Monetary Discount Strategies for Real-Time Promotion Campaign

Abstract

The effectiveness of monetary promotions has been well reported in the literature to affect shopping decisions for products in real life experience. Nowadays, e-commerce retailers are facing more fierce competition on price promotion in that consumers can easily use a search engine to find another merchant selling an identical product for comparing price. To achieve more effectiveness on real-time promotion in pursuit of better profits, we propose two discount-giving strategies: an algorithm based on Kernel density estimation, and the other algorithm based on Thompson sampling strategy. We show that, given a pre-determined discount budget, our algorithms can significantly acquire better revenue in return than classical strategies with simply fixed discount on label price. We then demonstrate its feasibility to be a promising deployment in e-commerce services for real-time promotion.