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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Mei-Chuan Cheng & Chun-Tao Chang & Tsu-Pang Hsieh, 2023. "An Inventory Model with Advertisement- and Customer-Relationship-Management-Sensitive Demand for a Product’s Life Cycle," Mathematics, MDPI, vol. 11(6), pages 1-16, March.
    • Handle: RePEc:gam:jmathe:v:11:y:2023:i:6:p:1555-:d:1104535
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    References listed on IDEAS

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    1. Mei-Chuan Cheng & Tsu-Pang Hsieh & Hsiu-Mei Lee & Liang-Yuh Ouyang, 2020. "Optimal ordering policies for deteriorating items with a return period and price-dependent demand under two-phase advance sales," Operational Research, Springer, vol. 20(2), pages 585-604, June.
    2. Wu, Jiang & Chang, Chun-Tao & Teng, Jinn-Tsair & Lai, Kuei-Kuei, 2017. "Optimal order quantity and selling price over a product life cycle with deterioration rate linked to expiration date," International Journal of Production Economics, Elsevier, vol. 193(C), pages 343-351.
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    5. Bibhas C. Giri & Anamika Dash, 2022. "Optimal batch shipment policy for an imperfect production system under price-, advertisement- and green-sensitive demand," Journal of Management Analytics, Taylor & Francis Journals, vol. 9(1), pages 86-119, January.
    6. Yalabik, Baris & Petruzzi, Nicholas C. & Chhajed, Dilip, 2005. "An integrated product returns model with logistics and marketing coordination," European Journal of Operational Research, Elsevier, vol. 161(1), pages 162-182, February.
    7. K. Skouri & I. Konstantaras, 2009. "Order Level Inventory Models for Deteriorating Seasonable/Fashionable Products with Time Dependent Demand and Shortages," Mathematical Problems in Engineering, Hindawi, vol. 2009, pages 1-24, October.
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