Optimizing offer sets based on user profiles

Abstract

Personalization and recommendation systems are being increasingly utilized by ecommerce firms to provide personalized product offerings to visitors at the firms’ web sites. These systems often recommend, at each interaction, multiple items (referred to as an offer set) that might be of interest to a visitor. When making recommendations firms typically attempt to maximize their expected payoffs from the offer set. This paper examines how a firm can maximize its expected payoffs by leverag ing th e kn owledge of the profiles of visitors to their site. We provide a methodology that accounts for the interactions among items in an offer set in order to determine the expected payoff. Identifying the optimal offer set is a difficult problem when the number of candidate items to rec ommend is large. We develop an efficient heuristic for this problem, and show that it performs well for both small and large problem instances.