Market basket analysisMarket basket analysis identifies customers purchasing habits. It provides insight into the combination of products within a customers 'basket'. The term 'basket' normally applies to a single order. However, the analysis can be applied to other variations. We often compare all orders associated with a single customer. Ultimately, the purchasing insights provide the potential to create cross sell propositions:
Developing this understanding enables businesses to promote their most profitable products. It can also encourage customers to buy items that might have otherwise been overlooked or missed. Market basket analysis delivers the "Amazon effect" to your business. When you place an order on Amazon, a list of potentially interesting products (based on a profile of what other "similar" customers have ordered) is presented. They are seeking to encourage purchase of additional items and thereby increase average basket value. The following, often quoted, example illustrates the benefits of understanding purchasing habits. Beer and nappies
What did the supermarket do with this knowledge?
Implementing market basket analysisThis type of analysis is certainly not the exclusive domain of the supermarkets. Information required:
Data preparation:
Starting the analysis:
The market basket analysis results might look like this:
This analysis can be enhanced by combining other customer elements e.g. demographics, purchase channel preference, business sector. Perhaps there is a need to differentiate between male and female purchasers. When preparing the data, link in the associated customer records and add gender to the results e.g. fields: product A, product B, volume of purchases and gender. What are the challenges with Market basket Analysis?You could use the above as the basis for identification of latent cross-sale opportunities. But there are a few challenges to be overcome in order to be really successful:
All of these can be overcome by integrating other forms of customers analysis and profiling. Gaining value from Market Basket AnalysisMany of Information Drivers clients are interested in what their customers have purchased and in what combination. They use this information to direct on-line and off-line propositions. Would you like to understand your customer purchasing habits? Could market basket analysis be applied to your business and or website? A website implementation is an ideal candidate. Just like Amazon, you could use your website data to drive propositions, advert and product placement. Would some guidance with implementing market basket analysis be useful? If that's a 'Yes', get in touch to arrange an informal discussion contact our Customer Analytics Director: david.willis@information-drivers.com or call David Willis directly on: 01494 871342. Not ready yet? Perhaps you would you be interested in the results? Please view the results of our Business Opportunity Assessment. |
Telephone: 01494 871 342 contact@information-drivers.com"The reports generated by Information Drivers have enabled us to make more informed decisions about the business and its processes. As a result we have commissioned further complementary projects." ~ Natalia Norford, Business Development Executive, b-Live CMP Information is an international publisher and major events organiser. CMPi delivers targeted integrated business media solutions to around 20 industry sectors. The management team, recognised they were not leveraging the strengths of their vast media empire. They sort external assistance from one of the big four consultancies to address this issue. One of the observations was 'there were probably cross-sell and up-sell opportunities' and CMPI should capitalise on them. That is where Information Drivers came into the project. We delivered actionable results faster and cheaper than the incumbent consultancy. Ask for advice about your data and the information you need. Just submit your question to The Data Surgery |