Prepare Elasticity Model (Optimization - Price Waterfall)
- Jana Volencová (Deactivated)
To retrieve the elasticity factor calculated from transaction data, the Optimization - Price Waterfall model deployed by the Accelerator depends on another Negotiation Guidance model. Below is the simplest way to configure such a model on the partition; for details see the complete documentation for Negotiation Guidance models.
In this section:
Deploy
Note that if the Negotiation Guidance Model Class & Logics have already been deployed on the partition, deploying them again might override specific changes done by a pricing scientist. Also if the Negotiation Guidance Model Class is already present in Administration > Configuration > Optimization > Model Classes, you can directly use it without doing the deployment again.
The deployment can be done by PlatformManager, see Accelerate Negotiation Guidance for more details.
Prepare Transaction Source
The Negotiation Guidance model runs using a transaction source. The transaction source must meet the following prerequisites.
The transaction source must contain the following fields (create them if needed):
Customer field – ID of each customer. Be careful: it cannot be a source key. If it is, duplicate the field to be able to access it.
Customer Group field – ID of each customer group. Be careful: it cannot be a source key. If it is, duplicate the field to be able to access it. It must be defined as a dimension.
Product field – ID of each product. Be careful: it cannot be a source key. If it is, duplicate the field to be able to access it.
Product Group field – ID of each product group. Be careful: it cannot be a source key. If it is, duplicate the field to be able to access it. It must be defined as a dimension.
Quantity field – Number of products in each transaction.
Revenue field – Also named Invoice Price in the waterfall of the Price Waterfall Accelerator (extended to quantity).
Margin field – Also named Pocket Margin in the waterfall of the Price Waterfall Accelerator (extended to quantity).
Optimization Metric field – Margin percentage field, containing the quotient of Margin divided by Revenue.
The user will define some segmentation levels.
These fields must be defined as dimensions in the transaction source.
Avoid null values because the corresponding transaction rows will be ignored in the segmentation model and will cause an error in Optimization Price Waterfall models. If necessary, create a new field by using an expression that replaces empty values with a text (e.g., “Not provided”).
Create Model
In Optimization > Models, use the Add Model button.
Set a Name and a Label.
Select Negotiation Guidance as Model Class.
Click the Create button.
Run the Model
For basic negotiation guidance, it is pretty straightforward to run a model. If needed, please refer to Usage to run exactly what you need.
In the end, you need to have one and only one sigmoidal elasticity defined for each pair of product and customer. It is important to set the parameters in order to reach this goal. In particular, in the Configuration step:
Define levels of segmentation that belong to the customers or products (not a date of purchase, for instance).
Set the segmentation thresholds suitably for this goal.
Set the elasticity model to sigmoidal.
Only the product–customer pairs with an elasticity will be used in the optimization model. To ensure that most of the product–customer pairs have an elasticity, you can do the following in the Configuration step:
Increase the parameter value for Min depth of leaves for elasticity calculation, in particular, if your model has many segmentation levels.
Decrease the parameter for Max #Transactions in segment for elasticity calculation, in particular, if some of your leaves contain a lot of items.