Measuring the Impacts of Consumers’ Demographics on Spending Propensity and Expenses on Firms Profitability using Market Basket Optimization Model

Abstract

Market Basket Analysis (MBA) and its importance in selecting the right basket of goods have obtained considerable interest among the managers and executives of many retail stores. The present study has explored the literature gap in measuring the determinants for managing the optimum market basket of goods for consumers. The study found that some customer demographic and firm specific expense variables provide important prediction power to measure the customer spending propensity and firms’ profitability respectively. We have used two different market basket optimization models to measure and analyze the results. The results show significant influence of age and advertising expenses on consumers’ propensity to expense and firms’ profitability respectively. The study has used two regression models to analyze the market basket using WarpPLS and R Software. Finally, the study suggests for future study to measure the impacts of consumer behavioral and psychological aspects and industry types on the spending propensity and firms’ profitability through market basket analysis.