Application of renewal theory in marketing

Example 11.1

Consider a consumer buys or utilizes the service of the same manufacturer originated product or service repeatedly over time rather than buying from multiple suppliers. A consumer who shows a penchant of buying the same product or service is said to possess brand loyalty for that particular product or service. This means the consumer consistently purchases the same brand within a product class. Thus brand loyalty, which includes some degree of pre-dispositional commitment towards a brand, may be perceived as being affected by multidimensional/multivariate multi factors. Some of the known factors are customers' perceived value, brand trust, customers' satisfaction, repeat purchase behavior, commitment level, etc. Hence a marketing or advertising firm, which enhances customer loyalty through brand loyalty, can ensure strong positive effects on the profitability of a brand.

It is quite interesting to study how one can quantify brand loyalty and also understand how long term forecasting of market share can be undertaken utilizing some simple concepts of stochastic processes. Concepts like Markov Chain are used to study brand loyalties in marketing and in this example we discuss such a case, though theoretically which is mainly due to lack of any marketing data.