Transactions on Machine Learning and Data Mining (ISSN: 1865-6781)

Volume 10 - Number 2 - October 2017 - Pages 57-65

Simulation based Approach for Special Discounting Threshold

Shashank Shekhar, Kaushik Shankar, Sushanta Kumar Mishra, Sam Pritchett, and Parag Chitalia

VMware Inc., Palo Alto, USA


There are many existing solutions available that provide a recommendation to increase the threshold of the minimum order size to avail special discounts (SPF) by minimizing the loss in order conversion. The goal of such solutions is to maximize the earning and maximize quote to order conversion. However, these solutions are primarily based on the relationship between order size and quote to order conversion and utilize historical conversion rates at different price points (List Price-Discount). This paper illustrates the use of Single Item Single Period Newsvendor problem and Extreme Gradient Tree Boosting methods to simulate a case for increasing order thresholds and calculating the corresponding loss in order conversion. The boosting method was applied on the training data and simulated and cross-validated across three test data sets to test three different price change scenarios. We computed the expected quotes at the end of the period and expected conversion at the end of the period to maximize profit.

Keywords:Extreme Gradient Tree Boosting, SPF, List Price, B2B, Single Item Single Period Newsvendor problem, quotes, conversion

PDFDownload Paper (379 KB)

Back to Table of Contents