Market Basket Analysis
- Identifies which products or services are frequently bought together.
- Helps businesses make decisions about product placement, promotions, bundling, and pricing.
- Used to understand consumer behavior and uncover opportunities for revenue and satisfaction improvements.
Definition
Section titled “Definition”Market Basket Analysis is a type of data mining technique that is used to identify the relationship between different products or services that are purchased together.
Explanation
Section titled “Explanation”Businesses apply Market Basket Analysis to understand consumer behavior and make better business decisions. Typical objectives include identifying new product opportunities and optimizing pricing strategies. By revealing which items are commonly purchased together, the analysis supports targeted marketing campaigns, pricing and promotional tactics, and improved product placement to increase sales and customer satisfaction.
Examples
Section titled “Examples”Grocery store example
Section titled “Grocery store example”A grocery store can use Market Basket Analysis to find items frequently purchased together. For example, the analysis may show that customers who purchase bread are also likely to purchase milk and eggs. Based on this information, the grocery store can place these items in close proximity, offer discounts for buying them together, or promote them as a meal solution.
Online retailer example
Section titled “Online retailer example”An online retailer can use Market Basket Analysis to identify products often bought together. For example, the analysis may show that customers who purchase a certain brand of shoes are also likely to purchase a specific brand of socks. The retailer can then display the sock brand on the shoe product page, offer a discount for purchasing both items together, or promote them as a bundle.
Use cases
Section titled “Use cases”- Understanding consumer behavior
- Identifying new product opportunities
- Optimizing pricing strategies
- Determining product placement in stores or on product pages
- Designing discounts, bundles, and targeted promotions
- Improving customer engagement and loyalty
Related terms
Section titled “Related terms”- Data mining
- Consumer behavior
- Targeted marketing
- Bundling
- Pricing strategies
- Product placement