Analyzing customer loyalty for savory brands using Markov Chain

Abstract

The objective of this project is to study the brand loyalty amongst popular savory brands in a supermarket. Currently this market is dominated by the brand Haldirams and it faces stiff competition from various other brands. We chose to study the brand switching dynamics using Markov Chain Analysis. Markov Chain Analysis is the most popular and most used stochastic process in market research to study brand loyalty. In Markov Chains the future state of the system depends only on the present and is independent of the past. With Markov Chain Analysis we predict the long term market shares of the brands under consideration. The project is significant for understanding the impact of competing brands on the brand repurchase. Most companies have realized that acquiring new customers is much more costly than retaining existing customers. Though absolute loyalty is difficult to achieve brand managers can strive to study the user’s propensity to switch. This would enable them to identify and take appropriate action such as stepping up promotion, launching on advertising campaign or altering prices to bolster their market share.