In a highly fragmented and complex business landscape, manufacturers are looking at leveraging smart analytics tools to address the rapid shifts in customer demands and preferences. This is where market basket analysis can help manufacturers to understand the purchasing behaviors of consumers. Market basket analysis can aid companies to develop precise marketing strategies and meet business goals. Also, market basket analysis can help in increasing the efficiency of marketing messages resulting in improved customer experience and customer loyalty.
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The client, a well-known food and beverage manufacturer, lacked a robust cross-selling strategy for their products. As a result, the food and beverage manufacturer was facing a continuous reduction in the profit margins for two consecutive years. Also, the client was struggling when it came to inventory management due to which they were not able to fulfill customer demands on time. Furthermore, their inability to analyze historical data properly prevented them from creating effective pricing models. Therefore, the company was looking for market basket analysis solution to utilize the historical data to identify relationships products and customers and generate new revenue.
Quantzig’s market basket analysis solutions help companies to develop customer centric marketing strategies by identifying factors that drive consumer buying preferences and behaviors. Request a FREE proposal to gain in-depth insights into our portfolio of analytics solutions.
Solution Offered and Value Delivered
To help the client tackle their core business challenges, the market basket analysis experts adopted a comprehensive three-step approach. The first phase of the market basket analysis engagement focused on analyzing available customer data to help the client devise robust cross-selling strategies. In the second phase of the market basket analysis, the analytics experts focused on the creation of extract, transform and load (ETL) processes for the initial data load to support methodologies of market basket analysis. The third and final phase revolved around the creation of customized analytics dashboards to support market basket analysis at the store and product category level.
The solution offered by Quantzig’s experts helped the client to keep a track of key metrics such as average spend and profit per basket. This, in turn, helped the client to track the performance of their top-selling product categories. Additionally, Quantzig’s market basket analysis solution helped the client to optimize their product placement. Furthermore, the client was able to improve the effectiveness of their marketing campaigns by 2X, enhance customer satisfaction and reduce churn rate.
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Quantzig’s market basket analysis solution also helped the client to:
- Increase quarterly sales by 54%
- Decrease overall marketing budget by 18%
- Develop a flexible and reliable business model
To learn more about how our analytics solution can help you gain actionable insights and make smarter decisions to future-proof your business, request for more information now!
What is Market Basket Analysis?
Market basket analysis is an analytical technique that helps in predicting customers’ future purchase decisions. Market basket analysis is one of the most commonly used technique in retail to boost sales. It enables retailers to yield insights into the sales patterns of any product by analyzing online browsing behaviour of customers and historical sales records. The method of market basket analysis is used to improve marketing effectiveness and increase opportunities for up-sell and cross-sell significantly.
The primary objective of market basket analysis model is to identify the next product that the customer might find interesting and worth buying. Market basket analysis works on related products that occur together frequently in transactions. It aids retailers to identify the similarities and relationships between items that customers buy.
What are the Benefits of Market Basket Analysis?
Arranging the display of SKU
Market basket analysis helps in identifying products that have a close affinity to each other in spite of falling into different categories. This information can help retailers to place the products with higher affinity close to each other to boost sales. For instance, if chips are placed closer to a beer bottle, there is a high probability that customers may end up buying both. On the contrary, if they were placed in two extremes, then it is highly likely that the customer would just visit the store, buy beer and leave causing loss to the sale of chips.
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Market basket analysis helps online retailers to analyze buying behaviour of every individual. Such analysis can help in estimating what items the customers may purchase at a specific time. For example, a customer who likes barbecues would most likely buy barbecue sauce and meat on weekends. So, this way retailers can customize special offers on weekends to increase the purchase frequency.
Our real-time analytics and market analysis solutions can help retail companies to improve sales effectiveness. Request a FREE demo below to know how.
Identifying sales influencers
All the items in the retail store have some affinity with each other, strong or weak. Market basket analysis can help retailers to study the buying trends of a certain SKU. For example, two SKUs can reveal a strong affinity for a period of time and sales can suddenly reduce because of several factors ranging from the introduction of the new brand, the price increase of one SKU to unavailability of a certain brand in the SKU. This way marketers can understand the influence of such activities in the sales figure.
Are you facing difficulties in devising new cross-selling strategies by analyzing huge datasets? Get in touch with our experts.
How Can Quantzig’s Market basket Analysis Solutions Help Your Business?
With the immense increase in competition, there is a dire need for innovation in marketing and sales strategies to retain, attract, and achieve better customer relationships. As a result, companies in the retail and CPG industry globally are facing issues in making use of customer datasets for developing the right strategy for customer segmentation and implementing the same for each segment to improve ROI. Quantzig’s market basket analysis solutions can help retail companies to optimize digital advertising investments, successfully improve marketing ROI, identify right media mix, devise the most profitable sales strategies, and optimize sales force to create maximum business value.
Additionally, Quantzig’s market basket analysis approach can assist in developing successful cross-channel and multi-channel retail strategies, by yielding insights into customer preferences and demands. By leveraging our customized analytics dashboard, companies can devise localized strategies to implement merchandising plans based on historic patterns, demographic segmentation and customer buying patterns.
Headquartered in the United States, the client is a leading global retailer.
The Business Challenge
Change is continuous as tastes, fashions, and, customer preferences sway with every passing year. Thus, with the aid of a market basket analysis engagement, the retail market client wanted to understand and cater to their customers’ changing purchasing behaviors and preferences. They realized that analyzing the current retail market trends and their customers’ behavior will help them identify which items or a customer is more (or less) likely to buy. With the help of Quantzig’s market basket analysis strategy, the client wanted to analyze their customers’ behavior and make crucial decisions regarding promotions, displays, product placements, store segmentation, customer segmentation and target messaging. Additionally, they wanted to create promotions that leverage correlations and track current retail market trends and customers’ purchasing behaviors to better predict their purchasing patterns.
The current scenario in the retail industry is characterized by its highly customer-centric nature. Retailers are leaving no stone unturned to discover new ways of getting to know their customers better. Market basket analysis is one such tool that has caught the eye of several retail companies. The technique of identifying customer behavior, buying patterns, and finding the relationship between products and content delivery by the retailer inside the store or on their online shop is known as market basket analysis. With the help of this tool, not only can retailers identify target markets, but they can also enhance their customer-base by creating, delivering, and communicating a superior customer experience. Market basket analysis allows retailers to easily and promptly look at the size, quantity, and value of the customers’ market basket to understand the pattern in which products are purchased. But that is not all; there are an array of benefits that market basket analysis offers to players in the retail industry. Here is a look at some of them:
Advertising and promotions
Modern retailers are using market basket analysis for making advertising and promotions more predictable by understanding how consumers respond to various offers and communications. For instance, this technique will help companies in the retail industry to know when and where a discount will have an impact on top-line sales and cut down on unnecessary reductions. It will give retailers a clearer picture of whether their promotional activities are merely shifting revenue around or if it is genuinely contributing to boosting the gross sales.
Precise targeting and improved ROI
By understanding what exactly their customers need, retailers can easily engage in specific targeting. Companies in the retail industry are using market basket analysis to optimize campaigns and promotions for with margins and sales uplift with more precise campaigns. This method will also yield good ROI as only the right customers who might be interested in the campaigns are targeted.
More in-store traffic
Retail companies can use market basket analysis to get a better understanding of what products and offers will drive more traffic to the stores. This can be done by correlating market basket analysis with foot traffic counts to understand what customers purchased when they were in the store. Once a retailer successfully identifies what initially bought the customers to the store, they can use market basket analysis to determine how to make their customers come back to the store next time.
Optimized store layout
Players in the retail industry can use market basket assessment to enhance their space planning and visual merchandising, consequently ensuring better efforts to cross-sell and upsell. For example, it will help retailers identify if end caps in the retail store are helping to drive more sales. In case they are, it can be analyzed if they are also driving sales of complementary products. This will help retailers to better plan their store layout and make the necessary changes.
To know more about the benefits of market basket analysis for companies in the retail industry
Recent advancements in data analytics technology have opened up a world of possibility for players in the food and beverages sector to increase their operational efficiency and delight their customers. The advancements have increased to such a level that data scientists have been able to create algorithms that accurately predict the next group of items you are about to buy based on a certain group of items that were previously purchased. For instance, people who buy beer and plastic mugs are more likely to buy chips as their next item. Similarly, retailers can create relationships between specific items and accurately predict which items will be purchased next by assigning a certain level of probability. Market basket analysis can be used effectively to increase the overall spending from the customer by placing complimentary items close together or bundling such items at a discounted price.
Helps in setting prices
Market basket analysis helps a retailer to identify which SKU’s are more preferred amongst certain customers. For instance, milk powder and coffee are frequently bought together, so analysts assign a high probability of association compared to cookies. Without market basket analysis retailers would usually mark down on coffee on certain days, assuming coffee will be sold at certain times. However, market basket analysis can point out that whenever a customer buys milk, they end up purchasing coffee as well. So whenever the sale of milk and coffee is expected to rise, retailers can mark down the price of cookies to increase the sales volume.
Arranging SKU display
A common display format adopted across the supermarket chains is the department system, where goods are categorized as per department and sorted. For instance, groceries, dairy products, snacks, breakfast items, cosmetics, and body care products are properly classified and displayed in different sections. Market basket analysis helps identify items that have a close affinity to each other even if they fall into different categories. With the help of this knowledge, retailers can place the items with higher affinity close to each other to increase the sale. For instance, if chips are placed relatively close to a beer bottle, customers may almost always end up buying both. In contrast, if they were placed in two extremes, then the customer would just walk in the store buy beer and leave the store causing lost sales of chips.
Marketers can study the purchase behavior of individual customers to estimate with relative certainty what items they are more likely to purchase next. Today, many online retailers use market basket analysis to analyze purchase behavior of each individual. Such retailers can estimate with certainty what items the individual may purchase at a specific time. For instance, a customer fond of barbecues would likely purchase meat and barbecue sauce on some weekends. So retailers can customize offers to create a combo of 2lbs of meat with one pack of barbecue sauce at a discounted price every weekend to increase his purchase frequency.
Identifying sales influencers
All items in a retail store have some relationship with each other – be it strong or weak. In most cases, the sale of one item is driven by the increase or decrease in the sale of other items. Market basket analysis can be used to study the purchasing trend of a certain SKU. For instance, two SKUs can exhibit a strong affinity for a period of time and suddenly decrease because of various factors ranging from an increase in the price of one SKU, new brand introduction, or unavailability of a certain brand in the SKU. For instance, if Corona is the favorite beer among the consumers, and the brand is suddenly removed from the beer SKU, the sales of chips will go down as well, even though the sales of other beer brands is steady. This way marketers can understand the influence of such activities in the sales figure.
For more information on the benefits of market basket analysis, retail industry, food and beverage sector, data analytics, and predictive analytics:
The recent financial pressure on the healthcare industry has led to a major concern for the stakeholders; leaving pharmaceutical, medical device, and diagnostic firms in a dilemma to seek ways to present the real value of their products. To better understand the value of their products, organizations need to carry out a robust budget impact analysis. A budget impact analysis allows organizations to determine the financial impact of new products on the budgets of healthcare-decision makers. It also allows organizations to manipulate the market share of treatments for certain conditions. Consequently, budget impact analysis finds application in assessing a product’s affordability and for the reallocation of resources, understanding of trade-offs for new products, as well as budget planning and forecasting. In the pharmaceutical sector, budget impact analysis helps organizations build arguments for the adoption of the new product.
Quantzig’s budget impact analysis solution helps the client understand the use of the application, which is relevant to a particular payer’s healthcare environment. Also, Quantzig provides interactive dashboards to provide real-time statistics regarding the healthcare environment such as health systems population and hospital resources.
A leading pharma manufacturer in Europe wanted to assess the budget impact of vaccinations using different vaccines. Like all other companies in the pharma landscape, the client wanted to evaluate the best vaccination strategy that is available in the manufacturing landscape. Also, the client wanted to quantify the health and budget impact of vaccination strategies for pneumonia in adults. Since the prevalence of vaccination is increasing in the market, the client wanted to carry out a deep-dive assessment to analyze the impact of two types of vaccines. This identification process will help draw a conclusion in terms of better vaccines and the most cost-effective method of treatment.
The primary objective of the study was to understand the performance of vaccines on individuals as compared to ideal settings using the real-world data. Consequently, the client also wanted to analyze the health outcomes under different vaccination scenarios and the associated budget impact.
With years of expertise in offering the best-in class analytical services, Quantzig’s team of experts carried out an in-depth strategy for vaccinations independently. The experts were very certain of not performing back calculations to curtail the chances of underestimation in the number of cases with illness.
To derive better clarity, the budget’s impact was assessed for each scenario using clinical, demographic, and cost parameters to identify the most cost-effective treatment method. The key highlight of Quantzig’s solution was the formulating a population based “Markov Model” to predict if the adults who were at-risk should be vaccinated or remain unvaccinated.
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Budget Impact Modeling Solution Benefits
- Vaccination of separate set of individuals with Type 1 and Type 2 showed a decrease in cases of pneumonia
- Vaccination with Type 2 showed less favorable as compared to vaccination with Type 1 based on demographic and clinical characteristics
- The vaccination with Type 2 is associated with higher costs as compared to the counterparts
- A detailed sensitivity analysis was carried out for all scenarios with variations in the price of vaccines and other risk factors
- The budget impact analysis also proved that the use of Type 1 and Type 2 vaccinations in combination was better than Type 2 alone, and had a reduced budget impact
Budget Impact Modeling Predictive Insights
- Created an interactive dashboard to visualize patient engagement rates
- The descriptive dashboard also covered different patient profiles based on demography, vaccine administered and the costs incurred
- Visualized different scenarios and costs associated with the same for budget impact analysis and ease of comparison
- Improved budget impact by 50%
- Assessed health outcomes based on scenario analysis
- Carried out vaccination strategy based on the analysis of the population group
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Business Challenge: Using advanced analytics techniques to assess current performance levels and determine ways of improvement
A leading retail chain, with variety of stores in North America, wanted us to conduct a market basket analysis to assess the current market basket performance and determine ways of improvement.
Situation: Lack of visibility on current performance levels and improving product lift
Client wanted to understand the trends on the market basket performance, seasonality effect based on days of sales, and impact of store size and other factors on the basket performance.
Solution/Approach: Market basket analysis solution based on regression analysis
We conducted a deep dive analysis on the current performance on the various product baskets and impact of other factors. We implemented support, confidence and lift analysis which used regression analysis for assessing impact of store size on the basket size and value. We also defined various scenarios for market basket combinations and resulting profitability.
Impact: Increase in sales up to 27%
Client achieved in-depth analysis on the basket performance along with combinations that work well and have better lift. We also implemented a statistical model based impact analysis technique that helped clients in deriving insights to focus only on factors that impact the sales volume and value. Based on this the client was able to increase its sales up to 27%.
Business Challenge: Developing customer centric marketing strategy.
Our client, a leading retailer, wanted to improve the returns from its marketing efforts by incorporating customer behavior insights and creating a customer centric marketing strategy.
Situation: Need for improved customer focus as a result of high competition.
The client was facing a big challenge from the competition in its market which mandated a shift in business focus. The client wanted to adopt a more customer centric approach to its marketing practices, and was looking to understand customer behavior, to drive strategic decision making and create customer-focused marketing strategy.
Solution/Approach: Market basket analysis to create product bundles and pricing.
We consolidated the vast amounts of customer demographic, transaction and interaction data on a single platform. We conducted support, confidence and lift analysis on each purchase and transaction, and created a customer value model. This was followed by predictive analytics and affinity analysis to create most profitable product bundles and price strategies for the customers which increased their purchase propensity.
Impact: Improved customer retention and revenue.
The client was able to understand customer purchase patterns and predict future behavior. Our solution also helped them improve customer acquisition, customer retention and achieving growth. This helped the client in eventually improving the revenue.