Viewing Assortment Optimization Through Shopper Decision Trees

I was asked to take a look at DemandTec's new site and provide some commentary on the redesign  and their approaches.  I went quickly to assortment choices and shelf planning, which  are something I had examined very early on in my analytics career.

We were always looking at ways to analytically describe which products should be included in retail and where they should be placed.

It can be analytically described, but the resulting number of combinations are daunting.  We did work in this area for parts of categories, using IBM's behemoth MPSX package,  as early as the late 60's.

When  I arrived much later on I was asked to look at the systems involved.  You could not solve all of the problem, but you could satisfactorily do very useful things for parts of the shelf and aisle. Then use them as building blocks to understand the entire store.

It was understood early on that such planning needed to be done collaboratively.    In particular between humans acting as designers, and computers that could handle the sheer quantity of information involved.  It was also clear that there was a need to have long term design stability, so as to not confuse the shopper and effectively support brand loyalty.

This turned out to be done best my having people adjust the computer generated design. Then re-evaluate the results.   You also needed to think about how the shopper reacted when their favorite item was moved or disappeared. Where would they go?  What was next?  Think of it as a decision tree of choices.  That is what we ultimately considered.

The complete implications of any particular assortment choice was often not considered completely from the perspective of the shopper.

This was where I particularly enjoyed DemandTec's overview, and  their view of  " ... the shopper, their decision trees, and the marginal additional value of each SKU to the equation, manufacturers and retailers can work together more effectively to delight shoppers and build customer loyalty ... ".  

Ultimately it is about the shopper and how they interact with shelf and purchase.  The right assortment produces value for retailer, manufacturer and shopper.

See their overview, and their Assortment optimization brief.