An Integrated Approach for Retail Budget Allocations Across Store Labor and Marketing Activities PDF Download

Author: Olga Perdikaki
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Languages : en
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Book Description
The performance of a retail store depends on its ability to attract customer traffic, match labor with incoming traffic, and convert the incoming traffic into sales. Retailers make significant investments in marketing activities (such as advertising to bring customers into their stores) and in store labor (to convert that traffic into sales). In addition to advertising, some retailers offer promotions to shift store traffic within the day from peak to off-peak hours and reduce intra-day traffic variability.Based on prior studies and proprietary data, we establish the relationship between weekly sales performance of a retail store with respect to weekly store traffic, weekly store labor hours, and average intra-day traffic variability within a week. We develop a centralized model to allocate jointly limited store budget across (i) store labor, (ii) marketing efforts to drive traffic into the store, and (iii) marketing efforts to shift store traffic from busy to slow hours within a day, with the objective of maximizing store sales. We also discuss an uncoordinated case where the marketing group and the labor planning group make decisions separately. For this setting, we present different mechanisms that can be employed to achieve the centralized solution. Finally, we provide a framework that incorporates the output of the budget allocation model to facilitate store level sales force scheduling. Based on the results of our model, we present several insights that can help managers in budget allocation and sales force planning.