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Write-Up On Basket Analysis

Market basket analysis is an unsupervised machine learning technique used to discover relationships between products that are frequently purchased together. It analyzes customer purchase data to find associations, such as products that are often bought together. These associations can then be used to develop targeted marketing strategies, like bundling related products or recommending additional items to customers. For example, an analysis may find that milk and sugar are often purchased together, so a retailer could offer promotions on a milk-sugar-coffee bundle. Understanding which products are frequently purchased together provides insights to optimize marketing, merchandising, and customer experience.

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38 views3 pages

Write-Up On Basket Analysis

Market basket analysis is an unsupervised machine learning technique used to discover relationships between products that are frequently purchased together. It analyzes customer purchase data to find associations, such as products that are often bought together. These associations can then be used to develop targeted marketing strategies, like bundling related products or recommending additional items to customers. For example, an analysis may find that milk and sugar are often purchased together, so a retailer could offer promotions on a milk-sugar-coffee bundle. Understanding which products are frequently purchased together provides insights to optimize marketing, merchandising, and customer experience.

Uploaded by

vanshika modi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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WRITE-UP ON BASKET ANALYSIS

Submitted by:
Name- Vanshika Modi
Campus- Gurgaon

Market Basket Analysis is an extensively being used technique in identifying relationship


between customer buying pattern and find out the item sets that occur frequently in the sales
dataset. This is done to analyze and identify the best possible combinations of products or
services that customers frequently buy together. Finding out such associations between various
products is called Association Rule Learning. It is an unsupervised Machine learning algorithm
used to discover interesting and strong relationships between multiple products that are bought
by customers frequently and together. The outcome of an Association Rule Learning algorithm is
a set of association rules among various products which helps the marketers to strategize their
recommendations.

The association rule learning is one of the very important concepts of machine learning, and it is
employed in Market Basket analysis, Web usage mining, continuous production, etc. Here
market basket analysis is a technique used by the various big retailer to discover the associations
between items. We can understand it by taking an example of a supermarket, as in a
supermarket, all products that are purchased together are put together. In Market Basket
Analysis: Association Rule Learning is one of the popular examples and applications of
association rule mining. This technique is commonly used by big retailers to determine
the association between items. It helps the marketers to figure out what product is purchased
with what product or if certain products are purchased together as a group of items which they
can use to strategize on the cross-selling activities.

To put simply Market Basket Analysis looks at the purchase coincidence with the items
purchased among the transactions. i.e., what is purchased with what? For example, in a foot-wear
store, a shoe is often purchased with a pair of socks.  When two or more products are purchased,
Market Basket Analysis is done to check whether the purchase of one product increases the
likelihood of the purchase of other products. This knowledge is a tool for the marketers to bundle
the products or strategize a product cross sell to a customer.

1. Whenever Milk is purchased, Sugar is also purchased or vice versa.


2. If Milk and Sugar is purchased then coffee powder is also purchased. This is true in 3 out
of the 5 transactions. In other words we can say that we have a support of 3 out of 5
transactions for this rule. (60% possibility).
A Marketer can build crossing selling strategies for wooing the remaining 40% of the customer
(who did not buy coffee powder) to buy Coffee powder along with Milk and Sugar. He might
bundle all these products and give at discounted price.

A retail shop manager can stock same amount of sugar and coffee powder in his shop.

He can place these items optimally in a store for the ease of picking by the customer.

To determine what products are frequently bought. Thankfully we have a better option for such
an analysis with a machine learning technique known as association rules mining (ARM)
It leverages an algorithm that is very effective at uncovering interesting relationships between
variables in large datasets.
market basket analysis, which identified which combination of products are often purchased by
customers. 
finding any product that had a strong relationship with any other product. 

ARM produces a set of rules that describes how any given variable (a product in this case)
relates to other variables in a dataset. The rules can be very simple with only one or two
relationships mapped or they can be very complex with many relationships described. Each
relationship is evaluated using a set of three criteria:   

1. Support: How frequently a combination of items occurs in a dataset. 

1. Confidence: The expected probability that Y would occur when X occurs. 

1. Lift: How many more times X and Y occur together than expected.

The associated support, confidence, and lift help us understand the strength of any given rule. 

Investigate cross-selling opportunities. Using a machine learning technique called association


rules mining (ARM),
Sales and Marketing team needed a high leverage way to increase sales and they decided to
investigate cross-selling opportunities. Using a machine learning technique called association
rules mining (ARM),
We can say that with some promotion, many of these customers will purchase at least some of
the related products because so many others have done so in the past. 
In other words, what do customers usually select before buying your target product and what do
customers usually select after buying your target product. If you are interested in optimizing an
online buying experience, understanding the order in which customers add products to a cart is
very valuable.  It requires careful analysis and planning in order to avoid inadvertently marketing
unrelated or irrelevant products, which will make a company look out-of-touch with the needs of
its customers.
Once a company fully understands how high-probability products intersect with high-probability
target customers, any number of creative cross-selling campaigns can be designed that could
make a material impact on a company’s revenues.

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