How does the outputs provide a basis for solving the problem?

Background:

Retro Motors is considering offering predefined options combination
packages (trim levels) for its cars rather than letting customers select
individual options. The company wants to determine what the most
desirable options packages are. Sven Jorgensen, Retro data analyst, has
been looking at options packages and working with clustering as a data
mining technique.

Market Basket Analysis (MBA) would be appropriate for the problem and
agrees to send you an e-mail containing a brief analysis of the problem.

From Sven Jorgensen

Subject: Options Packages Data Mining Report

As you know, Retro is interested in offering different trim packages for
its models (similar to Honda's DX, LX, and EX model trim levels).
Currently, customers are allowed to choose individual options and
accessories when they place a custom order. Enrique Munoz, the
manufacturing manager, thinks that more standardized trim levels will
increase efficiencies in his department and provide better market
segmentation for sales. We need to figure out what these different trim
levels should be. I realize that the trim levels must satisfy most
customers' preferences while still being profitable for our company.

I have completed an initial analysis of our sales data. Based on our
discussions, I thought this situation would be a great opportunity to
apply some data mining techniques. In fact, it appeared to me that the
data are well suited for market basket analysis, so I applied that
technique. Here are the association rules with the highest support:

Bucket seats 0.62 0.037

After finishing this analysis, I am more confused than ever. I still
cannot figure out which options should apply to the proposed new trim
levels. Do you have any ideas?

From: Sean Canada

Subject: Options Packages

Thanks for contacting me about your data mining project regarding the
trim styles. Here are my thoughts on this issue.

Yes, Sven's list may show what options are selling together, but it
would leave many Retro customers unsatisfied, especially for the Vortex.
We sell leather seats on 48 percent of the Vortexes, not standard
upholstery. Vortex customers spend between $15,000 and $23,000,
depending on the options they add. The low-end Vortex has a very
different list of options than the high-end Vortex. And you can probably
find a middle group, too. Why don't you look at what the options
packages would be at three different price points for each model? If you
look at it that way, it would really help Retro use the three different
trim levels to target different market segments more effectively.

Alisa Quinn, Appex Decision Support

Subject: Market Basket Analysis

In our recent conversation, you indicated that Retro is contemplating
introducing three trim levels for its new models. I started with the
market basket analysis provided by Mr. Jorgensen, and took into
consideration the customer information from your past sales. I performed
an initial clustering of the data to see whether any obvious patterns
emerged. Then I performed a market basket analysis on the clustered
data.

The results, as you will see from the attached report, were quite
interesting. I think that the results from this combination analysis
will be more helpful to you in determining options packages, because of
the more targeted nature of the data mining process I used. Let me know
if you have any questions about the analysis.

Thank you for the opportunity to provide data mining services to Retro
Motors. If I can be of further assistance, please feel free to contact
me.

Regards,

Alissa Quinn



Options Packages Report

In response to your request for data mining assistance related to
options packages for Retro Motors, I first clustered sales by customer
age and salary, and found three distinct clusters in the data. For
simplicity's sake, I labeled the clusters "Entry," "Sport," and
"Luxury." Then I performed a market basket analysis to discover the
popular options combinations within each segment. The figure below is a
graphic representation of the clustering process.



Market Basket Analysis

The following automotive options were considered for the market basket
analysis:

Power windows Power door locks

Turbo Rust-proofing

Leather seats Floor mats

Rain detector V-6 engine

Parking sensor V-8 engine

Fog lamps Heated mirrors

Pin striping Heated seats

White letter tires CD player

Custom wheels Six-CD changer

Halogen lights Heads-up display

Leather-wrapped steering wheel Steering wheel controls

Power seats  

Cluster: Luxury

The following association rules were generated for the Luxury trim
level:

Heated seats 0.6 0.067

Cluster: Sport

The following association rules were generated for the Sport trim level:

Fog lamps 0.99 0.068

Cluster: Entry

No interesting association rules were discovered