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Please use this identifier to cite or link to this item: http://hdl.handle.net/1942/2074

Title: Why promotion strategies based on market basket analysis do not work
Authors: Vindevogel, B
Van den Poel, D
WETS, Geert
Issue Date: 2005
Publisher: PERGAMON-ELSEVIER SCIENCE LTD
Citation: EXPERT SYSTEMS WITH APPLICATIONS, 28(3). p. 583-590
Abstract: In text books as well as in the business literature, market basket analysis is often promoted as a means to obtain product associations to base a retailer's promotion strategy on. They argue that associated products with a high lift/interest can be promoted effectively by only discounting just one of the two products. Implicitly, they argue that market basket analysis automatically identifies complements. In this research, we show that this implicit assumption does not hold. Our empirical analysis reveals that market basket analysis identifies as many substitutes as complements. Therefore, market basket analysis cannot be used to build a promotion expert system for retailers. Instead, we advice to base the promotion strategy on cross-price elasticities. We conduct this research using scanner data of a large European retailer. Multivariate time-series techniques are used to identify both short-run as well as long-run (persistent) effects of promotions. (c) 2005 Elsevier Ltd. All rights reserved.
Notes: State Univ Ghent, Dept Mkt, B-9000 Ghent, Belgium. Univ Limburg, B-3590 Diepenbeek, Belgium.Vindevogel, B, State Univ Ghent, Dept Mkt, Hoveniersberg 24, B-9000 Ghent, Belgium.bernd.vindevogel@ugent.be
URI: http://hdl.handle.net/1942/2074
DOI: 10.1016/j.eswa.2004.12.019
ISI #: 000227546200018
ISSN: 0957-4174
Category: A1
Type: Journal Contribution
Validation: ecoom, 2006
Appears in Collections: Transportation Research Institute
Research Center for Entrepreneurship and Innovation
Data-analysis and Modelling - Archive
Institute for Applied Economic Research (ITEO) - Archive

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