Recommended for You: Market Basket Analysis for Uncovering Top Product Pairings
By Steven Spellman
Introduction:
Market basket analysis (MBA) is a powerful data mining technique that helps businesses uncover hidden patterns in customer purchasing behavior. By identifying items frequently bought together, retailers can develop targeted marketing campaigns, optimize store layouts, and increase sales. In this blog post, the members of the Creative Data Solutions Initiative (CDSI) group within Salt Flats LLC’s Insights & Analytics team will share our recent experience conducting a market basket analysis for a client to reveal the top 4 pair of items most purchased together.
Task Overview and Methodology:
Our client, a Shopify merchant within the Fashion and Lifestyle Industry, approached us to analyze their transaction data and identify product pairings with strong sales potential. To achieve this, we were given a snapshot of one month's worth of transactional data from their store. Our team normalized, cleansed, and analyzed the data using Excel and Python; then employed the Apriori algorithm - a popular method for conducting a market basket analysis. This algorithm helps determine the likelihood of items being purchased together. By setting minimum threshold values for these metrics, we filtered out less significant associations and focused on the top 4 co-purchases.
Key Findings:
Based on the provided market basket analysis data, the following relationships and insights can be observed:
‘SOCKS’ and ‘UNDERWEAR’: These items are frequently purchased together with a lift value of 0.86, which indicates a mild negative association. This means that the likelihood of these two items being purchased together is slightly lower than expected, but they are still commonly purchased together.
'TOPS' and ‘SOCKS’: This item pair has a lift value of 1.44, suggesting a positive association between the two items. Customers who purchase 'TOPS' are more likely to purchase ‘SOCKS’ together.
'LOUNGEWEAR' and ‘SOCKS’: The lift value of 1.29 indicates a positive association between these items. Customers purchasing 'LOUNGEWEAR' are more likely to also buy ‘SOCKS’ in the same transaction.
'LOUNGEWEAR' and 'TOPS': With a lift value of 2.32, there is a strong positive association between these items. Customers who purchase 'LOUNGEWEAR' are more likely to purchase 'TOPS' together.
This analysis suggests that customers frequently purchase 'TOPS' and ‘SOCKS,’ as well as 'LOUNGEWEAR' and 'TOPS' together. There is also a positive association between 'LOUNGEWEAR' and ‘SOCKS.’ The combination of ‘SOCKS’ and ‘UNDERWEAR’ is commonly purchased together but with a slightly lower likelihood than expected.
Based on the market basket analysis results, we would recommend the following advertising strategies to help improve sales:
Bundle promotions: Offer bundled deals or discounts when customers purchase 'TOPS' and ‘SOCKS’ together or 'LOUNGEWEAR' and 'TOPS' together, as these items have a strong positive association. This will encourage customers to buy both items, increasing sales for both products.
Cross-selling: Since there is a positive association between 'LOUNGEWEAR' and ‘SOCKS’ use cross-selling techniques to promote these items together. For instance, when customers view 'LOUNGEWEAR' on your website or in-store, display ‘SOCKS’ as a recommended or complementary item.
Targeted advertising: Utilize customer data and analytics to target advertisements for 'TOPS,' 'LOUNGEWEAR,' and ‘SOCKS’ to customers who have previously purchased one of these items. This will increase the likelihood of repeat purchases and promote cross-selling among these items.
In-store displays and online visuals: Create appealing in-store displays or online visuals that showcase 'TOPS,' 'LOUNGEWEAR,' and ‘SOCKS’ together. This will help customers visualize the items as a complete outfit, increasing the chances of purchasing multiple items together.
Seasonal promotions: If these items are suitable for specific seasons or occasions, consider running seasonal promotions or limited time offers to encourage customers to purchase these items together.
While the association between ‘SOCKS’ and ‘UNDERWEAR’ is slightly lower than expected, they are still commonly purchased together. Therefore, it might be beneficial to explore ways to strengthen this association, such as offering discounts or promotions for purchasing these items together or showcasing them side-by-side in-store or online.
Conclusion:
In conclusion, Salt Flats LLC's CDSI team offers versatile analytics services that empower businesses to harness their data's full potential. The true beauty lies in our CDSI team's ability to apply their skills, capabilities, and framework across a wide range of data and industries. Through market basket analysis, our team helped identify our client’s purchasing patterns and trends, allowing our clients to tailor their marketing strategies and product offerings to better cater to customer preferences. By leveraging these insights, our clients can make informed decisions on cross-selling, bundling promotions, targeted advertising, and in-store or online visuals that ultimately drive sales growth. The CDSI team's expertise in extracting valuable information ensures that businesses remain agile and competitive in today's fast-paced retail landscape. Partnering with the CDSI team not only gives businesses access to cutting-edge analytics solutions but also equips them with the knowledge and strategies necessary to transform their customer experiences and elevate their market presence. Discover more about our data-focused services by attending a complimentary 30-minute workshop with one of our team members. Follow this link HERE to reserve your spot now.