What is the function of market basket analysis in category management?

Market basket analysis plays a crucial role in category management by identifying purchasing patterns among products. This analytical method examines the items that customers frequently buy together within a single transaction. By understanding these relationships, category managers can make more informed decisions regarding product placement, promotions, and inventory management.

For example, if market basket analysis reveals that customers who purchase bread often also buy butter, category managers might decide to place these products closer together in the store or create bundled promotions. This strategic alignment can enhance the shopping experience, increase sales, and encourage cross-selling.

The other choices, while related to aspects of category management, do not directly capture the essence of market basket analysis. It is not primarily focused on increasing product costs or analyzing customer demographics—though insights from market basket analysis could inform pricing strategies and target specific customer segments. Similarly, while it may indirectly contribute to forecasting sales trends by revealing customer preferences, its primary function is to uncover the relationships between items in customer transactions.