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Discovering heterogeneous consumer groups from sales transaction data

Title
Discovering heterogeneous consumer groups from sales transaction data
Authors
Lee, HaengjuEun, Yongsoon
DGIST Authors
Eun, Yongsoon
Issue Date
2020-01
Citation
European Journal of Operational Research, 280(1), 338-350
Type
Article
Article Type
Article
Author Keywords
Revenue managementDemand untruncationDemand segmentationLatent class multinomial logit modelEM method
Keywords
ESTIMATING PRIMARY DEMANDASSORTMENT OPTIMIZATIONREVENUE MANAGEMENTCHOICE MODELSUBSTITUTIONALGORITHMCATEGORY
ISSN
0377-2217
Abstract
We propose a demand estimation method to discover heterogeneous consumer groups. The estimation requires only historical sales data and product availability. Consumers belonging to different segments possess heterogeneous preferences and, in turn, heterogeneous substitution behaviors. For such consumers, the latent class consumer choice model can better represent their heterogeneous purchasing behaviors. In the latent class choice model, there are multiple consumer segments, and the segment types are not observable to the retailer. The expectation-maximization (EM) method is developed to jointly estimate the arrival rate and the parameters of the choice model. The developed method enables a simple estimation procedure by treating the observed data as incomplete observations of the consumer type along with consumer's first choice. The first choice is the choice before the substitution effects occur. We test the procedure on simulated data sets. The results show that the procedure effectively detects heterogeneous consumer segments that have significant market presence. © 2019
URI
http://hdl.handle.net/20.500.11750/10494
DOI
10.1016/j.ejor.2019.05.043
Publisher
Elsevier BV
Related Researcher
  • Author Eun, Yongsoon DSC Lab(Dynamic Systems and Control Laboratory)
  • Research Interests Resilient control systems; Control systems with nonlinear sensors and actuators; Quasi-linear control systems; Intelligent transportation systems; Networked control systems
Files:
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Collection:
Department of Information and Communication EngineeringDSC Lab(Dynamic Systems and Control Laboratory)1. Journal Articles


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