1. Suppose you work at Costco or another major, national, big-box store, and you do a market-basket analysis and identify the 25 pairs of items in the store that have the highest lift and the 25 pairs of items that have the lowest lift. What would you do with this knowledge? Costco (or your big-box store) doesn't have salespeople, so up-selling is not an option. What else might you do with information about these items' lift? Consider advertising, pricing, item location in stores, and any other factor that you might adjust. Do you think the lift calculations are valid for all stores in the United States (or other country)? Why or why not? Are the 50 pairs of products with the highest lift and lowest lift the best place to focus your attention? What other 50 pairs of products might you want to consider? Explain.
2. Imagine you own a company that sells large volumes of athletic wear to wholesalers who then sell your product to retailers. A single order from any given customer can potentially range in the millions of dollars, so you want to get a better understanding of who your "good" and "bad" customers are. You conduct an RFM analysis on 5 customers who you believe to be your best 5 customers. The RFM scores are: [1,1,1], [3,1,1], [1,4,1], [3,3,1], and [1,1,3]. Is this analysis useful to you? What do the scores tell you?
3. Considering all of the BI techniques you have learned thusfar, which would be most likely to facilitate a business who's competitive strategy is to be the one-stop shop in its harket niche; in other words, to have precisely the parts that customers need on hand.