Market basket
Encyclopedia
The term market basket or commodity bundle refers to a fixed list of items used specifically to track the progress of inflation
in an economy
or specific market.
The most common type of market basket is the basket of consumer goods
, used to define the Consumer Price Index
(CPI). Other types of baskets are used to define
The term market basket analysis in the retail
business
refers to research that provides the retailer with information to understand the purchase behaviour of a buyer. This information will enable the retailer to understand the buyer's needs and rewrite the store's layout accordingly, develop cross-promotional programs, or even capture new buyers (much like the cross-selling
concept). An apocryphal early illustrative example for this was when one super market chain discovered in its analysis that customers that bought diapers often bought beer as well, have put the diapers close to beer coolers, and their sales increased dramatically. Although this urban legend is only an example that professors use to illustrate the concept to students, the explanation of this imaginary phenomenon might be that fathers that are sent out to buy diapers often buy a beer as well, as a reward. This kind of analysis is supposedly an example of the use of data mining
. A widely used example of cross selling on the web with market basket analysis is Amazon.com's use of "customers who bought book A also bought book B", e.g. "People who read History of Portugal
were also interested in Naval History
".
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
in an economy
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
or specific market.
The most common type of market basket is the basket of consumer goods
Consumer basket
The basket of consumer goods or consumer basket is the market basket intended for tracking the prices of consumer goods and services, i.e., it is a sample of goods and services, offered at the consumer market...
, used to define the Consumer Price Index
Consumer price index
A consumer price index measures changes in the price level of consumer goods and services purchased by households. The CPI, in the United States is defined by the Bureau of Labor Statistics as "a measure of the average change over time in the prices paid by urban consumers for a market basket of...
(CPI). Other types of baskets are used to define
- Producer Price IndexProducer price indexA Producer Price Index measures average changes in prices received by domestic producers for their output. It is one of several price indices.Its importance is being undermined by the steady decline in manufactured goods as a share of spending....
(PPI), previously known as Wholesale Price IndexWholesale price indexThe Wholesale Price Index is the price of a representative basket of wholesale goods. Some countries use WPI changes as a central measure of inflation. However, United States now report a producer price index instead.The Wholesale Price Index or WPI is "the price of a representative basket of...
(WPI) - various commodity price indices
The term market basket analysis in the retail
Retail
Retail consists of the sale of physical goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery. Purchasers may be...
business
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
refers to research that provides the retailer with information to understand the purchase behaviour of a buyer. This information will enable the retailer to understand the buyer's needs and rewrite the store's layout accordingly, develop cross-promotional programs, or even capture new buyers (much like the cross-selling
Cross-selling
Cross-selling is the action or practice of selling among or between established clients, markets, traders, etc. or the action or practice of selling an additional product or service to an existing customer. This article deals exclusively with the latter meaning. In practice, businesses define...
concept). An apocryphal early illustrative example for this was when one super market chain discovered in its analysis that customers that bought diapers often bought beer as well, have put the diapers close to beer coolers, and their sales increased dramatically. Although this urban legend is only an example that professors use to illustrate the concept to students, the explanation of this imaginary phenomenon might be that fathers that are sent out to buy diapers often buy a beer as well, as a reward. This kind of analysis is supposedly an example of the use of data mining
Data mining
Data mining , a relatively young and interdisciplinary field of computer science is the process of discovering new patterns from large data sets involving methods at the intersection of artificial intelligence, machine learning, statistics and database systems...
. A widely used example of cross selling on the web with market basket analysis is Amazon.com's use of "customers who bought book A also bought book B", e.g. "People who read History of Portugal
History of Portugal
The history of Portugal, a European and an Atlantic nation, dates back to the Early Middle Ages. In the 15th and 16th centuries, it ascended to the status of a world power during Europe's "Age of Discovery" as it built up a vast empire including possessions in South America, Africa, Asia and...
were also interested in Naval History
Naval History
Naval History is a bi-monthly magazine published by the United States Naval Institute since 1987. The 72-page publication not only includes feature articles spanning the course of Naval History written by significant scholars of their subject, but also has standing features including: "Looking...
".