Market Basket Analysis

 

               Market Basket Analysis

        

Market Basket Analysis (MBA) is a powerful analytical technique used in marketing and retail management to understand customer purchasing behavior. It helps identify relationships between products or services that are frequently bought together, enabling businesses to make informed decisions on sales, promotions, and inventory management.

Definition

Market Basket Analysis is a data mining technique used to uncover patterns in transaction data by identifying associations or correlations between items purchased together.

Applications in Business

  1. Product Placement:
    Placing frequently co-purchased items together to increase cross-selling opportunities.

    • Example: Supermarkets placing chips and soda together.

  2. Targeted Marketing:
    Personalizing promotions or discounts based on purchase history.

    • Example: Offering discounts on coffee machines to customers buying coffee.

  3. Recommendation Systems:
    Suggesting products based on transaction patterns.

    • Example: E-commerce platforms showing "Customers who bought this also bought..." recommendations.

  4. Inventory Management:
    Stocking products based on observed purchase patterns to avoid shortages.

Example

A retailer analyzing transaction data finds:

  • 60% of customers who buy milk also buy bread (confidence = 60%).
  • The lift value of 1.5 indicates a strong association between milk and bread compared to random chance.
    The retailer can use this insight to create combo offers or place these items closer in the store.


Market Basket Analysis helps MBA students to understand customer behavior through data-driven insights. It equips businesses with tools to enhance customer experience, drive sales, and optimize marketing strategies. The application of MBA in real-world scenarios makes it an invaluable skill in retail and marketing analytics.


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