Promotion Forecasts

Nick T. Thomopoulos ()
Additional contact information
Nick T. Thomopoulos: Illinois Institute of Technology

Chapter 6 in Demand Forecasting for Inventory Control, 2015, pp 71-87 from Springer

Abstract: Abstract Promotions come in various ways: price reduction, buy one get one free, zero interest, no money down, and so on. They often occur when a supplier or a stock location offers a price incentive of some sort to the customers to buy now with enticements for purchases more often or in larger quantities. The promotion typically has a start-date and end-date, and the demand during these days is relatively higher than the normal non-promo days. This situation causes wild fluctuations in the demand history and upsets the forecasting model in use. The standard deviation increases and the forecast coefficients swing out of normal control. Special adjustments are needed in the forecast models to overcome the fluctuations. Two forecast models are described here to accommodate the promotion activity: the promotion horizontal model and the promotion trend model. Both of the models involve two stages: the initial stage and the revision stage. The initial stage is the first estimates of the coefficients of the model. This stage requires N history months of demands and promotion measures. The coefficients of the model are estimated using regression methods where equal weight is given to each of the history months. The revision stage is used for the months after the initial stage where the coefficients are revised every month with each current month’s data using the smoothing method. Estimates of the standard deviation and the coefficient of variation are computed for each of the two stages.

Keywords: Forecast Model; Residual Error; Forecast Error; Standard Deviation Increase; Stock Location (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-319-11976-2_6

Ordering information: This item can be ordered from
http://www.springer.com/9783319119762

DOI: 10.1007/978-3-319-11976-2_6

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().