Assignment

Amit(407)

1. Explain the concept of market basket analysis and its

benefits?(10)
Ans: Market basket analysis is a data mining technique used by retailers to increase sales
by better understanding customer purchasing patterns. It involves analyzing large data sets,
such as purchase history, to reveal product groupings, as well as products that are likely to
be purchased together

It is a process that looks for relationships among entities and objects that frequently appear
together, such as the collection of items in a shopper’s cart. For the purposes of customer
centricity, market basket analysis examines collections of items to identify affinities that are
relevant within the different contexts of the customer touch points.

The main objective of market basket analysis is to identify products that customers want to
purchase. Market basket analysis enables sales and marketing teams to develop more
effective product placement, pricing, cross-sell, and up-sell strategies.

A popular example of frequent itemset mining is Market Basket Analysis. This process
identifies customer buying habits by finding associations between the different items that
customers place in their “shopping baskets” as you can see in the following fig. The
discovery of this kind of association will be helpful for retailers or marketers to develop
marketing strategies by gaining insight into which items are frequently bought together by
customers

TYPES OF MARKET BASKET ANALYSIS

Descriptive market basket analysis: This type only derives insights on past data and is the
most frequently used approach. The analysis here does not make any predictions but simply
rates the association between products using statistical techniques. For those familiar with
the basics of Data Analysis, this type of modeling is known as unsupervised learning. Check
Jigsaw Academy’s Data Science Bootcamp for more information.
Predictive market basket analysis: This type uses supervised learning models like
classification and regression. It essentially aims to mimic the market to analyze what causes
what to happen. For example, buying an extended warranty is more likely to follow the
purchase of an iPhone. Essentially, it considers items purchased in a sequence to determine
cross-selling. While it isn’t as widely used as a descriptive MBA, it is still a very valuable tool
for marketers.

Differential market basket analysis: This type of analysis is a beneficial tool for competitor
analysis. It compares purchase history between stores, between seasons, between two time
periods, between different days of the week, etc., to find interesting patterns in consumer
behavior. For example, it can help determine why some users prefer to purchase the same
product with the same price on Amazon vs. Flipkart – the answer can simply be that the
Amazon reseller has more warehouses and can deliver faster, or maybe something more
profound like user experience.

Benefits of market basket analysis

Market basket analysis can increase sales and customer satisfaction. Using data to
determine that products are often purchased together, retailers can optimize product
placement, offer special deals and create new product bundles to encourage further sales of
these combinations.

These improvements can generate additional sales for the retailer, while making the
shopping experience more productive and valuable for customers. By using market basket
analysis, customers may feel a stronger sentiment or brand loyalty toward the company

Some of the benefits one get using market basket analysis are mentioned below

 Helps in Setting Prices

Market basket analysis helps a retailer to identify which SKUs 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.

 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.

 Customizing Promotions
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 the purchase behavior of each
individual.

 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. 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, a new brand introduction, or the unavailability of a certain brand in the
SKU.
2. What are the emerging issues in marketing analytics and also
explain the challenges that are faced by companies now a
days ?
Ans:
1 – Lack of Understanding How to Use Data
This is the basic one. One of the most common challenges in
marketing analytics management is a lack of understanding of
how to read and use marketing data to bring more growth for a
business.
Marketers might have a complete record of the number of
customers they open your email marketing, watch their explainer
videos, click on their banner ads, and more. But, many marketers
still can’t seem to grasp the exact worth of each data and how it
can contribute to their business operations.
In this case, they don’t really know what to expect from the
volume of data at hand and are clueless on how to use it
coherently.
And if people don’t really have enough context to understand the
implications, you can expect that there’s little to no change or
adjustment in a marketing strategy.

2 - Skill Shortage
We’ve slightly mentioned this challenge in the previous section.
Another of the most common marketing analytics challenges that
marketing faces is a skill shortage – especially for small businesses.
Since data analytics is complicated and pretty much challenging to
analyze, there are simply not enough marketers skilled in
marketing analytics.
As you might already know, drawing conclusions from data needs
to be done by someone with an in-depth knowledge of marketing
analytics. Otherwise, the data will be interpreted incorrectly.
With not-so-much skill in analytics, marketers find it hard to back
up decision-making with data. This, in turn, will lead to the
difficulty of measuring marketing campaigns’ success through
analytics. And without clear ROI, marketers are hesitant to
increase their investment in a better marketing strategy.

3 – Data Explosion
As a marketer, you might think that “the more data we collect, the
better we know about the audiences’ behavior.”
In fact, the irony of having too much data in hand is that you often
have too little information.
The more data and fields collected, the less they overlap as there’s
too much-varied information. This, in turn, will create “holes” in
the data.
You’ll find it difficult to turn all this data available into actionable
insights and fuel business results. It means that you’ll likely come
up with no conclusion towards your audiences’ buying behavior.

That’s the reason why at least 53% of marketers say that “you can
never have too much data on your marketing analytics
management.”
4 – Lack of Important Data
The amount of data being created continues to grow. And with all
of those abundances of data you’ve captured, you could still find
some gaps – whether it’s incomplete data records or miss on
tracking marketing and buying activities.
If you can’t completely track all of your marketing activities, it
means that you can’t truly measure the results. You can also say
that these data gaps can lead to inaccurate data analysis.
More often than not, this challenge appears because of the lack of
process by both the marketing and sales teams. Thankfully, the
data gap is one of the easiest challenges you can overcome.

5 – You Can’t Predict Upcoming Trends

It’s cool if you have enough resources for marketing analytics –
including tools you need and skilled teams. Now, the question is:
are you capable enough to keep up with ever-changing customer
trends?
When it comes to marketing analytics, getting ahead of your
customers’ needs and preferences is crucial so that you can create
more effective messaging and showcase the ROI of your
marketing activities.
However, since customer behavior keeps changing every year,
marketers can find it really hard to keep up with trends that will
require changes in their mix, let alone predict future trends. This
way, they can’t truly update their marketing strategy for the
better.

6 – Lack of Transparency
Another challenge you might face in marketing analytics is that
you can’t fully trust your data. According to a Forrester study,
although 78% of marketers claim that a data-driven marketing
strategy is crucial, as many as 70% of them admit they have poor
quality and inconsistent data.
Another research from KPMG and Forrester Consulting shows
that 38% of marketers claimed they have a high level of
confidence in their data and analytics that drives their customer
insights. That’s said, only a third of them seem to trust the
analytics they generate from their business operations.
This challenge can be a result of the lack of data sourcing and
analysis. In fact, transparency and data ownership are key parts of
any marketing ideas and strategies.

7 – Identify the Best Tool

Of course, there might be hundreds of useful tools as a solution
for your marketing analytics challenges. Therefore, it creates a
new challenge; the difficulty of choosing a tool of the many
available is best for which problem.
There’s nothing such a one-size-fits-all marketing analytics tool as
every tool has its own unique features to solve each business’s
unique and different needs.
Therefore, a strong understanding of marketing grounds and all of
marketing analytics tools in the business context is necessary to
produce sufficient advice.
If you don’t do in-depth research about the tool or tech you want
to use, you may find yourself incurring extra costs, let alone the
additional headache of how to use it.
 3. What is the difference in cross selling and upselling? What are
the ways to implement cross selling in e commerce and retail
store Explain with the help of examples?(15)
Ans: Upselling is the practice of encouraging customers to purchase a
comparable higher-end product than the one in question, while
cross-selling invites customers to buy related or complementary
items. Though often used interchangeably, both offer distinct
benefits and can be effective in tandem. Upselling and cross-selling
are mutually beneficial when done properly, providing maximum
value to customers and increasing revenue without the recurring
cost of many marketing channels.
Cross-selling
Cross-selling identifies products that satisfy additional,
complementary needs that are unfulfilled by the original item. For
example, a comb could be cross-sold to a customer purchasing a
blow dryer. Oftentimes, cross-selling points users to products they
would have purchased anyways; by showing them at the right time, a
store ensures they make the sale.

Cross-selling is prevalent in every type of commerce, including banks

and insurance agencies. Credit cards are cross-sold to people
registering a savings account, while life insurance is commonly
suggested to customers buying car coverage.

In ecommerce, cross-selling is often utilized on product pages, during

the checkout process, and in lifecycle campaigns. It is a highly-
effective tactic for generating repeat purchases, demonstrating the
breadth of a catalog to customers. Cross-selling can alert users to
products they didn't previously know you offered, further earning
their confidence as the best retailer to satisfy a particular need.
Up-selling
Upselling often employs comparison charts to market higher-end
products to customers. Showing visitors that other versions or
models may better fulfill their needs can increase AOV and help users
walk away more satisfied with their purchase. Companies that excel
at upselling are effective at helping customers visualize the value
they will get by ordering a higher-priced item.

Cross-selling and upselling are similar in that they both focus on

providing additional value to customers, instead of limiting them to
already-encountered products. In both cases, the business objective
is to increase order value inform customers about additional product
options they may not already know about. The key to success in both
is to truly understand what your customers value and then
responding with products and corresponding features that truly
meet those needs.

Ways to implement cross selling in e commerce:

1. Segmentation & Customized Information

One of the easiest and most common ways is to provide consumers

with purchasing advice based on their past purchases. The only thing
you need to do is to pay attention to their purchase histories, such as
colors they prefer and their sizes, and use this information to group
different types of customers and send customized newsletters,
messages, or place remarketing ads to attract them to buy again.

2. Provide special offers to induce additional purchases

When consumers are shopping on your site, it’s a solid way to make
more sales by providing special offers at appropriate timings. For
example, when a customer adds a top to the shopping cart, you can
suggest him/her purchase a pair of pants that goes well with the top
for a 10% off or free shipping.

3. You might like / They also bought this

Many e-commerce sellers skillfully use "other customers' previous

purchases" to bring up current customers’ buying interests, and
eventually let them buy more. For instance, when a customer is
shopping for a suit, you can actively recommend shoes that are often
ordered with the suit, because after all, it is difficult to sell another
suit, but they have the opportunity to buy accessories that match.

Cross-selling examples
1. Recommend other popular items when the consumer selects a
particular piece of clothing.

2. Apart from recommending similar products, some e-

commerce companies will also take the initiative to suggest
different styles of products to match the products selected by
consumers.
Ways to implement cross selling in retail store:

Place a salesperson at the end of an aisle

The first cross selling strategy to consider involves the placing of salespeople at the
end of your aisles. These salespeople are there to educate any passing customers
about a new product to the market or seasonal promotion.

For example, at the end of Coffee and Tea aisle, positioning a sales rep
demonstrating how a coffee machine works or handing out free coffee pod samples.
At the same time, they’re explaining the different varieties, and why they’re worth
purchasing over another coffee brand. This will increase your sales for that product
(and category). Also, customers will walk away having had a great brand experience
and remember it.

Merchandise complementary products together in-store

The second strategy to put into action in your store is to cross-merchandise your
products across a variety of categories. It’s an effective method to increase impulse
buys and create awareness around products. For the record, cross-merchandising
entails merchandising complementary products from separate categories together
to provide the shopper with solutions. Thus, implementing such a strategy also
makes it’s easier for your customers to shop your store since, At the same time,
cross-merchandising stretches your trade budget and draws attention to other
products throughout the store.

Create visually appealing displays

Since many of your customers shop with their eyes first, it goes without saying that
you need to include visually appealing displays throughout your store. When
implemented correctly, you can use them as a psychological tactic to draw your
customers into and through your store. More than that, they can make the whole
shopping experience exciting.