MARKOV CHAIN ANALYSIS OF MARKET SHARE DETERMINATION A PREDICTIVE MODEL

Title of Publication: MARKOV CHAIN ANALYSIS OF MARKET SHARE DETERMINATION A PREDICTIVE MODEL
Author(s): PROF. G. E. NWORUH, ANYIAM K. E
Year of Publication: 2009
ABSTRACT
This study attempted to use the first order Markov Chain to find out the equilibrium market share of products in the present period as a basis for predicting future market shares. The strength of brand loyalty of selected brands of toilet soap over a period using the variance analysis revealed that brand loyalty is functionally not dependent on the subjective perception of consumers, but on its five marketing mix determinants; price, quality, promotional activities, packaging and availability. By estimating the Transition Probability Matrix (TPM), using the method of Unweighted Restricted Ordinary Least Squares, the scope of brand loyalty brand switching probabilities among product types were calculated to suggest the probable marketing mix on equilibrium market share. From the results, it was suggested that the optimum marketing mix among the various types of toilet soap were as follows: Lux (52.5%), Imperial Leather (27.5%), Joy (4.7%) and Premier (15.3%). These proportions can be used as a guiding principle on future allocations purposes (i.e. optimal policy that maximizes the expected revenue of the process over a finite number of stages). Other subsequent periods were predicted using the model.
The paper concludes that for a profitable operation of any business, its marketing strategy must be designed to ensure that these variables price, product quality, promotional activities, packaging and product availability interact optimally.
KEYWORDS: Markov Chain Market Share Model, Market Share Determination, Brand Switching Behaviour, Transition Probability matrix

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