An Inventory Model with Advertisement- and Customer-Relationship-Management-Sensitive Demand for a Product’s Life Cycle

Mei-Chuan Cheng, Chun-Tao Chang and Tsu-Pang Hsieh ()
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Mei-Chuan Cheng: Department of Information Management, Fu Jen Catholic University, Xinzhuang Dist., New Taipei City 242062, Taiwan
Chun-Tao Chang: Department of Statistics, Tamkang University, Tamsui Dist., New Taipei City 251301, Taiwan
Tsu-Pang Hsieh: Department of Business Administration, Aletheia University, Tamsui Dist., New Taipei City 25103, Taiwan

Mathematics, 2023, vol. 11, issue 6, 1-16

Abstract: Advertisements play an important role in communicating with target customers. A higher advertisement frequency increases costs but may increase the chances of acquiring new customers. Moreover, faced with a wide-ranging array of products that might fit specific needs, customers usually buy according to expectations about value and satisfaction. When customers are satisfied with a purchasing experience, they are more likely to buy again and share their experiences with others. Hence, companies are concerned about increasing customer value and service satisfaction to develop and manage customer relationships. This maintains a company’s competitive edge and can improve its market share. In this article, we incorporate the frequency of advertisements and the cost of customer relationship management (CRM) into the demand function under a product life cycle (PLC). Customers can return products in the appreciation period offered by a retailer. A profit-maximizing model is developed to analyze the joint marketing and ordering policy of each stage of a product’s life cycle with a product return guarantee. We construct an algorithm to identify the optimal decisions. Finally, numerical examples are presented to illustrate the proposed model, and managerial insights are obtained from a sensitivity analysis, followed by conclusions and future research.

Keywords: inventory; marketing; appreciation period; advertisement; return products (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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