What is market basket analysis and does it add value?
Organisations can be emboldened by stories from other companies where products or services were bought together. Their marketing teams become enamoured at the promise of a cross-selling or promotional opportunity, only to find that such insights do not apply to their business. Re:Adapt can help clients generate lasting value, not just temporary sales increases at the expense of profits.
The problem – not just for retailers
Retailers with a physical presence will often hear of the opportunity to identify cases where one product is bought with another and look for other associations, hoping to set up new store placements or promotions. Those with an online presence will search for recommendation rules based on the purchase of a certain product. Actions may be taken based on a misleading correlation, not what causes a customer to choose their “basket” of goods (or services). Other factors, such as pricing strategy and the customer’s perceived benefits can be neglected, leaving money on the table.
The solution
Re:Adapt can deploy its capabilities in statistical analytics on large and disparate datasets to generate a clear set of actions:
- Make it easier for customers to buy groups of products by testing changes to their physical location or on-line presentation
- Validate the removal of profit-eroding promotions on products that are often purchased together anyway
- Experiment with value-adding innovations to products or services that reduce customer price-sensitivity and generate loyalty
We often see conflicts between everyday-low-price strategies and deep promotions which together can be unnecessary. By understanding the price sensitivity of customers and their potential affinity to a promotion, four separate but coherent strategies can be adopted to fit each situation.
But this is just two dimensions–a third is the customer’s view about the product or service itself. Deeper understanding here can offer opportunities to reduce price-sensitivity by making the product or service more valuable to customers.
Additions can include features that improve convenience or trust, and therefore the customer’s willingness to pay. This knowledge does not only reside in transaction data, but also in several other datasets. With this in mind, organisations find ways to get feedback from customers on why a product or service was considered but not selected, generating huge opportunities to improve the offering, resulting in higher average order values and better customer satisfaction.
If you are looking to make your business best-in-class, contact us at contact@readapt.science where you will see the insights we can help you bring to the surface. Do more with less by enabling your people to rapidly improve your customer experience and bottom-line at the same time.
