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.