Measure effect of Price Change of An Item on Market Basket

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Measure effect of Price Change of An Item on
Market Basket

• Mayur Sedani
• Sr. Merchandising Analyst
• Pricing and Product Optimization
• AutoZone Inc.

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Background on Market Basket (MB) Analysis

• Aimed at providing insight into combination of
  products sold together (in a customer basket)
• The insights obtained from MB analysis can be
  used for
• Product promotion strategies
• Product placements decisions in stores
• Product pricing decision
• Our Objective Find the impact of changing price
  of an item on Market Basket revenue

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Steps in MB Impact Calculation

1. Find the general Affinity between products
2. Find Affinity index in Test and Control Stores
3. Select item-Category Pairs (MB pairs)
4. Calculate MB Impact
5. All data manipulation and calculations were done
   in SAS

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Find Affinity between Products

• Find of time Product from Category B is sold
  when Item A is sold (last 6 months)
• This is defined as the Affinity between Item A
  and Category B
• Higher the Affinity more the likelihood for
  Market Basket behavior

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Affinity Index Test and Control

• Find Affinity Index (between item A and Category
  B) before and After Price Change
• a-t pre 8 week affinity index in the Test Stores
• at post 8 week affinity index in the Test
  Stores.
• a-c pre 8 week affinity index in the Control
  Stores
• ac post 8 week affinity index in the Control
  Stores.

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Affinity Index Test and Control
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Select item-Category Pairs (MB pairs)
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Select item-Category Pairs (MB pairs)
contd

• Condition1 a6 gt 0.05
• Condition 2
• Condition 3
• If Price Increase
• If Price Decrease

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Calculation of MB Impact on Revenue
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Example of Final Output from MB Analysis
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Questions or Comments

• Thank you!