Product Basket 2019-02-08T08:27:32+00:00
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Product basket

Product basket is used by retailers and economics to follow market changes that effect purchase power and purchase behavior.

Both marketers and economists are interested in knowing about consumer purchasing power and their buying behavior. This is where product basket comes into play.


Product basket refers to the fixed number of products and services that are valued on yearly basis and thereby used to measure inflation in a specific market or region.

Economists adjust goods within the basket from time to time to make sure they are in accordance with the consumer habits. It can include variety of products depending on the existing trend in the market and buying habits of consumers.

Using product baskets, economists are able to calculate what is known as consumer price index (CPI).

What is included in a product basket?

To better understand how consumers are making their purchasing decisions, marketers and economists choose everyday products like clothing, food, furniture and other products and services. In fact, there are eight major groups used in product baskets:

  1. Food and other dietary consumables – cereals, milk, coffee and tea, wine, snacks etc.
  2. Clothing – this includes both men and women shirts, sweaters along with accessories like jewelry etc.
  3. Transportation – prices of new vehicles, gasoline, public transportation fees, car insurance) etc.
  4. Housing – home rents, cost of furniture etc.
  5. Recreation and entertainment – this includes items like pets, pet accessories, toys, television, sports equipment etc.
  6. Health care and medicines – medical supplies, health care givers’ services, prescription drugs etc.)
  7. Other commodities and services tobacco and such related products
  8. Price of haircuts along with other common services that people use like funerals

Consumer Price Index and its relationship with Product Basket

Before we understand how consumer price index is related to product basket, let’s understand what it is.

Consumer price index is the measure used by economists when they take weighted averages of the prices of different product baskets. It is calculated by noting the changes in prices for every item and then taking averages.

It is the changes that are used to understand the CPI and thereby understanding what the cost of living is going to be. Governments use CPI to understand what the inflation or deflation of the country is.

CPI is often weaved with inflation, but it should be stated here that it only measures inflation that consumers experience. It is not the sole indicator of a country’s inflation. For a complete picture, different indexes are used like product price index which focuses on inflation faced by the production process whereas the employment cost index measures the labor market inflation. Then there is another price index to understand inflation in the import and export of a country while another index measures the GDP deflation/inflation as well.

Using product baskets in retail

While the concept of product basket is native to economists, it is also used in eCommerce but in different vein.

Today e-retailers are using data analysis and data mining tools and techniques to better understand how their customers are shopping online. Through these they have started to find different relationships between activities that are performed by customers on their websites. For instance, through data analysis they can find out which products are being sold at what time or whether some are being bought along with others (f.ex. hiking boots with thick woolen socks).

One such technique is known as affinity analysis. This is a common data analysis that used by eCommerce websites to understand the co-occurrence connection between products.

Affinity analysis is used in market basket analysis. For instance, if someone is buying a fancy dress, chances are they are going to buy fancy accessories as well. During the holiday season, many customers buy things in bundles like gaming consoles, DVDs, chocolates and other gift items. Affinity analysis helps e-retailers to easily create more campaigns to target customers that abandon carts, bundle products to create more conversions and helps them in pricing them together.

Benefits of market basket analysis

First, it gives insights into shoppers online buying behavior. Customers actions are recorded online like for instance, what pages they visited, what they were looking at, what was their cursor movement etc. Knowing this, an e-marketer can do a lot of things. They can change the layout of their website for better navigation, change how their products are shown and more.

But that’s not all. One of the biggest benefits of using market basket analysis is that it allows e-retailers to cross sell their items online.

Cross selling

Cross selling is a process where an additional product or service is sold to a customer along with their original product they wanted to buy. For instance, if a repeat customer is buying milk every day, you will find related items like cookies, cream or coffee near it so that people buy that as well. E-retailers use market basket analysis as well to cross sell products on their website in similar fashion.


Upselling is another technique that is used through insights generated from market basket analysis. E-retailers finding common trends in buying behaviors of their customers and using that, they induce them to buy more expensive products or use their impulse buying tendency to ask them use add-ons in their purchases.


Product basket is an important concept that is originally applied by economists. However, its use have trickled into retail space as well. Key product basket comparison with Sniffie is child’s play. You can start tracking how your key items’ prices compare against your competitors, today. Contact us and let’s discuss on how you could start monitoring your key products efficiently.

Strategy card

Strategic importance (retail) 85
Strategic importance (ecommerce) 90
Ease of use 85
Practical implementation 77