This research paper proposes a novel deteriorating inventory model tailored to address the complexities arising from stock- and advertisement-sensitive demand dynamics within the framework of a prepayment scheme. The model integrates considerations for product deterioration, fluctuating demand patterns influenced by advertising efforts, and prepayment arrangements. Additionally, the model accommodates permissible shortage and backordering rates, reflecting realistic scenarios encountered in supply chain management. By employing mathematical formulations and optimization techniques, the study aims to provide decision-makers with a comprehensive framework for managing inventory levels, pricing strategies, and advertising investments to optimize profit margins while ensuring customer satisfaction. The proposed model contributes to the existing literature by offering insights into the intricate interplay between inventory management, demand dynamics, and marketing strategies in a competitive business environment. The proposed model’s effectiveness and robustness are demonstrated through numerical experiments and sensitivity analyses, providing valuable implications for practitioners aiming to improve operational efficiency and profitability in inventory management systems.