29 Jul 2009

Can we use Multiple Linear Regressions to model sales promotions?

The simplest approach to model promotions is through interventions. This is also called event modeling in the literature. We collect a list of events and classify into types of events by the intended effect or by the sensitivity on the volume. For example, retailer tabs may have a 10% lift on volume while an FSI may have a 20% lift.

Then we create different indicator variables and use them as independent variables to do the volume forecast. In some of the tools, you can specifically calculate the volume lift by event type.

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