Use Predictive Analysis to Gauge the Effect of a Price Change or a Promotion on Sales
- by Sunil Mehta, Solution Architect, SAP
- Biswajit Biswas, Subject Matter Expert in SAP Analytics, SAP GD
- October 11, 2013
Predict the outcome of a promotional program or price change on sales figures using predictive analysis. Sunil Mehta and Biswajit Biswas provide step-by-step instructions that focus on the food and beverage industry.
Exponential smoothing is used to revisit, review, and revise forecast values based on comparison of historical data. This smoothing follows the concept of weighted averages. Older observations are given a lower weightage and more recent ones have a higher weightage. A selection of algorithms allows you to consider sales trends and seasonality in your forecasts.
A pizza chain wants to increase its sales volumes and its marketing team has come up with several ideas to promote sales. Because of budget constraints, the company doesn’t want to invest heavily. Therefore it would like to do some scientific analysis before it decides to invest in any of the promotional schemes.
The statistical analysis of the historical data would uncover hidden trends, allowing the company to evaluate the promotional schemes linked to such trends. It could then ascertain the probable impact on sales. The data is already available; the company just needs the right model to be created in the SAP BusinessObjects Predictive Analysis tool.
We first show how to see the impact of a promotion scheme in different markets across a region, with the emphasis on how to identify the impact of a price change and a scheme. For this purpose you need marketing data.
We then focus on forecasting future sales, a method that requires historical sales data.
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