Growing average basket value is not an uncommon goal for retailers. After all, increasing sales and revenue isn’t just about acquiring new customers, but increasing the average value of existing customers as well. Most retailers already know that pricing, assortment and promotions all play a key role in basket size. However, they often overlook perhaps the most important factor – emotion.
For a consumer, every shopping trip involves emotions, needs, and exploration for newness. Every time a customer steps into your store is an opportunity to connect and strengthen their bond with your brand by helping and guiding the customer on the buyer’s journey. Assisting the consumer with their decision making not only enhances their shopping experience, but also enables you to meet more of their needs, thus generating more revenue.
It is that guidance, along with the more commonly considered factors such as the right assortment, friendly staff, safety and cleanliness in stores, a functional and easy to use website, and a few others, that drives customers to return to the same retailers.
Consider the following example. A mom and her young son are in their store on their weekly grocery shopping trip. While walking down the pasta aisle, a box of organic, dinosaur-shaped pasta catches the son’s eye. The mom could just throw the box in her cart and move on with the rest of her shopping list, or, if given the right guidance from you, the retailer, she could seek out additional items to go with the pasta that fit her preference for organic, healthier products, like lower sodium sauce, organic tomatoes and low-fat mozzarella cheese.
However, successfully guiding the consumer on their buying journey requires an understanding of their needs and emotions. How? With data science. Retailers have a trove of data in their transaction logs on what customers purchase in every trip, including the items they purchase together. This brings us back around to basket value.
Looking at these transactions across customers can help you to see the commonality and trends on products or groups of products purchased together. However, correlation does not necessarily mean causation, so it is important that science and correct techniques are used to determine affinity.
Affinity measures the strength of the relationship between two items or a group of items. Along with the strength of the relationship, the directionality of the relationship is as important. Does product A drive the sale of product B or is it vice versa? The affinity of 0.47 between product A and product B means that if 100 people buy product A, 47 of them will also buy product B.
Many affinity relationships exist within a category or product group, as the products have similar characteristics and usage. Data analysis can provide insights into the customer buying journey and the relationship of products across categories.
Is there a strong relationship between products that are across categories and are placed across the aisle? How can a retailer entice customers to walk across the aisle to purchase both products? Can a right combo promotion do the trick?
Diving into the data, retailers can discover what products customers are regularly purchasing together, as well as which items are the driver products and which are the related drag items. It requires a true understanding of these product relationships, along with the strength of the relationships, for retailers to drive additional baskets.
Analyzing the transaction and affinity relationships further helps to identify if a product is a basket builder or a trip driver. A trip driver product is what motivates a customer to visit the store and make a purchase, while a basket builder is a common article that goes with many other products, e.g., batteries. In addition, you can assess which type of products are the anchor items, and which items may have multiple drag or driver relationships. All of this information is central in defining strong pricing and promotion strategies for leveraging affinities and meeting customer needs.
Once armed with the above information, retailers can start to take action to increase basket value. Organizations also have the flexibility here to choose the best promotion strategy for their specific customers, store locations, channels and brands that will incentivize the driver items and generate more drag items sold.
For example, retailers could have the top product pairs assorted together during the promotional cycle, or promoted together in a flyer or in an email. All you have to do is offer relevant discounts for the driver item, with limited or no discount on the drag item.
Driving the right combo items and executing well can drive shoppers to other parts of the stores and to other categories. In the current times, as many retailers are reevaluating their assortment, this can be a useful strategy for introducing the customer to a new assortment they may not already be aware of.
However, I would put to you that ultimately, growing your average basket size should be an outcome, not a solitary objective. The objective should be building on your relationship with the customer, a relationship that they have initiated by visiting your store. When you understand the purpose of their visit, you can relate to their underlying emotions and needs to connect better with the customer and drive both revenue and customer satisfaction.
Need help putting the science behind your pricing strategies? Reach out to our pricing experts for a Market Basket Analysis, Promo Strategy consultation and more.
Aditya Rastogi specializes in Retail Pricing Strategy and Advanced Analytics. He partners with retailers to define pricing strategies and integrating science-backed insights into the business processes. Aditya brings extensive experience in retail merchandising, promotional planning and process governance.