Market Basket Analysis in retail
Market Basket Analysis in retail
The retailer needs to understand both single purchases and combinations of products that the visitor buys together, as well as highlight the main trends among the needs of the buyer. Properly Market Basket Analysis regularly gives retailers an understanding of the true demand of customers, and implementing recommendations based on shopping cart analysis helps to increase the average order value.
Market Basket Analysis - additional opportunities for retail
The main task for a retailer is to understand who the people who make purchases in the store are, and with the help of this knowledge to influence the quantity and quality of purchases. To do this, you need to study the behavior of buyers and identify typical models.
The study of shopping baskets allows you to explore and interpret customer demand, understand the relationship between products and the rules for making a purchase. In essence, the analysis helps the retailer to recognize the needs of the buyer and form a profitable offer for his client.
Based on the data received, the trading chain can:
- Select a range of outlets. With the similarity of behavior, one of the clients may not take one or more units from the “typical basket”. And all because in a store that a visitor regularly goes to, either the entire category or a specific product may be absent. By choosing loyalists of certain categories and products, we can tailor the assortment to their needs.
- Understand what products are in demand. Thanks to the Market Basket Analysis, we can determine whether customers come for a particular brand or variety of cheese, or whether customers simply pick goods within a given category.
- To make a portrait of the buyer in terms of needs. The study of shopping baskets allows you to see the guests of the network not from the position as they see themselves, but as they are characterized by purchases in the store. For example, a client sees himself as a buyer of beauty products, but in fact, he makes purchases that are typical for a housewife. Consequently, his checks will be dominated by groceries, detergents, cleaning products, and other household goods. The person himself may not distinguish this and not be aware of it. Therefore, marketing surveys give way inaccuracy to calculating methodology calculating how a person buys certain goods in a retail chain on an ongoing basis. And mathematical methods allow you to assess the shopping basket as accurately as possible.
- To develop cross-selling kits. For example, if product A is often bought together with product B, then it makes sense to apply a discount to only one of the products of this pair since the complementary product is likely to be purchased without a discount.
Thanks to the analysis of checks, it is possible to determine what regular customers buy on the network and what size their check is, how much they buy and what variety within purchases.
By understanding the needs of the client, the retailer will be able to attract guests who are interesting in the perspective of long-term development. These are customers who shop regularly and spend large sums.
Benefits of Market Basket Analysis
The Market Basket Analysis allows retailers to place the right emphasis in marketing communications, in the selection of an assortment of product groups, and to identify shopping triggers. For example, for a young mother, when choosing a store, such a trigger is the availability of diapers and goods for children in the assortment. And if the “important” client of the network is a cheese lover, then it would be reasonable to fill this product category with the highest quality.
The 3 main benefits that a retailer receives by studying the market basket of their customers:
- Raising customer loyalty - the assortment always has the right products, and the stores of the chain meet the expectations of visitors.
- Increasing the margins of the business - we supply goods that turn around well and quickly.
- The maximum intersection of customer needs and products that are of business interest.
The data of the market basket analysis tells the retailer what the buyer votes for with money when purchasing goods in a retail chain, and where it is better to direct efforts. Such knowledge provides an advantage in conditions of limited resources and the need to quickly make strategic decisions.
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How does Market Basket Analysis work?
The retailer typically stores sales data linked to customer loyalty cards. Each profile of the loyalty program management system has a purchase history associated with it. For analysis, we take the general sales data stored in the CRM system.
- All combinations are calculated based on checks and purchases. The analytics system, thanks to special algorithms, selects the largest and most significant clusters of customers who shop in the retail chain in the same way.
- We get an understanding of how many buyers we have with similar receipts.
The study of checks provides information based on which we draw conclusions about which direction is promising for business. For these "significant and important" customers, we try to satisfy the demand as much as possible. What results can be achieved by studying receipts data? Read on!
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Market Basket Analysis in practice
Case: How Increased Sales of the goods Finish brand and Detergent Categories
In the retail chain, sales fell in the category of detergents for dishwashers. In particular, the leading brand in the category, Finish, saw a 6% decline in sales.
The experts analyzed Market Baskets and found that buyers of the primary segment generate the bulk of goods Finish brand sales. The experts also compiled a correlation rating of product categories that are also included in the checks of this group of customers and identified an audience with similar shopping carts.
Subsequently, 2 groups of buyers from the target audience were identified:
- those who left the category of products for washing machines;
- the buyers which not buy a category or goods Finish brand but buy products from top related categories.
Based on the data obtained, recommendations were developed for conducting promotions for the selected target audience. During the promotion, they offered to buy Finish on special terms together with top related categories.
Then we monitored the results of the co-promo for samples of buyers, and also made a plan for communicating with the target audience as part of the promo for a year, with regular monitoring of progress to adjust the messages.
As a result, by analyzing shopping carts and conducting co-promos, we ensured a 7.1% increase in sales in the category and brand products. In addition, they developed another possible strategy - “to offer to buy eco-products”. Experts saw this trend during the analysis of data from receipts.
The C4R team works according to its own methodology, thanks to which it is possible to quickly and efficiently study shopping baskets. Moreover, based on sales statistics, analytics data and calculations, and not on marketing research and assumptions.
The C4R portfolio includes more than 20 IT solutions for automating retail processes. The company's employees have over 15 years of experience in auditing and consulting for retail. During the work of the company, the team has implemented 200+ projects of various sizes. For questions about optimizing business processes and implementing IT solutions for automating retail, logistics, and distribution, please contact our consultants: write to [email protected] or fill out the form below.
The author of the article is Anastasia Isakova
CRM Consultant at Consulting for Retail
