swarm Factor
– Decision Rule
• Results
• Conclusion and Future Work
• References
Supermarkets
Supermarkets…
• Early Grocery stores - “Do Not Touch stores”

• To Reduce the Labor Cost, Supermarket Idea Came into


existence with Piggly-Wigly’s Store in 1920

• 160 Registered chains of Supermarkets in US alone

• Two opposite goals - Retailers want to keep the customers


in the store for as long as possible while customers want to
leave the store as soon as they finished their planned
shopping.
Supermarkets…
• Background Music, Greetings, Smiley, EDLP, Bargains,
Sales, Internet Booths, ATM, Barber Shops, Pharmacy all
are trying to keep the customer as long as they can.

• Wal-Mart - 250+ Billion Dollar Annual Sales,

• Stock Price has increased by 300% over the last decade

• Customer visits Supermarket (on average) 2 to 4 times per


week
Literature Review
Literature Review…
• More profit and sales is the number one priority for every
manufacturer to live, succeed and be in the business.

– There are generally two ways to do this


• Out-store tactics: Supply-chain management, personnel management,
inventory management, advertising campaigns, marketing, product
positioning, pricing etc From manufacturing of the product to place it in
the supermarket shelves.

• In-store tactics: When customers reaches the supermarket: Bargains,


everyday low prices, special and limited offers, buy-one-get-one, free
samples, shelf-reorganization, cross-categorization and use of previous
data to forecast the future sales and requirements.
Literature Review…
• Both approaches either work before customers enter the
market (Out-store) and after they leave the market (In-Store
for next set of customers)

• The majority of the available research has been done using


neural networks, genetic algorithms, KDD and data mining,
with the aim of searching for patterns and information in the
past data that can be used to predict the future sales level
and stock requirements (4th July Example).
Influencing Customers
• Milliman used background music to produce certain attitudes
among employees and customers to stimulate customers
purchasing and set the overall shopping flow.
• Kodak Company made the recommendations for lightning,
lights for plastic or glass items, fluorescent lights, polarized
lights, and brightness.

• The study of emergent buying behavior of customers in


store can be used in conjunction of other techniques
such as music, lights, shelf organization and product
positioning for particular group of customer in a given
time.
Impulse Shopping
Impulse Shopping…
• Immediate, unintended, powerful and persistent urge to buy
the product
• Unplanned Buying.

• Classification
– Pure Impulse: Immediate urge to buy a product which breaks the
normal shopping pattern.
– Reminder Impulse: Shopper sees an item and remembers that he is
out of stock or an advertisement about that product.
– Suggestion Impulse: Customer has no prior experience of an item,
he saw the item and realize the need for it.
– Planned Impulse: Customer wants to buy some product given it is
on sale or have some special bargain.
Impulse Shopping…
• Impulse Shopping accounts for 40% of all shopping in
supermarkets.
Swarm-Moves

The Secret of success is to do common


things uncommonly well.

~John D. Rockefeller
Rationale
• People have a natural tendency to follow the crowd.

• Knowing what is being purchased by other people in real-


time may/will affect others to purchase the same product(s).

• Ideally, the implementation of our model can provide


costumers with a better shopping experience and retailers
with a higher sales level, thus easing the tension that we
described earlier between the customers’ and the stores’
goals.
What
• Customers equipped with RFID-enabled shopping carts can
get information about other costumers purchases yet
informing the store of their own shopping.

• The Swarm-Moves simulator attempts to capture the


’Collective Average Choice’ that costumers are taking.

• No need to worry about “Why”. (Customer’s ages, sex,


status, pay etc)

• Just “What”
How – Customer Profiles

• Swarm-Moves implements a model where customers have


profiles, with the likelihood of purchase from individual
category (Books and CD example).

• Probability is also influenced by discount (sales) price and


the collective choice of other costumers in the store.
How – Products Database
• Database contains the inventory of Swarm-Mall (The Virtual
Supermarket).

• It has 120 products with following attributes


– Item Name, Price, Size, Advertisement Percentage,
Prominent Display (Yes, No), Weight, Product Life,
On-Sale percentage, Category, Good-will (Brand name)
On-Sale Factor
• It has been argued that the “depth of promotion” increases
the sales volume.

fonsale( x ) = 1 − e x log(1− a )
−µ
Where
• a = 0.03, µ = 0.1
• x = Discount level being offered to the product.
Swarm-based Purchase Factor
• The function conveys the idea that customers do not care about others’
purchases until it reaches a threshold when the influence greatly
improves and then stabilizes.

1
f RFID ( x) =
1
(1 + a ( x +b )
)
Where e
• X represents the percentage of people currently buying the product in
supermarket.
• Constants a and b control the slant of the function and the mid point of
the step function (a = 0.1 and b = −50).
Decision Rule
• The decision of buying an item is depends on the following
equation

• Factor F(x) is applied to the main probability (from customer


profile).

• F(x) can be sales factor or the swarm factor, or both applied


in series.

Pnew = Pprofile + (1 − Pprofile ) × F ( x )


Cheaters
• How we measure the penetration of false or controlled
information within the RFID model?
• How vulnerable the proposed system is when it comes
to feedback, trust and recommendations?
• a cheater is an agent that can be controlled by the
supermarket for their own benefit but it treated as an
ordinary agent by other agents
• Think of a customer who is buying just to increase the
number of units sold and therefore increasing the
chances of products’ recommendation by RFID model .
Cheaters…
• It should be noted that cheaters are ordinary agents and
not leaders, no body is following them, they are as
ordinary customers as any body else.
• The cheaters can cheat and exploit the portion of
influence they have being a customer on overall
supermarket’s RFID model.
• The cheaters have their own list of items to purchase,
we call it list C – that contains the products supermarket
wanted to sell more. All cheaters have the same list to
increase the influence of their recommendation on RFID
model.
Swarm-Moves Simulation
Results
Results…

• Swarm model is able to get more then double sales over


Customer profiles and 29% extra over Sales model.

• Swarm Factor is comparable (individually) with Sales Factor,


having the same (perhaps better) effects.
Customer Profiles Vs Swarm Factor
Profiles, Sales and Swarm Factor
Swarm-Factor Contribution
Average Customer Spending in the
Supermarket

250
29%
extra
200

150 108%
extra
79%
100
extra

50

0
Customer Profiles Sales Model Swarm-Sales Model

Customer Profiles Sales Model Swarm-Sales Model


Optimum Percentage of Depth-of-
Promotion in Sales model
Sales % and Volume

$400,000.00

$300,000.00

$200,000.00
Amount in US$

$100,000.00

$0.00
10 20 30 40 50 60 70 80 90 99

-$100,000.00

-$200,000.00
Sales Precentage

Sales Volume Profit


Influence of Cheaters

50

40
No of Agents

30

20

10

0
1 2 3 4 5
Agents 50 50 50 50 50
Cheaters 0 5 10 20 25
Purchases from set C 5 8 12 18 27
Cheaters with Variable Number of
Customers

250

200
No of Agents

150

100

50

0
1 2 3 4 5
Agents 50 100 150 200 250
Cheaters 10 20 30 40 50
Purchases from set C 12 19 27 41 47
Swarm Factor Contribution
• Swarm model contribution looks like the sigmoid.

• There is a threshold point in graph which changes the


customers decision to buy the product and at certain point it
will stabilize.

• These threshold and stabilization point can be different for


each product of different categories.
Conclusion & Future Work
Conclusion
• The simulation offers an effective marketing tool for
supermarkets to increase their sales volume based on
collective choice of customers.

• The Swarm-Factor has the similar effects as of depth of


promotion in supermarket sales.

• Environmental information can be used to influence


customers to buy more on impulse.

• The initial results should be validated in a real supermarket


setting.
Future Work

• Cheaters (submitted to JTAER)

• Addition of multiple entrance and exits

• Combine Bargains

• Effect of other factors like price, weight, size, advertisement


and prominent display on Sales Volume and Impulse
Shopping.
More Information
1. Zeeshan-ul-hassan Usmani, Ronaldo Menezes, “Increasing Sales in Supermarkets via
Real‐Time information about Customers’ Activities – The Swarm‐Moves Simulation”,
International Modeling, Simulation &Visualization Conference, MSV‐2006, Pages
108‐114, June 26‐28, 2006, Las Vegas ‐ NV, USA
2. Zeeshan-ul-hassan Usmani, "Swarm‐Moves: Changing Adaptive Behavior of Customers
to Increase Impulse Shopping,'' Last Minute results presented in the 9th International
Conference on the Simulation of Adaptive Behavior (SAB'06); From Animals to Animats
9, Sep 25‐29, 2006 Roma, Italy
3. Zeeshan-ul-hassan Usmani and Ronaldo Menezes, "Besides Tracking – Simulation of
RFID Marketing and Beyond", Journal of Theoretical and Applied Electronic
Commerce Research (Submitted to Review)
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