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Unit 5

Market Basket Analysis is a data mining technique used to identify purchase patterns in retail settings by analyzing combinations of products bought together. It employs association rules and the Apriori Algorithm to predict customer behavior and improve sales through targeted offers. There are three types of analysis: descriptive, predictive, and differential, each serving different purposes in understanding consumer behavior and optimizing marketing strategies.

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9 views2 pages

Unit 5

Market Basket Analysis is a data mining technique used to identify purchase patterns in retail settings by analyzing combinations of products bought together. It employs association rules and the Apriori Algorithm to predict customer behavior and improve sales through targeted offers. There are three types of analysis: descriptive, predictive, and differential, each serving different purposes in understanding consumer behavior and optimizing marketing strategies.

Uploaded by

pranay.mishra.pgdm-2023
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Market Basket Analysis

A data mining technique that is used to uncover purchase patterns in any retail setting is
known as Market Basket Analysis. Basically, market basket analysis in data mining involves
analyzing the combinations of products that are bought together.
This is a technique that gives the careful study of purchases done by a customer in a
supermarket. This concept identifies the pattern of frequent purchase items by customers.
This analysis can help to promote deals, offers, sale by the companies, and data mining
techniques helps to achieve this analysis task. Example:
 Data mining concepts are in use for Sales and marketing to provide better customer
service, to improve cross-selling opportunities, to increase direct mail response rates.
 Customer Retention in the form of pattern identification and prediction of likely defections
is possible by Data mining.
 Risk Assessment and Fraud area also use the data-mining concept for identifying
inappropriate or unusual behavior etc.
Market basket analysis mainly works with the ASSOCIATION RULE {IF} -> {THEN}.
 IF means Antecedent: An antecedent is an item found within the data
 THEN means Consequent: A consequent is an item found in combination with the
antecedent.

Let’s see ASSOCIATION RULE {IF} -> {THEN} rules used in Market Basket Analysis in Data
Mining. For example, customers buying a domain means they definitely need extra
plugins/extensions to make it easier for the users.
Like we said above Antecedent is the item sets that are available in data. By formulating from
the rules means {if} component and from the example is the domain.
Same as Consequent is the item that is found with the combination of Antecedents. By
formulating from the rules means {THEN} component and from the example is extra
plugins/extensions.
With the help of these, we are able to predict customer behavioral patterns. From this, we are
able to make certain combinations with offers that customers will probably buy those products.
That will automatically increase the sales and revenue of the company.
With the help of the Apriori Algorithm, we can further classify and simplify the item sets which
are frequently bought by the consumer.
There are three components in APRIORI ALGORITHM:
 SUPPORT
 CONFIDENCE
 LIFT
Now take an example, suppose 5000 transactions have been made through a popular
eCommerce website. Now they want to calculate the support, confidence, and lift for the two
products, let’s say pen and notebook for example out of 5000 transactions, 500 transactions
for pen, 700 transactions for notebook, and 1000 transactions for both.
SUPPORT: It is been calculated with the number of transactions divided by the total number
of transactions made,
Support=freq(A,B)/NSupport=freq(A,B)/N
support(pen) = transactions related to pen/total transactions
i.e support -> 500/5000=10 percent

CONFIDENCE: It is been calculated for whether the product sales are popular on individual
sales or through combined sales. That is calculated with combined transactions/individual
transactions.
Confidence=freq(A,B)/freq(A)Confidence=freq(A,B)/freq(A)
Confidence = combine transactions/individual transactions
i.e confidence-> 1000/500=20 percent

LIFT: Lift is calculated for knowing the ratio for the sales.
Lift=confidencepercent/supportpercentLift=confidencepercent/supportpercent
Lift-> 20/10=2
When the Lift value is below 1 means the combination is not so frequently bought by
consumers. But in this case, it shows that the probability of buying both the things together is
high when compared to the transaction for the individual items sold.
With this, we come to an overall view of the Market Basket Analysis in Data Mining and how to
calculate the sales for combination products.

Types of Market Basket Analysis


There are three types of Market Basket Analysis. They are as follow:
1. Descriptive market basket analysis: This sort of analysis looks for patterns and
connections in the data that exist between the components of a market basket. This kind
of study is mostly used to understand consumer behavior, including what products are
purchased in combination and what the most typical item combinations. Retailers can
place products in their stores more profitably by understanding which products are
frequently bought together with the aid of descriptive market basket analysis.
2. Predictive Market Basket Analysis: Market basket analysis that predicts future
purchases based on past purchasing patterns is known as predictive market basket
analysis. Large volumes of data are analyzed using machine learning algorithms in this
sort of analysis in order to create predictions about which products are most likely to be
bought together in the future. Retailers may make data-driven decisions about which
products to carry, how to price them, and how to optimize shop layouts with the use of
predictive market basket research.
3. Differential Market Basket Analysis: Differential market basket analysis analyses two
sets of market basket data to identify variations between them. Comparing the behavior of
various client segments or the behavior of customers over time is a common usage for this
kind of study. Retailers can respond to shifting consumer behavior by modifying their
marketing and sales tactics with the help of differential market basket analysis.

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