Consumer Offer Value Optimization via Segmented Testing
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Solution Overview
Problem
Manufacturers face challenges in optimizing product offer values, such as discounts, to maximize profit per unit sold due to insufficient data on price elasticity, especially in new markets, leading to inefficient production capacity utilization and potential losses from unknown discount values.
Innovation Solution
A method involving selecting a target group of consumers, assigning unique codes to products, and conducting tests with varying offer values from 0% to 100% to measure uptake and profit per unit sold, establishing a relationship to determine a near-optimal offer value that maximizes profit, allowing for precise planning of production infrastructure expansion.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If manufacturers offer discounts to increase sales volume, then the number of units sold increases, but the profit per unit sold decreases
Solution Approach 1:
The patent applies parameter changes by systematically varying the discount parameter across different test groups to observe its effect on sales volume and profit. By changing the discount parameter from 0% to 30% across multiple groups, the patent identifies the optimal parameter value that maximizes total profit while maintaining adequate sales volume.
Solution Approach 2:
The patent implements feedback by measuring the actual sales response and profit outcomes from each discount level offered to different consumer groups. This feedback loop allows the manufacturer to adjust the discount strategy based on observed consumer behavior and financial results, ultimately identifying the optimal discount level that balances sales volume and profit per unit.
2Productivity
If manufacturers expand production capacity to meet increased demand, then more units can be sold, but the infrastructure cost increases
Solution Approach 1:
The patent applies preliminary action by conducting test marketing campaigns with varying discount levels before committing to large-scale production expansion. By first measuring consumer response and demand elasticity through controlled tests, the manufacturer can make informed decisions about the necessary production capacity expansion, avoiding unnecessary infrastructure costs.
Solution Approach 2:
The patent uses partial action by implementing discount strategies in limited test groups rather than across the entire market simultaneously. This allows the manufacturer to gauge demand at different price points and plan production capacity expansion more precisely, avoiding excessive infrastructure investment while still capturing potential sales growth.
3Measurement precision
If manufacturers test multiple discount levels to find optimal pricing, then pricing strategy improves, but the testing cost increases
Solution Approach 1:
The patent applies segmentation by dividing the target consumer base into multiple distinct groups, with each group exposed to a specific discount level. This segmentation allows for controlled testing of different pricing strategies simultaneously, gathering comprehensive data on consumer price sensitivity while distributing the testing cost across multiple groups rather than requiring extensive testing on a single group.
Data Source
AI summary
A method of optimizing an offer value to be offered to a selected group of consumers includes selecting a series of products, wherein each are serialized unique code marked; selecting a target group of consumers from a consumer database, each consumer with a registered consumer profile in the consumer database, the selecting based on a set of criteria; selecting a first subgroup of consumers from the target group of consumers; determining an initial offer value of the uniquely code marked product to be presented to the initial first subgroup of consumers; distributing (offering) the initial offer value to the selected initial first subgroup of consumers; a number of the selected initial first subgroup of consumers accepting the offer; associating the code of the uniquely code marked product to the acceptance of offer to the consumer profile of each the accepting consumer in the first subgroup of consumers; summing the number of accepted uniquely code marked products to a first uptake value as a function of the initial offer value; registering the initial offer value and the first uptake value in order to calculate a first initial profit value; repeating, for a number of second, third, . . . time, the following steps: selecting a second, third, . . . subgroup of consumers from the target group of consumers; determining a second (third, . . . ) offer value of the uniquely code marked product to be presented to the second, third, . . . subgroup of consumers, being different from the first offer value; distributing (offering) the second (third, . . . ) offer value to the selected second, third, . . . subgroup of consumers; a number of the selected second group of consumers accepting the second, third, . . . offer; associating the code of the uniquely code marked product to the accepted second (third, . . . ) offer value to the consumer profile of each the accepting consumer; summing the second (third, . . . ) number of accepted uniquely code marked products to a second (third, . . . ) uptake value as a function of the second (third, . . . ) offer value; registering the second (third, . . . ) offer value and the second (third, . . . ) uptake value in order to calculate a second, (third, . . . ) initial profit value; thus establishing a set of uptake values as a function of offer values, and their calculated or estimated corresponding profit values; based on these data points, establishing a relationship of profit as a function of offer value; selecting from the relationship a near-optimal offer value giving a near-optimal profit; distributing (offering) the optimal offer value to a large part of or all of the selected target group of consumers.