amazon.com product network analysis (forte consultancy group)

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© 2006 Forte Consulting. All Rights Protected and Reserved. Analytics Services Product Network Analysis - Amazon.com Case Study Introduction Document March, 2013 Disclaimer: Public Amazon.com data is used for illustration and results can not be used for commercial purposes.

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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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Page 1: Amazon.com Product Network Analysis (Forte Consultancy Group)

© 2006 Forte Consulting. All Rights Protected and Reserved.

Analytics Services

Product Network Analysis -Amazon.com Case Study

Introduction Document

March, 2013

Disclaimer: Public Amazon.com data is used for illustration and results can not be used for commercial purposes.

Page 2: Amazon.com Product Network Analysis (Forte Consultancy Group)

© 2013 Forte Consultancy Group. All Rights Protected and Reserved. Forte Consultancy Group 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

Most commonly purchased item within “Parenting Books”.

Must have / loyalty builder for “Parenting Books”.

An item of interest for purchasers of both “Healthy Baby Products” and “Parenting Books”.

Effective in cross-category sales triggering.

An isolated item, creating limited synergy with portfolio. Evaluated in rationalization and new category build-up.

Page 3: Amazon.com Product Network Analysis (Forte Consultancy Group)

© 2013 Forte Consultancy Group. All Rights Protected and Reserved. Forte Consultancy Group 3

Targeted Promotions Sourcing & Assortment

Layout & Shelf Management Product Pricing

Increased cross-sales opportunities and micro-category loyalty management

Optimized product line-up, maximizing relevance and increasing impulse purchase

Optimized prices, incorporating cross-sales and loyalty impact of products

Increased efficiency in product portfolio and new category development opportunities.

PNA

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

Page 4: Amazon.com Product Network Analysis (Forte Consultancy Group)

© 2013 Forte Consultancy Group. All Rights Protected and Reserved. Forte Consultancy Group 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

2418

989

582

418 310

249 204 127 100 92 78 67 40 36 24 38 24 18 33

523

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 +

Size of Product Clusters vs. Number of Items

Portfolio Rationalization Opportunities

Cross-sales & Bundling Opportunities

Micro-Category Development Opportunities

Source: Forte Consultancy Analysis on product recommendation data of Amazon.com.

Page 5: Amazon.com Product Network Analysis (Forte Consultancy Group)

© 2013 Forte Consultancy Group. All Rights Protected and Reserved. Forte Consultancy Group 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

Page 6: Amazon.com Product Network Analysis (Forte Consultancy Group)

© 2013 Forte Consultancy Group. All Rights Protected and Reserved. Forte Consultancy Group 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

Page 7: Amazon.com Product Network Analysis (Forte Consultancy Group)

© 2013 Forte Consultancy Group. All Rights Protected and Reserved. Forte Consultancy Group 7

Sample Product Clusters Discovered (3 of 3) …which can be quite sizeable in some cases

Cluster # 62 (Troubled Family)

Products in Cluster 4092

Page 8: Amazon.com Product Network Analysis (Forte Consultancy Group)

© 2013 Forte Consultancy Group. All Rights Protected and Reserved. Forte Consultancy Group 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)

Boston University Hockey

Isolated Cluster (# 2)

Everything about Zippo

Isolated Cluster (# 3)

Discovering Houston

Isolated Cluster (# 4)

Gender Specific Mentoring

Page 9: Amazon.com Product Network Analysis (Forte Consultancy Group)

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The information contained in this document, much of which is confidential to Forte Consultancy Group, is for the sole use of the intended recipients. No part of this document may be reproduced in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Forte Consultancy Group.