Amazon.com Product Network Analysis (Forte Consultancy Group)

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According to a 2011 study by Kantar Retail, 72% of retailers consider category management very / extremely important, with 88% believing that use of category insights will differentiate companies in the future, putting it on top of the list. Yet, for years, category management analytics in most retailers has not gone beyond using standard market research, voice of the customer, and market basket analysis tools, barely scratching the surface. Today, thanks to advancements in data mining techniques, retailers can do more.

Social Network Analysis (SNA) is a relatively new commercialized analysis method, automatically identifying social relations between individuals, based on their telecommunications, finance or social media interactions. Today, most leading telecoms operators in the world are using some SNA solution.

Product Network Analysis (PNA) is the application of SNA algorithms in the category management domain, in order to automatically identify:

Which products naturally belong to the same micro category
Which products are most important in terms of creating category loyalty
Which products are most likely to trigger cross-category sales
Where category rationalization opportunities exist

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Amazon.com Product Network Analysis (Forte Consultancy Group)

  1. 1. Analytics Services Product Network Analysis - Amazon.com Case Study Introduction Document March, 2013© 2006 Forte Consulting. All Rights Protected and Reserved. Disclaimer: Public Amazon.com data is used for illustration and results can not be used for commercial purposes.
  2. 2. What is PNA? Product Network Analysis (PNA) is the automated discovery of relations as well as key products and their roles within a product portfolio  An item of interest for purchasers of both “Healthy Baby Products” and “Parenting Books”.  Most commonly purchased item  Effective in cross-category sales within “Parenting Books”. triggering.  Must have / loyalty builder for “Parenting Books”.  An isolated item, creating limited synergy with portfolio.  Evaluated in rationalization and new category build-up.© 2013 Forte Consultancy Group. All Rights Protected and Reserved. Forte Consultancy Group 2
  3. 3. Why use PNA? PNA provides ability to identify hidden, untapped opportunities across merchandising and marketing activities, increasing customer loyalty and sales as the ultimate impact Sourcing & Assortment Targeted Promotions Increased efficiency in product Increased cross-sales portfolio and new category opportunities and micro- development opportunities. category loyalty management PNA Product Pricing Layout & Shelf Management Optimized prices, incorporating cross-sales and loyalty impact Optimized product line-up, of products maximizing relevance and increasing impulse purchase© 2013 Forte Consultancy Group. All Rights Protected and Reserved. Forte Consultancy Group 3
  4. 4. PNA Case Study – Amazon.com As a showcase, our PNA model discovered 6,370 product clusters from Amazon.com product data from 2006, including over 350K books, video and music items Size of Product Clusters vs. Number of Items Portfolio Rationalization Opportunities 2418 Micro-Category Development Opportunities Cross-sales & Bundling Opportunities 989 582 523 418 310 249 204 127 100 92 78 67 40 36 38 33 24 24 18 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 + Source: Forte Consultancy Analysis on product recommendation data of Amazon.com.© 2013 Forte Consultancy Group. All Rights Protected and Reserved. Forte Consultancy Group 4
  5. 5. Sample Product Clusters Discovered (1 of 3) PNA provides ability to fine-tune and sub-categorize product categories managed by retailers… Cluster # 57 (Art of Music) Products in Cluster 1659© 2013 Forte Consultancy Group. All Rights Protected and Reserved. Forte Consultancy Group 5
  6. 6. Sample Product Clusters Discovered (2 of 3) …and provide opportunity to discover less traditional and overlooked micro-categories… Cluster # 65 (Witchcraft) Products in Cluster 2215© 2013 Forte Consultancy Group. All Rights Protected and Reserved. Forte Consultancy Group 6
  7. 7. Sample Product Clusters Discovered (3 of 3) …which can be quite sizeable in some cases Cluster # 62 (Troubled Family) Products in Cluster 4092© 2013 Forte Consultancy Group. All Rights Protected and Reserved. Forte Consultancy Group 7
  8. 8. Sample Isolated Products Discovered In addition, PNA facilitates identification of isolated products, which point out to merchandising rationalization and enrichment opportunities Isolated Cluster (# 1) Isolated Cluster (# 2) Boston University Hockey Everything about Zippo Isolated Cluster (# 3) Isolated Cluster (# 4) Discovering Houston Gender Specific Mentoring© 2013 Forte Consultancy Group. All Rights Protected and Reserved. Forte Consultancy Group 8
  9. 9. The information contained in this document, much of which is confidential to Forte Forte Consultancy Group | Istanbul OfficeConsultancy Group, is for the sole use of the intended recipients. No part of this  Giz 2000 Plaza No: 7/57, 15th Floordocument may be reproduced in any form or by any means, electronic, mechanical, Maslak, Istanbul - Turkeyphotocopying, recording, or otherwise, without the prior written permission of Forte @ info@forteconsultancy.comConsultancy Group.  +90 212 230 9004

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