How to Use Market Basket Analysis to Improve Ecommerce Sales

Using market basket analysis, you gain many benefits. Let’s look at some of the highlights. 

Finds cross-selling opportunities in frequently bundled purchases

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From analysis, you can see that customers often buy products together. For example, you might find that customers are often buying laptops and laptop bags. Other customers, on the other hand, go elsewhere to find a cheaper deal. By bundling these products together into a special deal, you boost the chances of making a larger sale.

Bundles can also make a more pleasurable buying experience for the customer. Instead of going through your store and adding each product manually, they can take advantage of the bundle. In this sense, market basket analysis can even help you to boost customer satisfaction. 

Personalizes recommendations relevant to shopping patterns

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Regardless of whether you’re running a B2C or a B2B e-commerce operation, all customers like personalization. 

That’s why 69% of business leaders are increasing their investment in the tactic. Customers like experiences that are tailored to their wants and needs. 

Looking at factors like purchase history, you can better understand customers on a granular level. Using this information, you can better recommend products that they might enjoy. Customers have to spend less time searching your store to find the product for them. There’s less chance they’ll go elsewhere, and you have a higher chance of making a sale. 

Aids product demand forecasting and prevents stockouts

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The process of ordering stock can be tricky. Order too much, and there’s a risk that products could sit around for extended periods. During that time, you’ll be filling space that could be used for more valuable products. On the other hand, there’s the risk of ordering too few products and selling out. Customers will be disappointed and unable to get the items they want. 

Market basket analysis helps you to better understand the demand for individual products. Looking at historical purchase trends, you can determine how a product is likely to perform in the future. Basing your orders on data, you increase the chances that you’ll order the correct amount.   

This data can even be used to bolster your wider supply chain optimization operation. Data will be an essential part of implementing technologies such as AI and the Internet of Things into your supply chain.  

Improve product visibility and inform placement decisions

Where you choose to place your product in your online store has a big impact on its saleability. This is no different from a physical store – the product at the back of a shop won’t get as many views as the item by the door. However, finding the perfect spot to attract the most customers is difficult. Not every product can be at the top of the page. 

With an understanding of the behavior of customers, you can create better product placements. For instance, if you know that customers tend to buy eggs and flour together, have them on the same page.   

Monitors changes in customer preferences and buying habits 

Customers aren’t static; their habits and preferences will change over time. What’s ‘in’ today probably won’t be a hit tomorrow. Adapting alongside customer preferences is key to e-commerce success. 

Market basket analysis is the quickest way to spot changes in buyer behaviors. Are customers starting to prefer different combinations of products? If so, get in early and start capitalizing on these new behaviors. Alter store layout, bundles, and featured products to match customer’s latest interests.  

Supports strategic pricing decisions and effective promotions 

Effective promotions are key for bringing new customers to your e-commerce store. Promotions are all about finding the most appealing way to present your products. With a greater understanding of buyer preferences, you’ll be able to create more relevant adverts. 

Below are some of the ways that market basket analysis can boost your promotions. 

• Feature products that are bought together in promotional images 
• A discount on bundled items
• Use historical sales data to remarket to customers who have previously invested in product combinations. 

There’s no shortage of benefits associated with market basket analysis. But how can you use it in a way that will boost sales? Here are some key steps to follow in your analysis. 

Collect customer transactional and behavioral data

Effective market basket analysis needs data – lots of it. Luckily, as an e-commerce store, there’s a good chance that you’re already sitting on a mountain of data. With proper streaming ingestion, you can harness this data to your advantage. You can focus on transactional and behavioral data and identify correlations in buying habits. 

An important note! When working with customer information, be mindful of data laws. In particular, your data mustn’t contain any personally identifiable information (PII). 

Refine and organize data into a digestible format

Raw data isn’t of much use to humans (although it's great for training AI). Additionally, unfiltered data tends to contain inaccuracies that can throw off your insights. This includes data that is missing values, duplicated, or simply incorrect. You need a way of presenting it in an error-free, digestible format. 

If you haven’t already, now is the time to invest in analytics to support your data collection. The right tools can give you the information you need for your analysis. Moreover, you shouldn’t need to be a data analyst to use a tool. The best solutions are equipped with intuitive dashboards, visualizations, and reports to help you understand your data. 

Apply the relevant algorithm for your analysis

With your processed data ready, it's time to add an algorithm. This stage is known as ‘association rule mining.’ During this process, association rules are created, which help the algorithm identify correlations between products. Your applied algorithm will look to identify patterns in buying behaviors of products that are bought together. 

Interpret results to gather insights on sales impact

How do associated products impact sales? Using the information gathered from market basket analysis, you can gain insights to make key decisions. These might include: 

• The kinds of product bundles that will generate the most amount of sales
• The optimum layout for products in your store
• The best pricing strategy to influence a sale
• Whether existing bundles are effective

Use insights to refine strategies and promotions 

The data you gain from market basket analysis can help guide your overall strategy. Let's say that a certain group of products is performing well. You can focus on products in that category, ordering more stock and tailoring your promotions around them. At the same time, you can put less emphasis on less successful products. 

You can alter your strategy over time as you gain new insights from your analysis. This way, you’re always in line with the requirements of your customers. 

Conduct A/B testing and gather customer feedback

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Using data to inform your strategy is great, but how can you be truly confident of success? You need a way of trialing your new approach before implementing it. This is where A/B testing comes in handy. 

A/B testing is a form of split testing where you trial two different versions of the same webpage. It’s a tried and tested approach – Around 70% of marketers believe that A/B testing is essential to enhance conversions. Here’s an imaginary example to demonstrate how this can work with market basket analysis. 

Group A arrives on a generic product page, with products laid out from A to Z. Group B lands on a page where products are grouped by association. After completing your test, you find that Group B had a 50% higher conversion rate than Group A. Thanks to A/B testing, you could validate that your insights from market basket analysis were accurate.