Cross-Selling Optimization for Customized Promotion

The profit of a retail product not only comes from its own sales, but also comes from its influence on the sales of other products. How to promote the right products to the right customers becomes one of the key issues in marketing. In this paper, we propose a new formulation of promotion value by considering cross-selling effects within selected products and customers, which were largely ignored by existing work. We investigate the problem of customized promotion, which identifies promotional products and customers so that the promotion effect can be maximized. This problem can be decomposed into two subproblems: product selection and customer selection. The baseline methods entail an exhaustive traversal of all possible product and customer combinations, which is computationally intractable. As an alternative, we propose greedy and randomized algorithms to produce approximation solutions in an efficient manner. Experiments on both synthetic and real-world supermarket transaction data demonstrate the effectiveness and efficiency of the proposed algorithms.