Next-Item Discovery in the Market Basket

Analysis
Luis Cavique, IEEE Member
ESCS- Polytechnic Institute of Lisboa,
Campus de Benfica do IPL,
1509- 014 Lisboa, Portugal
phone: (+351) 21 711 90 00

Abstract This paper addresses the problem of finding the
next-item for each customer in large database marketing and can
be seem as an extension of the market basket analysis. Most of
the existing software uses Apriori-like algorithms. The outputs of
the Apriori algorithms are easy to understand and many new
patterns can be identified. However, the sheer number of
association rules may make the interpretation of the results
difficult. The aim of this work is to automate the cross-selling
strategy. We would like to simplify the work of the marketer,
avoiding the analysis of thousands of rules in associating
customers with their next-item.
Index Terms market basket analysis, temporal knowledge
extraction, database marketing
I. INTRODUCTION
C urrent database capacities associated with bar code
technology and growth of the Internet has led to a huge
collection of customer transaction data. Companies in
different sectors such as banking, insurance,
telecommunications and airlines have now become more
customer-oriented than never.
To obtain the customer's profile there are two main data
sources: using the customer's personal data or the item-
oriented data. In order to gather demographic, social,
geographic, personality or lifestyle data of the customer,
costly surveys are needed. On the other hand, item-oriented
data, regarding the frequency or the quantity each customer
buys of a certain item, already exists in the companies'
database.
A market basket is composed of an itemset bought together
in a single trip to a store [1]. Given that, each customer buys
different itemsets, in different quantities, in different times,
makes the market basket analysis a difficult task. To simplify
the problem only two attributes are used for each transaction:
the customer and the purchased item.
Most of the existing software uses Apriori-like algorithms
[2] known for their higher algorithmic complexity in time.
The outputs of the Apriori algorithm are easy to understand
and many new patterns can be identified.
For the cross-selling marketing strategy the knowledge of
the next-item is essential. However, the sheer number of
association rules may make the interpretation of the results
difficult. Therefore it is difficult for the marketer to predict the
next-item that each customer will buy.
In order to obtain frequent market baskets in reduced
computational times the Similis algorithm [3] can be used,
since this algorithm reduces the number of passes over the
database.
This paper addresses the problem of finding the next-item
for each customer in large database marketing and can be
seem as an extension of the market basket analysis.
We describe a way of finding the next-item each specific
customer will buy using the market basket analysis. We study
not only the discovery of data patterns, but also sequential
patterns, allowing a clearer real-world approach for one-time
purchases. A typical example is buying a laptop as first item,
followed by the purchase of the mouse, some software, a bag,
a memory stick, a diskette drive, a printer/scanner, a modem
and so on [4].
The sequence of items must be added to the information in
the database marketing. Finally, the association of each
customer with his next-item is obtained using a procedure
developed in SQL and written in Relational Algebra.
II. SEQUENTIAL PATTERNS
Sequential pattern mining is an important data mining
problem with a wide range of applications. Sequence analysis
is used to determine data patterns throughout a sequence of
temporal states.
Nowadays, sequence analysis is widely applied to find
click-stream data in the Web sites. In this work we are going
to apply it to the market basket sequence. Several authors
have been trying to find customers' purchase patterns of
goods in the retail and in the financial sectors [5].
For the market basket analysis, in the input database, each
transaction represents a purchase, which occurred in a specific
time and place and the transaction needs at least two
attributes: customer and item. For this new problem each
transaction needs three attributes: customer, item and time.

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The output of the algorithm will be the most frequent
sequence of items.
This work is based on the principle that the purchase
patterns can be represented by a State Transition Model in
such a way that if the present state of a specific customer is
known, the following purchase state can be predicted, and an
adequate cross-selling strategy can be implemented.
SI - Item-Sequence Algorithm
Input: a database Transaction (transaction-id, customer-id,
item-id, date);
Output: a sequence of items;
1) Find a maximal market basket (i.e. a market basket that is
not included in another market basket) using Apriori-like
algorithms or the Similis algorithm;
2) Select the transactions using the items found in step 1;
3) Transform of the input data in a dataset using sequences of
items for each customer, as referred in Agrawal [6];
4) Build a state transition diagram, where each state
corresponds to an item and each transition represents the
sequence from one item to the next-item;
5) Find the most probable path using the Viterbi algorithm [7].
III. ASSOCIATING CUSTOMERS WITH THE NEXT-ITEM
Given the following basic database marketing, where the
primary keys are underlined, the information of the Item-
Sequence algorithm is stored in the table Basket:
Customer (customer id, customer-details);
Item (item_id, item-details);
Transaction (transaction id, customer-id, item-id, date);
Basket(sequence id, item id);
The foreign keys are the folowing:
Transaction. item-id cItem. item_id;
Transaction. customer id c- Customer. customer_id;
Basket. item-id cItem. item id;
We propose the following algorithm, expressed in
Relational Algebra, where ca and ® represents the Selection
operator and Join operator respectively. Firstly, all the
possible purchases are generated by applying a Cartesian
Product to Customer and Basket tables. To obtain all the next
purchases, we subtract from the Cartesian Product output, the
purchases already made in Transactions. Then, for each
customer the first item in his sequence is chosen in
Min-sequence. Finally, the Next item returns the association
of the customer with his next-item.
IV. CONCLUSIONS
The aim of this work is to automate the cross-selling
strategy. We would like to simplify the work of the marketer,
avoiding the analysis of thousands of rules in associating
customers with their next-item.
To find the sequential patterns we use a state transition
algorithm that returns the most probable item sequence. With
the given sequence in the database marketing, it is possible to
discover the next-item for each customer.
The scalability of SI and S2 algorithms performs well,
allowing their inclusion in a commercial database-marketing.
During the presentation some specific examples will be
given using real datasets.
REFERENCES
[1] Berry, M. and Linoff, G., Data Miining Techniques for Marketing, Sales
and Customer Support, John Wiley and Sons, 1997.
[2] Agrawal, R. and Srikan, R., "Fast algorithms for mining association
rules", Proceedings of the 20th international conference on very large
data bases, 1994, pp. 478-499.
[3] Cavique, L., "Graph-based Structures for the Market Basket Analysis",
Revista de Investigavao Operacional, 2004, vol.24, pp. 1-14.
[4] Chen, Y.-L., Chiang, M.-C. and Ko, M.-T., "Discovering time-interval
sequential patterns in sequence databases", Expert Systems with
Applications, 2003, vol. 25, pp. 343-354.
[5] Prinzie, A. and Van-Den-Poel, D., "Investigating Purchasing Patterns for
Financial Services using Markov, MTD and MTDg Models", European
Journal of Operational Research (forthcoming).
[6] Agrawal, R. and Srikan, R., "Mining sequential patterns", Proceedings
of the 11th international conference on data engineering, 1995, pp. 3-14.
[7] Han, J. and Kamber, M., Data Mining: Concepts and Techniques,
Morgan Kaufmann Series in Data Maanagement Systems, 2002.

S2 - Next-item Algorithm
Input: a database marketing
Output: Customer-Next-Item (customer-id, customer-details,
next-item)
1) Cartesian Product = Customer x Basket
2) Minus= Cartesian Product- Transaction
3) Min Sequence= 6 min (Minus sequence id) (Minus)
4) Next-Item= (Min-sequence ® Basket C Item)

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