Introduction to Market Basket Analysis

Market Basket Analysis (Association Analysis) is a mathematical modeling technique based upon the theory that if you buy a certain group of items, you are likely to buy another group of items.  It is used to analyze the consumer purchasing behavior and helps in increasing the sales and maintain inventory by focusing on the point of sale transaction(POS) data. Apriori algorithm is used to achieve this.

Apriori Algorithm

This algorithm is used to identify the pattern of data. It’s basically based on observation of data pattern around a transaction.

Example:

If a person goes to a gift shop and purchase a Birthday Card and a gift, it’s likely that he might purchase a Cake, Candles or Candy.  So these combinations help predict the possible combination of purchase to the retail shop owner to club or package it as offers to make better margins. This also enables to understand consumer behavior.

When we look at apriori algorithm its essential to understand what is Association rules too. That will help to understand in the right perspective.

Association rule learning is a popular machine learning technique in data mining. It helps to understand relationship between variables in large databases. It’s being primarily implemented in Point of Sale in retail where large transactions are recorded.

Reference links for Begineers:

http://en.wikipedia.org/wiki/Apriori_algorithm

http://en.wikipedia.org/wiki/Association_rule_learning

http://www.nytimes.com/2012/02/19/magazine/shopping-habits.html?pagewanted=all&_moc.semityn.www&_r=0

http://cran.r-project.org/web/packages/arules/vignettes/arules.pdf

I like this http://nikhilvithlani.blogspot.in/2012/03/apriori-algorithm-for-data-mining-made.html url very simple and easy to understand for novice or beginners.

Reference links for Researchers and algorithm lovers:

http://learninglover.com/blog/?p=245

http://www.cs.umd.edu/~samir/498/10Algorithms-08.pdf

http://www-users.cs.umn.edu/~kumar/dmbook/dmslides/chap6_basic_association_analysis.pdf

My objective of this post is a pre-cursor to use R and Big Data to use Market Basket analysis to do recommendation in retail point of sale domain or based on billions of e-Commerce transactions. In the upcoming posts we will see how we leverage this algorithm and do appropriate analysis on a point of sale data. Keep watching this space.

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