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. Background on Market Basket (MB) Analysis. Aimed at providing insight into combination of products sold together (in a customer basket)

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Measure effect of price change of an item on market basket

Measure effect of Price Change of An Item on Market Basket

Mayur Sedani

Sr. Merchandising Analyst

Pricing and Product Optimization

AutoZone Inc.


Background on market basket mb analysis
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


Steps in mb impact calculation
Steps in MB Impact Calculation

  • Find the general Affinity between products

  • Find Affinity index in Test and Control Stores

  • Select item-Category Pairs (MB pairs)

  • Calculate MB Impact

  • All data manipulation and calculations were done in SAS


Find affinity between products
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


Affinity index test and control
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

    • a+t: post 8 week affinity index in the Test Stores.

    • a-c: pre 8 week affinity index in the Control Stores

    • a+c: post 8 week affinity index in the Control Stores.



Select item category pairs mb pairs

a+c/ a-c should be within 0.9 and 1.1

If Driver item Price Increased

If Driver item Price Decreased

a6

0.5

0

0.9 1 1.1

a+c/ aor a+t/ a-t

Select item-Category Pairs (MB pairs)


Select item category pairs mb pairs contd
Select item-Category Pairs (MB pairs) contd…

  • Condition1: a6 > 0.05

  • Condition 2:

  • Condition 3:

    • If Price Increase:

    • If Price Decrease:





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