Pricing and capacity planning under hunger marketing

This research studies pricing and capacity planning problems under hunger marketing. Hunger marketing is a tool used to influence customers’ demand behavior by providing limited product supply. Due to the inventory shortages and long queues, customers who buy the product earlier will enhance their social status. In addition, the popularity of products (or maybe bandwagon effect) also serves an indicator or superior product quality and to attract more attention from consumers. The long waiting queue will lure more potential buyers to join based on the reasons that have mentioned above. There are few literatures discussed the hunger marketing issues, especially the customers demand are influenced by the waiting time. In our research, customer’s utility function for the product depends on: (1) Customer Waiting Time (2) Product Utility (3) Product Price. To benefit from hunger marketing strategy, the company decision maker must determine a proper capacity level. Furthermore, different customer has his/her own individual appetite toward the product. Thus, some people buy earlier owing to the benefit of showing of their difference, but others wait until the price dropped as a result of they cannot afford it. Hence, the company can take more customers surplus from the market by changing its price. Our model establish two types of condition that happened in the hunger marketing such as customers have a difficult with observing the queue length, and they can figure out the exact waiting time. We analyzed three kinds of customers who have different attitude while they are waiting. Situations that including customers have the same sensitivity in benefit of waiting and cost of waiting, another is they easily run out of patience and hard to be lured by the long queues, and the other is they have a bandwagon effect that consumers simply follow the trend to purchase. In conclusion, numerical studies showed that when customers cannot catch the precise time they will wait, hunger marketing strategy is beneficial and pricing strategy has a ladder tendency. In contrast, when every customer knows his/her waiting time precisely, company will no longer do the hunger marketing, and rely on mark down pricing to earn more profit.