CASE PROBLEM

( Sourced from Quantitative Methods in Business by Anderson,et al.)

ABC Computers has hired a marketing service firm to develop an advertising strategy for promoting
ABC’s computer software sales. The marketing firm has recommended that ABC use spot
announcements on both television and radio as the advertising media for the proposed promotional
campaign. Advertising strategy guidelines are expressed as follows:

1. Use at least 30 announcements for combined television and radio coverage.

2. Do not use more than 25 radio announcements.
3. The number of radio announcements cannot be less than the number of television
announcements.

The television station has quoted a cost of P2400 per announcement, and the radio station has quoted
a cost of P600 per spot announcement. ABC’s advertising budget has been set at P51000. The marketing
services firm has rated the various advertising media in terms of audio coverage and recall power of the
advertisement. For ABC’s media alternatives, the television announcement is rated at 600, and the
radio announcement is rated at 200. ABC’s president would like to know how many televisions and how
many radio spot announcements should be used to maximize the overall rating of the advertising
campaign.

ABC’s president believes the television station will consider running the ABC spot announcement on its
highly rated evening news program (at the same cost) if ABC will consider using additional television
announcements.

Managerial Report

Perform an analysis of advertising strategy for ABC Computers and prepare a report to ABC’s president
presenting your findings and recommendations. Include ( but do not limit your discussion to) a
consideration of the following:

1. The recommended number of television and radio spot announcements

2. The relative merits of each advertising medium
3. The news program rating that would be necessary before it would make sense to increase
the number of television spots
4. The number of television spots that should be purchased if the news program is rated highly
enough to make increasing the number of television spots advisable
5. The restrictions placed on the advertising strategy that ABC might want to consider relaxing
or altering
6. The best use of any possible increase in the advertising budget
7. Any other information that may help ABC’s president make the advertising strategy
decision.
Include a copy of your linear programming model and the solution using the provided software (STORM)