Brand Switching Ted Mitchell. Switching & Loyalty Even The Most Brand Loyal Customer has Some...
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Transcript of Brand Switching Ted Mitchell. Switching & Loyalty Even The Most Brand Loyal Customer has Some...
Brand Switching
Ted Mitchell
Switching & Loyalty
• Even The Most Brand Loyal Customer has Some Probability of Switching
• The Cost of Keeping a Profitable Customer is Almost Always Lower than the Cost of Attracting a New Profitable Customer
Switching
• Switching brands– Coke - Pepsi– Tide - Sun Light
• Switching Customer Classification– Heavy user - Light user - Non-User– Prime Account - Non-Prime Account– Believer - Non-Believer
Visualize SwitchingPOOL of people who bought coke
last time
Pool of peopleWho bought pepsi
Last time
Visualize Switching
Visualize Switching
Visual Switching
Eventually
62.5% 37.5%
Calculation
(Coke Share, Pepsi Share) Coke Loyal, Coke Switch
Pepsi Switch, Pepsi Loyal[ ](.5 .5) .7 .3
.5 .5[ ]= (.5x.7)+(.5x.5) = .6
Coke’s Share Next Period
Current Shares
Calculation
(Coke Share, Pepsi Share) Coke Loyal, Coke Switch
Pepsi Switch, Pepsi Loyal[ ](.6 .4) .7 .3
.5 .5[ ]= (.6x.7)+(.4x.5) = .62
Coke’s Share Next Period
Period 1
Calculation
(Coke Share, Pepsi Share) Coke Loyal, Coke Switch
Pepsi Switch, Pepsi Loyal[ ](.625 .375) .7 .3
.5 .5[ ]= (.625x.7) + (.375x.5) = .4375 + .1875 = .625
Coke’s Share Long Term
Period n
Eventually
62.5% 37.5%
Markov Switching
• Assumes probabilities are constant
• Size of market is constant
• Probabilities reflect the amount of marketing effort devoted to getting and keeping customers– Coupons, More Shelf Space, Advertising,
Increasing satisfaction, etc.