Decision support system development for store flyer space allocation: Leveraging own- and cross-category sales effects

Print store flyers that feature retailer assortments remain a key retail marketing communication tool, making their space allocation among various product categories a vital decision. Academic research on store flyers has mostly taken a descriptive approach, focused on grocery settings where a large number of (often competing) categories are promoted, neglecting cross-category flyer space effects. We advance the literature by addressing how a non-grocery retailer can best allocate space in a showcase flyer intended to highlight the assortment of a few categories, with the aim of maximizing total store revenue. For this purpose, we have developed a dynamic Decision Support System (DSS) handling own- and cross-category flyer space effects on sales. Our DSS features two components: (1) a sales response model and (2) a store flyer space allocation tool that enlists a custom-built Large Neighborhood Search heuristic to solve the store flyer space allocation problem in less than a minute. Dynamics are captured using time-varying baseline estimates that yield optimal flyers to serve different seasons by limiting the level of overlap in subsequent flyers within the same season. In an empirical application for a furniture and home goods retailer, our optimization generates an overall average expected sales improvement of 13.0% versus this retailer’s actual flyers. By exploiting cross-category effects, store flyers become more thematic as they concentrate on one or two departments.