LPO Run Optimization

Run optimization in LPO determines the best pricing strategies at various levels, such as location, product category, and time. Users can configure optimization to apply pricing decisions at a price zone (a group of stores or online locations) or a specific node in the location hierarchy, such as a region or store group. However, the same instance cannot be set up to generate recommendations by price zone and location node (for example, region).

Once optimization is completed, LPO generates price recommendations at a more detailed level, known as the recommendation level. This can include:

  • Location or Price Zone Level - The specific stores, regions, or online locations where pricing applies.

  • Merchandise Level - The product category or grouping (for example, department, brand, or style/color).

  • Calendar Level - The period for which pricing recommendations are valid.

  • Customer Segment Level (for Targeted Offers) - Specific customer groups that receive personalized pricing or promotions.

For example, a retailer selling women’s apparel in university-based stores can group these locations into a single price zone and optimize pricing accordingly. Typically, optimization runs are set up at higher levels, such as Region or Price Zone, Department, and Week, while recommendations are generated at more granular levels, such as Style/Color, Location, or Customer Segment.

Example of Optimization in Action:

Imagine a retailer is optimizing prices for a grocery chain:

  • Optimization Setup Level: The retailer configures the run for the Dairy department across a price zone (for example, all urban stores) for a specific week.

  • Inventory and Data Roll-Up: LPO considers inventory, demand, and pricing rules at the chosen levels.

  • Price Recommendations: LPO generates recommendations for specific products (for example., different brands of milk), at each price zone, for a specific week, and even for different customer segments (if targeted offers apply).