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date: 11 April 2021

Abstract and Keywords

This article covers markdown optimization. After discussing the need for effective markdown management, it describes the nature of the markdown optimization problem, highlighting the key metrics that need to be optimized and the business rules and operating practices which constrain markdown decisions. The article discusses traditional markdown management methods and their shortcomings. Modern markdown optimization methods developed to address these shortcomings rely on two key building blocks: demand models and optimization algorithms. The article describes how to build and estimate demand models. It discusses several optimization approaches, offering guidelines on how to select the appropriate one, and concludes by describing how to measure the benefits of markdown optimization.

Keywords: markdown optimization, price decrease, pricing management, demand models

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