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From Data to Dollars: Practical Applications of Market Basket & Association Analysis in Finance | by Jyoti Dabass, Ph.D | Jul, 2024

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Are you tired of feeling like you’re shooting in the dark when it comes to marketing and sales in the finance industry? It’s time to turn on the lights with Market Basket Analysis and Association Analysis! These data-driven techniques help you understand your customers’ behavior and preferences, so you can offer targeted promotions, cross-sell products, and increase revenue. In this blog post, we’ll show you how these powerful methods are used in the finance domain, and how you can start using them to grow your business today. Let’s get started with Market Basket Analysis!!

Market Basket Analysis

Market Basket Analysis is a technique used in the field of data mining to identify patterns in the items that customers purchase together. It helps retailers to identify complementary products, which can be used to increase sales and profits.

A simple real-life example of this from the finance domain is the “credit card reward points” offered by banks. When a customer uses their credit card to make purchases, the bank keeps track of the items they buy. Market Basket Analysis can be used to identify which products are often purchased together by customers who use their credit card to buy groceries.

Market Basket Analysis

For example, a bank may find that customers who buy diapers and wipes together are also likely to buy baby formula. Based on this information, the bank can offer a promotion to customers who buy a certain amount of diapers and wipes in a single transaction. The bank may also offer a bonus reward point for purchasing baby formula in the same transaction, incentivizing customers to buy all three items together.

Market Basket Analysis can also be used to identify products that are often purchased together by customers who are at risk of defaulting on their credit card payments. For example, banks may find that customers who buy alcohol and tobacco products together are more likely to miss payments. The bank can use this information to offer targeted promotions or financial assistance to help these customers manage their credit card debt.

Market Basket Analysis

In summary, Market Basket Analysis is a powerful tool that helps retailers and financial institutions to identify patterns in customer purchasing behavior and use this information to increase sales, reduce costs, and provide targeted promotions and assistance to customers. Next, let’s cover the Association analysis.

Association Analysis

Association Analysis is a technique used in the field of data mining to identify patterns in the relationship between different items or events. It helps businesses to understand which products, services, or events are often purchased or experienced together, which can be used to increase sales and improve customer satisfaction.

A simple real-life example from the finance domain is the “cross-selling” strategy used by banks to offer additional products or services to their existing customers. For example, when a bank notices that a customer has taken out a personal loan, they may use Association Analysis to identify which other products the customer is likely to be interested in.

Association Analysis

Let’s say a bank finds that customers who have taken out personal loans are also likely to be interested in credit cards with rewards points. The bank can use this information to send targeted marketing messages to these customers, offering them a credit card with a sign-up bonus or special rewards for their purchases.

Association Analysis can also be used to identify which products or services are often purchased together by customers. For example, a bank may find that customers who buy life insurance are also likely to be interested in investing in a retirement savings plan. The bank can use this information to offer bundled products or promotions to customers who purchase life insurance, incentivizing them to invest in both products together.

Association Analysis

In summary, Association Analysis is a useful technique for businesses to identify patterns in customer behavior and use this information to offer targeted promotions, bundled products, and cross-selling opportunities. It helps businesses to increase sales, improve customer satisfaction, and build stronger relationships with their customers.

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