European Journal of Business and Management www.iiste.org ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol.5, No.22, 2013 110 Markovian Application to Brand Switching Behaviour: A Survey of Toothpaste Godwin I. Umoh, Ph.D Department of Management, University of Port Harcourt Hart O. Awa, Ph.D Department of Marketing, University of Port Harcourt Prince T. Ebitu, Ph.D Department of Marketing, University of Calabar Abstract Every industry and economy is idiosyncratic especially in terms of what drives consumer loyalty and so, extrapolating knowledge may not always provide the right basis for competitive advantage. This paper borrows transition matrix as a forecasting instrument for determining the market environment in the future, and sets out to unveil the potential of Markov chains in sequencing family brand choice and in determining intensive transitional probabilities for toothpaste. Data were purposefully drawn from 785 students of universities of Abuja, Lagos, and Port Harcourt. The data generated were cast into a Markov matrix to permit meaningful observation of the households’ behaviour toward five brands of toothpaste. Further, the data were analyzed using multiple regressions and Pearson correlation co-efficient; and the findings showed that households exhibit AAAAA, AAAAB, and AAABC not because of trade deals, out-of-stock of favourites, and in-store stimuli; rather because of such product-delivery attributes as flavour and functionality, brand availability and awareness, and brand name and image. While the paper concludes that subjects exhibit brand loyalty based on brand’s selling points, the paper advised on creating corporate framework that allows for more strategic and perhaps tactical actions. Key words: Markov chain, toothpaste, switching behaviour, brand loyalty. Introduction Building sustainable competitive advantage (SCA) has long made the phenomenon of consumer brand switching a central issue underlying market dynamics (Dick and Basu, 1994; Parker, 1979). Amidst the prevailing stiff competition and informed consumers, scholars and practitioners recognize that steady throughput lies on grasping the processes that underlie brand switching/loyalty and to cast it into a framework suitable for evaluating market factors and for predicting their influences on sales behaviour (Farley and Kuehn, 1965; Parker, 1979). This is worthwhile because loyal behaviour attracts product-support information and advocacy behaviour (Schoenbachler, 2004; Kuenzel, 2009; McGrath, 2011), less price sensitivity, and willingness to spend more resources to maintain undisrupted behaviour (Paswan et al., 2007). Aside loyal consumers refusing to switch in order to show cohesiveness to the symbols of their social class (Nia and Zaichkowsky, 2000); their positive word-of-mouth represents the mechanism for saving marketing cost (Rundle-Thiele and Mackay, 2001). Boone and Kurtz (2007) observe that generating a new customer costs 5 to 7 times as much as keeping a current one, so firms pay steep prices when customers stray to other brands. Depending on the industry, a 10 percent reduction in value-chain cost structure may yield 40 to 50 percent improvement in pre-tax profit (Eisingerich and Bell, 2007; Alrubaiee and Al-Nazer, 2010; Shaker and Basem, 2010) or as little as a 5 percent improvement in