Join 44,000+ Retailers and 3,600+ Vendors. And Growing.

See how iControl has helped thousands instantly improve their financial transactions and margins.


CVS
Walgreens
Riteaid
Applebees
Red Lobster
Benihana
Kroger
Target
Safeway

Retail Insights & Analytics

(Used for SEO) Applying Advanced Retail Analytics: Market Basket Analysis

Applying advanced retail analytics in market basket analysis can tell you things about consumers you maybe didn't know without better management software.


Going beyond top line sales reporting and drilling down into your market basket is essential for retailers to see what customers buy, how often, and what products are purchased together. Unfortunately, getting market basket data can be challenging because it requires complex queries across large data-sets that need to fit the user's specific geography, product, and time frame requirements.

Applying advanced analytics.png

Today many companies either can't get market basket information or require a request into a data science group that is prioritizing against their own strategic projects to get it. A retail analytics solution that can provide advanced market basket metrics in a format that is easy to understand and available to everyone in the organization can have applications to many areas of your business.

Couple this with the actionable value of real time reporting and you will be able to capitalize on opportunities that would otherwise be difficult to see with top line sales reporting.  

Here's how applying advanced retail analytics in market basket analysis can tell you things about consumers you maybe didn't know.

Reading Your Total Market Baskets

Market basket analysis is all about analyzing the items purchased during a customer's transaction. But trying to decipher all of these transactions at numerous store locations is a tough job when you don't have software to give you a more comprehensive view.

With better analytic tools, you'll get a full picture of all your market baskets and see what people buy in each store. Using enhanced search features, you can retrieve data from each location and analyze what people bought within a certain time frame.

Real-time capabilities take this even further, which is why so many now prefer this technology in their analytic platforms. You want to know which products consumers buy, yet also what else they bought at the same time and what the attraction was.

Market Basket Penetration

Along with the above, you need to dig a little deeper and see what the percentage is of total market baskets containing selected products. By analyzing this through a specific product, you get a better idea of how well a product performs in daily sales. There are millions of customers walking by your product sitting on the shelf––how do you know if they are or are not putting it in their shopping cart?

Without looking into this more thoroughly, you may just go by generalities, which only leads to discrepancies and embarrassing money losses later. Gaining visibility into these important metrics and consumer reactions of your promotions will help you understand how to best get customers to stop and put your product in their shopping cart.

Penetration is also a valuable metric when dealing with changes in the number of customers visiting the store. In today's retail world store traffic declines can sometimes be an issue that is out of your control. Maintaining or increasing your penetration in this environment means that you are capitalizing on the customers still shopping the aisle. Vice versa, if store traffic is growing, your penetration percentage will tell you if you are reaping the benefits of additional customers coming into the store.

You can see all this data in real time and will be able to realize how your b2b payment solutions strategy is impacting the customer's decision on whether to purchase your product or not when they are in the aisle.

The best analytic tools add a "unit per basket" metric with the above for detailed measurement of how your products sell per store location.

Understanding Purchase Multiples and Basket Size

Knowing whether a consumer put your product in their shopping cart is one thing, but knowing how much is another important factor to consider. What if they decided to pick up two boxes instead of one? Or what if they were having a big party and picked up 15? Maybe it's near a holiday and that could be correlated with higher units per purchase. Knowing these purchase multiples will help you structure the types of promotions you run and the time frame in which you run them.

Multiples.png

Another metric to look at is total basket size. What if customers spend more money in the store when they purchase your product as opposed to your competitor's products? Certainly this would be a strong differentiator for you when it comes to assortment decisions and promotional placements. Understanding how your product impacts a customer's basket size can give you an advantage over your competition when it comes to shelf space and marketing decisions.

Having access to these analytics helps you understand if promotions you are running are driving bigger baskets and multiples. And if so, by how much larger they were and what this correlated to in terms of dollars and units.

Calculating Average Retail for Each Product

Taking your analytics even further, you can break it down to average retail per product so you get an idea of how to price your items. You can find out quite a bit from your market basket this way and whether products truly sell based on their price or other factors.

Since your competitors are probably in a constant pricing war, you need to act accordingly in pricing things based on sales records. Being able to do this with an advanced analytic tool helps save you time and money having to find information from more than one source.

Customer Centric Price Optimization

When thinking about how to price your products, it's also important to know whether the low price you're setting it at was a good price investment. You'll be able to quantify the value added to your supply chain collaboration efficiency along with your investment in price in terms of sales dollars, and quickly understand if spending a large sum of money in a price investment was worth it. How much did you gain from increased penetration or units per purchase? Did it offset the dollars I lost in average retail?

Basket Driver-1.png

There are many factors that go into determining whether a price investment is successful. Say you sell a product for $2 and sell 1,000 units, totaling $2,000. If you decide to change the price to $1, selling 1,000 units now only equates to $1,000. What you can't see from this example is how the price change is going to impact the number of customers that purchase your product or the number of units they purchase in each transaction. You'll need to make sure you're getting more shoppers to buy a higher number of units than what you are giving up in the price.

Complementary Items and Consumer Behavior

Another important basket analysis is to determine which items consumers have commonly bought together and how likely they are to be bought together in the future. Classic example? Peanut butter and jelly. Hot dogs and hot dog buns. These are the obvious ones of course, but what about the ones that aren't so obvious? Using iControl's analytics, it was found that hamburger and pasta are highly correlated as well. 

Advanced retail analytics will also show you what types of people buy what kinds of things––understanding consumer behavior. Health conscious people are found to buy more fruit and yogurt, for example. Maybe there's a certain time of the year in your town where everyone is buying large basket sizes of cookie mix, because of an annual bakeoff. You'll see things that might seem obvious, and things that are also quite unexpected.

Knowing these relationships can be valuable in multiple areas of your business. Cross-promotional opportunities between products can be identified using this process in addition to measuring the success of those promotions. Shelf alignment can be optimized through this as well. Understanding how and when consumers shop the store is key in aligning your strategy to fit their needs.

 

See Everything In Real Time

Everything you see when analyzing your market basket is going to be updated in real time. That means that all the information is going to be accurate, timely, and most importantly––relevant. It's important to be able to understand consumer's response to real time market changes in your price, your competitors price, and the effectiveness of a promotion you're currently running.

Is a lower price causing more customers to put your product in their shopping cart? What products are in a customer's basket in winter as opposed to summer? You'll be able to answer those questions immediately, and be able to make faster decisions on how to improve.

 

Similar posts

Can't Get Enough?

Subscribe to our newsletter to see how you can improve margins through operational efficiency and insights.