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An EOQ model incorporating consumer behavior towards marketing policy change
Journal article   Open access   Peer reviewed

An EOQ model incorporating consumer behavior towards marketing policy change

Seung-Lae Kim, Eunice Y. Kim and Se-Kwon Kim
Opsearch
12 Sep 2024
DOI: https://doi.org/10.1007/s12597-024-00850-5
Featured in Collection :   Research Supported by Drexel Libraries' OA Programs
url
https://doi.org/10.1007/s12597-024-00850-5View
Published, Version of Record (VoR)Open Access via Drexel Libraries Read and Publish Program 2024CC BY V4.0,  Open

Abstract

Inventory model EOQ Markovian EOQ Brand-Loyalty
This paper introduces the Markovian EOQ model, an inventory management tool that considers how consumers respond to different marketing strategies. The model uses the Markov process to estimate the demand for two competing brands in a dynamic market. Its purpose is to create a more practical EOQ model that can be used in real-world scenarios where consumers may switch brands due to advertising, promotions, price adjustments, or dissatisfaction. By using the Markovian EOQ model, companies can make better inventory decisions and choose the most effective marketing strategies. One of the assumptions of the model is that the demand in the next period is a function of marketing expenditure in the current period. Our research found that the optimal lot size increases with marketing expenditure but at a slower rate than the traditional EOQ model due to brand loyalty. We provide a numerical example to demonstrate the effectiveness of the model.

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Domestic collaboration
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Operations Research & Management Science
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