Using Market Basket Rules

There are a variety of ways to take action within your business based on the insights that AA provides. The most common use is to develop a promotion strategy that takes advantage of product affinities to maximize halo effects across other categories. By reducing the amount spent on promotions while increasing the effect of those promotions, you can realize additional revenue and boost profit margins. For example, by analyzing the AA results, it is possible to identify multiple product categories with affinities on a target category, where some categories are more profitable than others. This can provide alternatives for promoting items that will yield more in sales or profit than a more obvious affinity like Hot Dogs and Hot Dog Buns.

Another common practice is for store planners and planogrammers to take advantage of product affinities when deciding how to arrange the products on the shelf or for adding aisle end-caps for strongly associated product categories. AA can show obvious relationships like Bread and Peanut Butter, but it may also reveal previously unknown associations like Pet Food and Beer. Using market basket rules to inform store layouts allows you to place commonly purchased groups of products close together in the store, increasing the chance of customers purchasing more from those categories.

Combining market basket analysis with customer segments further enhances the potential benefits of AA. Customer behavior information is obtained from mining transaction history, and it is correlated with customer segment attributes to inform your promotion strategies. The ability to understand market basket affinities allows marketers to calculate, monitor, and build promotion strategies based on critical metrics such as customer profitability and preferred categories.

As an example, consider a marketer that is planning promotions for the Soda and Chips categories. While analyzing the data in Affinity Analysis, the marketer finds that a particular customer segment, College Singles, has a very strong affinity for buying Soda any time they purchase Chips.Armed with this knowledge, the marketer may decide to create a targeted offer for this customer segment only on the Chips category, knowing that they are likely to also buy Soda in the same basket. This kind of offer is more cost effective than a company-wide promotion on both the chips and soda categories, but may yield almost the same results, because the offer has focused in on the customers that will generate the most revenue in these categories.