Finite Mixture Models for Clustering Auto-Correlated Sales Series Data Influenced by Promotions

Abstract

The focus of the present paper is on clustering, namely the problem of finding distinct groups in a dataset so that each group consists of similar observations. We consider the finite mixtures of regression models, given their flexibility in modeling heterogeneous time series. Our study aims to implement a novel approach, which fits mixture models based on the spline and polynomial regression in the case of auto-correlated data, to cluster time series in an unsupervised machine learning framework. Given the assumption of auto-correlated data and the usage of exogenous variables in the mixture model, the usual approach of estimating the maximum likelihood parameters using the Expectation–Maximization (EM) algorithm is computationally prohibitive. Therefore, we provide a novel algorithm for model fitting combining auto-correlated observations with spline and polynomial regression. The case study of this paper consists of the task of clustering the time series of sales data influenced by promotional campaigns. We demonstrate the effectiveness of our method in a case study of 131 sales series data from a real-world company. Numerical outcomes demonstrate the efficacy of the proposed method for clustering auto-correlated time series. Despite the specific case study of this paper, the proposed method can be used in several real-world application fields.

Keywords

• sales series data
• auto-correlated data
• clustering
• finite mixture model
• expectation-maximization