System and method for forecasting price optimization benefits in retail stores utilizing back-casting and decomposition analysis

Abstract

A system and method for merchandising decomposition analysis (MDA), useful with stores, is provided. Econometric models are generated for product sales and are used to set pricing. Price setting may include optimizing prices. Point of sales data is collected from the stores, and benefits forecasts are generated and displayed. Benefit forecasts includes generating compliance, generating optimization benefit and generating level benefits. Generating optimization benefit includes at least one of differential benefit analysis, authorized benefit analysis and testable benefit analysis. The differential benefit analysis includes old/new cost method, cost neutral method and ignore cost method. Benefit forecasts generally include determining pre- and post-optimization price of the products, determining pre- and post-optimization costs, generating pre- and post-optimization forecasted units, calculating forecasted pre- and post-optimization profit, generate raw profit benefit, and calibrate raw profit benefit.