MARKET BASKET ANALYSIS – AFFINITY
Product recommendation:
“Customers who bought/viewed this item also bought/viewed…”
– Understand the purchase behaviour of buyers, their needs, to better prepare promotional programs (what products are most frequently sold together).
– One can divide customers into groups or divide products into groups.
– By selecting a profile of customers, say teenager girls, one can scrutinize what (combination of) products they buy or visit in a website. By selecting a specific product, say vegetarian (no) beef burger, one can get a profile of the buyers (demographic data).
DEMAND FORECASTING AND PRICE OPTIMIZATION
Both are challenging projects and many factors are to be considered to predict units to be sold at different prices. The most sensible is to approach one factor at a time using different tools. To give you an idea, the following is just data preparation that should not be neglected and it is only a prologue prior to any “intelligent” statistical approach:
– Different event lengths overlapping each other (maybe be due to Flash sales or just additional discounts to boost sales sooner than expected) will change the planned number of days at a price (no overlap was anticipated): adjusting a planned duration into a real duration is not immediate when handling thousands of SKU (items).
– If items (SKU) are defined by “equal price”, what does “stock-out” mean? imagine a collection of 20 lipsticks, if the fashion colour is sold-out, the whole collection is sold-out? New price will only mean price for non-fashion colours: no “demand curves” to be computed because the SKU also includes fashion colour. Clothing sizes have a similar problem because the price tends to be the same across sizes, but no concern for parfums because different sizes have different prices.
– “Zero units sold” at a price are fundamental but they are not in Sales datasets unless they are included on purpose.