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Linear Programming-Example On Marketing

The document describes a linear programming problem to determine the optimal promotional campaign for the product Crunchy Start across three advertising media: television commercials, magazine advertisements, and newspaper advertisements. The objective is to maximize exposure given budget constraints on advertising spending and planning costs, as well as a limit on the number of television commercial spots. The problem is formulated algebraically with variables representing levels of advertising in each medium and constraints representing the budgets and spot limit.

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93 views13 pages

Linear Programming-Example On Marketing

The document describes a linear programming problem to determine the optimal promotional campaign for the product Crunchy Start across three advertising media: television commercials, magazine advertisements, and newspaper advertisements. The objective is to maximize exposure given budget constraints on advertising spending and planning costs, as well as a limit on the number of television commercial spots. The problem is formulated algebraically with variables representing levels of advertising in each medium and constraints representing the budgets and spot limit.

Uploaded by

mandeep_tc
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Linear Programming- Example on Marketing

Goal: Design the promotional campaign for Crunchy Start.


The three most effective advertising media for this product are
Television commercials on Saturday morning programs for children.
Advertisements in food and family-oriented magazines.
Advertisements in Sunday supplements of major newspapers.
The limited resources in the problem are
Advertising budget ($4 million).
Planning budget ($1 million).
TV commercial spots available (5).
The objective will be measured in terms of the expected number of
exposures.
Question: At what level should they advertise Crunchy Start in each of
the three media?
Cost and Exposure Data
Algebraic Formulation
• Let TV = Number of commercials for separate spots on
television
M = Number of advertisements in magazines.
SS = Number of advertisements in Sunday supplements.

Maximize Exposure = 1,300TV + 600M + 500SS


subject to
Ad Spending: 300TV + 150M + 100SS ≤ 4,000
($thousand)
Planning Cost: 90TV + 30M + 30SS ≤ 1,000 ($thousand)
Number of TV Spots: TV ≤ 5
and
TV ≥ 0, M ≥ 0, SS ≥ 0.
Linear Programming- Example on Finance

• Think-Big Development Co. is a major investor in commercial real-estate


development projects.
• They are considering three large construction projects
– Construct a high-rise office building.
– Construct a hotel.
– Construct a shopping center.
• Each project requires each partner to make four investments: a down
payment now, and additional capital after one, two, and three years.

Question: At what fraction should Think-Big invest in each of the three


projects?
Financial Data for the Projects
Financial Data for the Projects
• Year by Year Investment Capacity of the company-

Time Period Capital


Now 25
After 1 Year 45
After 2 Year 65
After 3 Year 80
(In millions )
Algebraic Formulation
• Let OB = Participation share in the office building,
H = Participation share in the hotel,
SC = Participation share in the shopping center.

Maximize NPV = 45OB + 70H + 50SC


subject to
Total invested now: 40OB + 80H + 90SC ≤ 25 ($million)
Total invested within 1 year: 100OB + 160H + 140SC ≤ 45
($million)
Total invested within 2 years: 190OB + 240H + 160SC ≤ 65
($million)
Total invested within 3 years: 200OB + 310H + 220SC ≤ 80
($million)
and
OB ≥ 0, H ≥ 0, SC ≥ 0.
LP Example- (Assignment Problem)

A prison is trying to decide what to feed its prisoners.


They would like to offer some combination of milk,
beans, and oranges. Their goal is to minimize cost,
subject to meeting the minimum nutritional
requirements imposed by law.

Question: What should the diet for each prisoner


be?
Data Available
• The cost and nutritional contents of each food, along with the
minimum nutritional requirements are shown below.
Algebraic Formulation

Let x1 = gallons of milk per prisoner,


x2 = cups of beans per prisoner,
x3 = number of oranges per prisoner.

Minimize Cost = $2.00x1 + $0.20x2 + $0.25x3


subject to
Niacin: 3.2x1 + 4.9x2 + 0.8x3 ≥ 13 mg
Thiamin: 1.12x1 + 1.3x2 + 0.19x3 ≥ 1.5 mg
Vitamin C: 32x1 + 93x3 ≥ 45 mg
and
x1 ≥ 0, x2 ≥ 0, x3 ≥ 0.
LP – Example on Transportation
A company has two plants producing a certain product that is to be shipped
to three distribution centers. The unit production costs are the same at the
two plants, and the shipping cost per unit is shown below. Shipments are
made once per week. During each week, each plant produces at most 60
units and each distribution center needs at least 40 units .
Data Available

Question: How many units should be shipped


from each plant to each distribution center?
Algebraic Formulation
Let xij = units to ship from plant i to distribution center j (i = A, B; j = 1, 2,
3),

Minimize Cost = $4xA1 + $6xA2 + $4xA3 + $6xB1 + $5xB2 + $2xB3


subject to
Plant A: xA1 + xA2 + xA3 ≤ 60
Plant B: xB1 + xB2 + xB3 ≤ 60
Distribution Center 1: xA1 + xB1 ≥ 40
Distribution Center 2: xA2 + xB2 ≥ 40
Distribution Center 3: xA3 + xB3 ≥ 40
and
xij ≥ 0 (i = A, B; j = 1, 2, 3).

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