A customer visits a retailer to buy various products. The marketing advertisement or discounts along with customer’s preferences and needs drives the customer to the store. The customer travels different sections and aisles of the retail stores. The customer picks up products based on planed list of products, product assortment and in-store advertisements and offers. Once the customer buys all the products, it goes to billing counter and checkout for the visit. Somewhat similar activities happen at an online retailer website except product selected based on clicks.
A group of all the products which are bought by a customer on a single store visit is called a Basket or Shopping cart.
Composition of products selected by consumers during their visits to the retailers, Shopping Baskets, provides opportunities to understand consumer shopping behavior, factors driveling product selection, and the consumer make spending tradeoffs.
Understanding of how baskets are built by the consumers, the retailer can leverage in
- Allocating Space for various product categories
- Designing store layout
- Formulating merchandising (Activities involved in promoting product sales in a retail is called merchandising)
Merchandising – According to American Marketing Association- is the “planning involved in marketing the right merchandise or service at the right place, at the right time, in the right quantities, and at the right price.”
Market Basket Analysis Approach
Market Basket Analysis (Association Analysis) is a mathematical modeling technique and estimates probability of customer buying a certain group of items and also likely to buy another group of items. Following steps are typically followed to carry out Market Basket Analysis.
- Data Preparation
- Pattern Identification and Association/Affinity Analysis
- Validation of associations
- Leveraging for cross-sell, product promotions and affinity positioning