Short note on Market basket analysis and Benefits of Market Basket Analysis.

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 MARKET BASKET ANALYSIS

Market basket analysis is an example of a frequent pattern mining mainly used by retailers to understand customer purchase behaviors. In market basket analysis retailers determines what items are frequently bought together or placed in the same basket by customers. Based on the combinations of products that frequently co-occur in transactions retailer uncovers associations between products. These uncovered associations are then used by retailers to make purchase suggestions to consumers. For example, when a person buys a particular model of smartphone, the retailer may suggest other products such as phone cases, screen protectors, memory cards, or other accessories for that particular phone. This is due to the frequency with which other consumers bought these items in the same transaction as the phone. Similarly, stationery retailers also, make their recommendation of the next item to the customer based on the baskets similar to shown in figure 5.1 below.


                                    figure 5.1: Market baskets for Stationary

Market basket analysis only uses transactions with more than one item, as no associations can be made with single purchases. Besides this it does not consider the order of items either within a transaction or across transactions.

Benefits of Market Basket Analysis

  • Market basket analysis can increase sales and customer satisfaction. Using data to determine what products are often purchased together, retailers can optimize product placement, offer special deals and create new product bundles to encourage further sales of these combinations. These improvements can generate additional sales for the retailer while making the shopping experience more productive and valuable for customers. By using market basket analysis, customers may feel a stronger sentiment or brand loyalty toward the company.
  • Market basket analysis isn't limited to shopping baskets. Other areas where the technique is used include e-commerce websites, analysis of credit card purchases, analysis of telephone calling patterns, Identification of fraudulent insurance claims, analysis of telecom service purchases etc.

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