Promotion Optimization

Demand modeling and promotion optimization using the Iowa Liquor Sales dataset.

Research questions

Exploratory data analysis

• Which Iowa counties consume the most liquor by volume?

• Who are the top 10 vendors in Iowa by sales?

• What are Jim Beam's top selling liquors by sales?

Demand modeling

• Predict weekly sales as a function of price and seasonality (month).

Which Iowa counties consume the most liquor by volume?

Who are the top 10 vendors in Iowa by sales?

ID	Sales (Millions of $)	Vendor
260	307.54	Diageo Americas
370	103.29	Pernod Ricard USA/Austin Nichols
65	100.22	Jim Beam Brands
434	96.61	Luxco-St Louis
115	85.89	"Constellation Wine Company, Inc."
85	80.92	Brown-Forman Corporation
421	79.48	"Sazerac Co., Inc."
35	67.17	"Bacardi U.S.A., Inc."
395	47.44	Proximo
55	46.03	Sazerac North America

What are Jim Beam's top selling liquors by sales?

ItemID	Sales (Millions of $)	VendorID	Item	Volume (ml)
19068	5.39	65	Jim Beam	1750
19067	4.9	65	Jim Beam	1000
34578	4.33	65	Pinnacle Vodka	1750
15248	3.97	65	Windsor Canadian Pet	1750
19066	3.9	65	Jim Beam	750
19476	3.88	65	Maker's Mark	750
19477	3.82	65	Maker's Mark	1000
24458	3.26	65	Kessler Blend Whiskey	1750
82847	3.09	65	Dekuyper Peachtree	1000
10628	2.63	65	Canadian Club Whisky	1750

What is the price-response for Jim Beam 1750ml?

How has demand for Jim Beam 1750ml varied over time?

How have prices for Jim Beam 1750ml varied over time?

Demand modeling

• Take month (one hot encoded) and log price as features.

• Take log demand as response.

• RMSE Mean = 779 Bottles

• RMSE Standard Deviation = 678 Bottles

• RMSE Median = 672 Bottles

Model interpretation

PED = % Change in Quantity Demanded / % Change in Price

Therefore,

% Change in Quantity Demanded = PED x % Change in Price

So a +1% change in price will only result in a (-0.02) x 1% = -0.02% change in demand (very inelastic).

Therefore, it's no wonder Jim Beam has continued to raise prices and stopped offering promotions all together in 2016.

Setting APP_TOKEN Environment Variable

In ~/.bashrc add the following at bottom of file:

export APP_TOKEN='YOUR_APP_TOKEN'

App tokens can be obtained here.

Getting Iowa precinct level shape file

https://sos.iowa.gov/shapefiles/Statewide%20Precinct%20Layer/

https://upload.wikimedia.org/wikipedia/commons/5/5f/USA_Counties_with_FIPS_and_names.svg