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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. 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

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  1. Measure effect of Price Change of An Item on Market Basket Mayur Sedani Sr. Merchandising Analyst Pricing and Product Optimization AutoZone Inc.

  2. 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

  3. 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

  4. 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

  5. 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.

  6. Affinity Index – Test and Control

  7. 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)

  8. Select item-Category Pairs (MB pairs) contd… • Condition1: a6 > 0.05 • Condition 2: • Condition 3: • If Price Increase: • If Price Decrease:

  9. Calculation of MB Impact on Revenue

  10. Example of Final Output from MB Analysis

  11. Questions or Comments Thank you!

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