Journal of Chemical and Pharmaceutical Research (ISSN : 0975-7384)

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Original Articles: 2014 Vol: 6 Issue: 5

Retailer?¢????s optimal decision model when marketing cost affected by demand

Abstract

Retailers often play the role of co-brokers in the marketing channel, their decisions affect the optimal profit of the manufacturers at upstream and consumer surplus at downstream. So the research of retailer’s optimal decision has a strong theoretical and practical significance. This paper assumes that the demand function is a function of the retail price and the marketing cost, and set up three stages model to solve the optimal strategy of retailer. We introduce marketing costs into demand rate, and get the optimal retail price, marketing costs and order quantity of retailer. The study shows that: wholesale price, order costs and demand elasticity of marketing costs have positive impact on marketing costs, while price elasticity of demand and order quantity have negative impact. Ordering costs, wholesale price and marketing cost flexibility of demand have positive impact on optimal retail price, but price elasticity of demand and order quantity have negative impact. Ordering costs, marketing costs and elasticity of marketing costs have positive impact on order quantity, while retail price, price elasticity of demand and inventory cost have negative impact. The innovation of this paper lies in multiple decision variables of the retailers, which are retail price, order quantity and marketing costs as three decision variables.This paper complement the existing research on the retailers’ optimal decision.