Market Basket Analysis

Market basket analysis is one of many techniques in data mining or data analysis used to associate items that can be targeted for business tactics.   It is used to discover the patterns co-occurrence of specific groups or items used to assist business in decision-making.   By using this information driven tool, transactions with customers can be recorded and analyzed to reveal valuable information about the purchasing or consumption behavior of customers.  Retail industry is among many industries that utilize this technique rigorously in managing customer relations.   One common use of this technique is to create and increase opportunities of cross selling and up selling.  In short, it provides insight into the combination of products in particular customer’s consumption baskets. 

Particularly, what is Market Basket Analysis?

Market basket analysis particularly seeks to identify the relationship of group of items or also called an item set by using a logic relationship in designed algorithm ruled.  For example, IF{Beer, meat}, THEN {chips} or IF{Diaper, Onion}, THEN {Beer}

Potential cross-selling opportunities can be identified by finding the information on customers:

-          Which product combination that customers often buy?

-          When will they purchase the combination?

-          In what sequence that they purchase the items?


Cross selling is important because it helps to increase opportunities to make the sales of different products and increase the profitability of the business.  By identifying the basket of purchased items, business will be more likely to introduce products that will be more likely accepted by customer and be less likely to miss out a sale. 

Example: Amazon is well known with its algorithm of cross selling.  Returned customers usually find Amazon suggests items that would be in customer’s interests.  The website recorded customers’ browsing and purchasing history and when customers come back to the site, it would be able to cross sell related products that exist in customer’s history.


Up selling is the technique used to target customer in giving them the opportunities to purchase more expensive items or upgrade the current purchase.  Up selling involves in marketing a more profitable product or introducing a new product that was not considered before by customers. 

Some common up-selling tactics:

-          Selling an extended service contract for an electronic item, such as the extended two-year service plan for an Ipad

-          Asking customers whether they want to upgrade a large meal size, such as super size meal at McDonald

-          Suggesting a premium brand of products when customers do not specify specific product brand name, such as a premium spa package

Implementing market basket analysis:



Further readings: