Discovering Interpretable Rules that Explain Customers’ Brand Choice Behavior

Abstract

The problem about brand choice or brand switching has been discussed for a long time in a marketing research field [1][2][3][6]. They focus on revealing a probability of brand switching and what factors are related to the brand switching. However, brand choice behavior of individual customer has been neglected in most of existing literature. In this study, we consider the problem of finding an optimal distribution strategy of discount coupon that determines to which customers and at what price coupons should be distributed, using detailed customer information.

Such a way to distribute a discount coupon based on customer information is available on today’s new technology. For example, Pharma, which is one of the biggest drugstore chains in Japan, developed advanced POS terminal that has a function to issue a customized coupon [5]. Furthermore, in today’s virtual store on the Internet it is possible to set a different price on a different customer.

In view of this, we formulate the problem as two different optimization problems by paying a special attention to the interpretability of rules. We then propose a heuristic method for solving it. Using huge sales data of the biggest drugstore chain in Japan, we have applied the algorithm to the case of detergents. Using the method we found some interesting rules which can be implemented in real business.

It should be pointed out here that the interpretability of the rules obtained from the solution is extremely important because even if the solution is good,

Research of this paper is partly supported by the Grant-in-Aid for Scientific Research on Priority Areas (A) by the Ministry of Education, Science, Sports and Culture of Japan. We also express our gratitude to Gamp;G Pharma Inc. for kindly providing us with their sales data.