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    Case Problem 1 Planning An Advertising Campaign

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    1. The optimal solution allocates the $279,000 advertising budget across television, radio, and newspaper to maximize total exposure rating. It results in 15 television ads, 33 radio ads, and 30 newspaper ads, reaching 127,100 new customers. 2. A $10,000 increase in the budget would increase total exposure by only 55 points, a much smaller percentage than the budget increase, so may not be worth the additional cost. 3. The ranges for the exposure ratings show the solution is not very sensitive to exact ratings, except for the newspaper rating of 5.

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    Case Problem 1 Planning An Advertising Campaign

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    811 views4 pages
    1. The optimal solution allocates the $279,000 advertising budget across television, radio, and newspaper to maximize total exposure rating. It results in 15 television ads, 33 radio ads, and 30 newspaper ads, reaching 127,100 new customers. 2. A $10,000 increase in the budget would increase total exposure by only 55 points, a much smaller percentage than the budget increase, so may not be worth the additional cost. 3. The ranges for the exposure ratings show the solution is not very sensitive to exact ratings, except for the newspaper rating of 5.

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    Case Problem 1 Planning an Advertising Campaign

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    1. The optimal solution allocates the $279,000 advertising budget across television, radio, and newspaper to maximize total exposure rating. It results in 15 television ads, 33 radio ads, and 30 newspaper ads, reaching 127,100 new customers. 2. A $10,000 increase in the budget would increase total exposure by only 55 points, a much smaller percentage than the budget increase, so may not be worth the additional cost. 3. The ranges for the exposure ratings show the solution is not very sensitive to exact ratings, except for the newspaper rating of 5.

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    811 views4 pages

    Case Problem 1 Planning An Advertising Campaign

    Uploaded by

    Admin
    1. The optimal solution allocates the $279,000 advertising budget across television, radio, and newspaper to maximize total exposure rating. It results in 15 television ads, 33 radio ads, and 30 newspaper ads, reaching 127,100 new customers. 2. A $10,000 increase in the budget would increase total exposure by only 55 points, a much smaller percentage than the budget increase, so may not be worth the additional cost. 3. The ranges for the exposure ratings show the solution is not very sensitive to exact ratings, except for the newspaper rating of 5.

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    of 4

    Case Problem 1: Planning an Advertising Campaign

    The decision variables are as follows:

    T1 = number of television advertisements with rating of 90 and 4000 new customers

    T2 = number of television advertisements with rating of 40 and 1500 new customers

    R1 = number of radio advertisements with rating of 25 and 2000 new customers

    R2 = number of radio advertisements with rating of 15 and 1200 new customers

    N1 = number of newspaper advertisements with rating of 10 and 1000 new customers

    N2 = number of newspaper advertisements with rating of 5 and 800 new customers

    The Linear Programming Model and solution are as follows:

    MAX 90T1+55T2+25R1+20R2+10N1+5N2

    S.T.

    1) 1T1<=10

    2) 1R1<=15

    3) 1N1<=20

    4) 10000T1+10000T2+3000R1+3000R2+1000N1+1000N2<=279000

    5) 4000T1+1500T2+2000R1+1200R2+1000N1+800N2>=100000

    6) -2T1-2T2+1R1+1R2>=0

    7) 1T1+1T2<=20

    8) 10000T1+10000T2>=140000

    9) 3000R1+3000R2<=99000

    10) 1000N1+1000N2>=30000

    OPTIMAL SOLUTION

    Optimal Objective Value

    2160.00000

    Variable Value Reduced Cost

    T1 10.00000 0.00000

    T2 5.00000 0.00000

    R1 15.00000 0.00000

    R2 18.00000 0.00000

    N1 20.00000 0.00000

    N2 10.00000 0.00000
    Constraint Slack/Surplus Dual Value

    1 0.00000 35.00000

    2 0.00000 5.00000

    3 0.00000 5.00000

    4 0.00000 0.00550

    5 27100.00000 0.00000

    6 3.00000 0.00000

    7 5.00000 0.00000

    8 10000.00000 0.00000

    9 0.00000 0.00117

    10 0.00000 -0.00050

    Objective Coefficient Allowable Increase Allowable Decrease

    90.00000 Infinite 35.00000

    55.00000 11.66667 5.00000

    25.00000 Infinite 5.00000

    20.00000 5.00000 3.50000

    10.00000 Infinite 5.00000

    5.00000 0.50000 Infinite

    RHS Value Allowable Increase Allowable Decrease

    10.00000 5.00000 10.00000

    15.00000 18.00000 15.00000

    20.00000 10.00000 20.00000

    279000.00000 15000.00000 10000.00000

    100000.00000 27100.00000 Infinite

    0.00000 3.00000 Infinite

    20.00000 Infinite 5.00000

    140000.00000 10000.00000 Infinite

    99000.00000 10000.00000 5625.00000

    30000.00000 10000.00000 10000.00000


    1. Summary of the Optimal Solution

    T1 + T2 = 10 + 5 = 15 Television advertisements

    R1 + R2 = 15 + 18 = 33 Radio advertisements

    N1 + N2 = 20 + 10 = 30 Newspaper advertisements

    Advertising Schedule:

    Media Number of Ads Budget

    Television 15 $150,000

    Radio 33 99,000

    Newspaper 30 30,000

    Totals 78 $279,000

    Total Exposure Rating: 2,160

    Total New Customers Reached: 127,100 (Surplus constraint 5)

    2. The dual value shows that total exposure increases 0.0055 points for each one dollar increase in
    the

    advertising budget. Right Hand Side Ranges show this dual value applies for a budget increase of up

    to $15,000. Thus the dual value applies for the $10,000 increase.

    Total Exposure Rating would increase by 10,000(0.0055) = 55 points

    A $10,000 increase in the advertising budget is a 3.6% increase. But, it only provides a 2.54%

    increase in total exposure. Management may decide that the additional exposure is not worth the

    cost. This is a discussion point.

    3. The ranges for the exposure rating of 90 for the first 10 television ads show that the solution
    remains

    optimal as long as the exposure rating is 55 or higher. This indicates that the solution is not very

    sensitive to the exposure rating HJ has provided. Indeed, we would draw the same conclusion after

    reviewing the next four ranges. We could conclude that Flamingo does not have to be concerned

    about the exact exposure rating. The only concern might be the newspaper exposure rating of 5. A

    rating of 5.5 or better can be expected to alter the current optimal solution.

    4. Remove constraint #5 for the linear programming model and use it to develop the objective
    function:

    MAX 4000T1+1500T2+2000R1+1200R2+1000N1+800N2
    Solving provides the following Optimal Solution

    T1 + T2 = 10 + 4 = 14 Television advertisements

    R1 + R2 = 15 + 13 = 28 Radio advertisements

    N1 + N2 = 20 + 35 = 55 Newspaper advertisements

    Advertising Schedule:

    Media Number of Ads Budget

    Television 14 $140,000

    Radio 28 83,000

    Newspaper 55 55,000

    Totals 97 $279,000

    Total New Customers Reached: 139,600

    Total Exposure Rating

    90(10) + 55(4) + 25(15) + 20(13) + 10(20) + 5(35) = 2130

    5. The solution with the objective to maximize the number of potential new customers reached
    looks

    attractive. The total number of ads is increased from 78 to 97 (24%) and the number of potential

    new customers reached is increased by 139,600 – 127,100 = 12,500 (9.8%).

    Maximizing total exposure may seem to be the preferred objective because it is a more general

    measure of advertising effectiveness. Exposure includes issues of image, message recall and appeal

    to repeat customers. However, in this case, many more potential new customers will be reached

    with the objective of maximizing reach, and the total exposure is only reduced by 2160 – 2130 = 30

    points (1.4%).

    At this point, we would expect some discussion concerning which solution is preferred: the one

    obtained by maximizing total exposure or the one obtained by maximizing potential new customers

    reached. Expect students to have differing opinions on the final recommendation. Basically, there

    are two good media allocation solutions for this problem.

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