Inventory management and endogenous demand: Investigating the role of customer referrals, defections and product market failure

摘要

Usually inventory policies do not take into account marketing feedback. In this case, lost sales have no influence on future demand. Recent studies have considered inventory policy and customer demand are endogenous. This article extends the approach of endogenous demand by integrating the approaches of earlier models into a holistic assessment of customer satisfaction. The article specifically focuses on the impact of product availability on customer satisfaction. If a customer order is fulfilled in the current period, then the customer is satisfied. Satisfied customers will continue to do business with the firm and make positive referrals and vice versa. This way customer demand and inventory policy are endogenous. A key innovation is that when the firm's market share drops below a threshold value, then there will be a product market failure. The inclusion of market share is exclusive to this study. The results of this study are applicable to smaller firms with low market share. The relationship between customer referrals, demand and its effect on market is evident in online shopping. This marketplace has provided enough freedom to customers to express their views on product quality transparently. Customer reviews on online sites is important to influence sales. Because of the impact of customer referrals on product demand, it is necessary to have their effects on demand and inventory policy investigated.