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Resource Optimization - Planning An Advertisement Campaign
Resource Optimization - Planning An Advertisement Campaign
Resource Optimization - Planning An Advertisement Campaign
OPTIMIZATION
CASE STUDY
GROUP 20 || EGMP49
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CONTENTS
03 – 04 CASE PROBLEM
PLANNING AN ADVERTISEMENT CAMPAIGN
05 – 08 MODEL DEVELOPMENT
DEFINE THE DECISION VARIABLES
DEFINE THE OBJECTIVE FUNCTION
DEFINE THE CONSTRAINTS
OPTIMAL SOLUTION USING SOLVER
SENSITIVITY ANALYSIS
ANSWER REPORT
09 – 09 SUMMARY
10 – 11 OTHER RECOMMENDATION(S)
RECOMMENDATION 1
RECOMMENDATION 2
11 – 12 APPENDICES
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EGMP 49 || RESOURCE OPTIMIZATION CASE STUDY || GROUP-20
1. CASE PROBLEM:
PLANNING AN ADVERTISEMENT CAMPAIGN
The exposure rating is viewed as a measure of the value of the ad to both existing
customers and potential new customers. It is a function of such things as image,
message recall, visual and audio appeal, and so on. As expected, the more expensive
television advertisement has the highest exposure effectiveness rating along with the
greatest potential for reaching new customers.
At this point, the HJ consultants pointed out that the data concerning exposure and
reach were only applicable to the first few ads in each medium. For television, HJ
stated that the exposure rating of 90 and the 4000 new customers reached per ad
were reliable for the first 10 television ads. After 10 ads, the benefit is expected to
decline. For planning purposes, HJ recommended reducing the exposure rating to 55
and the estimate of the potential new customers reached to 1500 for any television
ads beyond 10. For radio ads, the preceding data are reliable up to a maximum of 15
ads. Beyond 15 ads, the exposure rating declines to 20 and the number of new
customers reached declines to 1200 per ad. Similarly, for newspaper ads, the
preceding data are reliable up to a maximum of 20; the exposure rating declines to 5
and the potential number of new customers reached declines to 800 for additional
ads.
Flamingo’s management team accepted maximizing the total exposure rating, across
all media, as the objective of the advertising campaign. Because of management’s
concern with attracting new customers, management stated that the advertising
campaign must reach at least 100,000 new customers.
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EGMP 49 || RESOURCE OPTIMIZATION CASE STUDY || GROUP-20
To balance the advertising campaign and make use of all advertising media,
Flamingo’s management team also adopted the following guidelines:
MANAGERIAL REPORT
Develop a model that can be used to determine the advertising budget allocation for
the Flamingo Grill.
2. How would the total exposure change if an additional $10,000 were added to the
advertising budget?
3. A discussion of the ranges for the objective function coefficients. What do the
ranges indicate about how sensitive the recommended solution is to HJ’s exposure
rating coefficients?
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EGMP 49 || RESOURCE OPTIMIZATION CASE STUDY || GROUP-20
2. MODEL DEVELOPMENT
We want to determine the number of ads in each category of advertising media. The
following table summarizes the decision variables:
No. of Ads in each category
Television Radio Newspaper
X1 X2 X3
P1, P2, P3 are price per ad in TV, Radio and Newspaper respectively.
- Non-negativity of variables:
(7) Xi >= 0, i = 1, 2, 3.
- With the developed model, we were able to reach out to new potential customers
well beyond the target within the budget.
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EGMP 49 || RESOURCE OPTIMIZATION CASE STUDY || GROUP-20
Constraints
Final Shadow Constraint Allowable Allowable Range of Feasibility
Cell Name Value Price R.H. Side Increase Decrease Upper Limit Lower Limit
$P$13 Advertising Budget 279000 0.0055 279000 15000 10000 294000 269000
$P$14 Constraint2 15 0 20 1E+30 5 Infinity 15
$P$15 Constraint4 99000 0.001166667 99000 10000 5625 109000 93375
$P$16 Constraint1 3 0 0 3 1E+30 3 Infinity
$P$17 New Customers Reach 127100 0 100000 27100 1E+30 127100 Infinity
$P$18 Constraint3 150000 0 140000 10000 1E+30 150000 Infinity
$P$19 Constraint5 30000 -0.0005 30000 10000 15000 40000 15000
- For advertising budget from USD 269k to USD 294k, the exposure rating changes
by 0.0055 for every unit increase or decrease of the value.
- For radio advertising budget from USD 93.375k to USD 109k, the exposure rating
changes by 0.001167 for every unit increase or decrease of the value.
- For newspaper advertising budget from USD 15k to USD 40k, the exposure rating
changes by -0.0005 for every unit increase or decrease of the value.
- Any change in the constraints beyond the range of lower and upper limits, the
nature of the solution changes and the solver tool needs to be applied again with the
changed values.
Variable Cells
Cell Name Original Value Final Value Integer
$M$5 X1 15 15 Contin
$N$5 X2 33 33 Contin
$O$5 X3 30 30 Contin
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EGMP 49 || RESOURCE OPTIMIZATION CASE STUDY || GROUP-20
Constraints
Cell Name Cell Value Formula Status Slack
$P$13 Advertising Budget 279000 $P$13<=$R$13 Binding 0
$P$14 Constraint2 15 $P$14<=$R$14 Not Binding 5
$P$15 Constraint4 99000 $P$15<=$R$15 Binding 0
$P$16 Constraint1 3 $P$16>=$R$16 Not Binding 3
$P$17 New Customers Reach 127100 $P$17>=$R$17 Not Binding 27100
$P$18 Constraint3 150000 $P$18>=$R$18 Not Binding 10000
$P$19 Constraint5 30000 $P$19>=$R$19 Binding 0
- Out of SEVEN constraints mentioned in the table, FOUR of them are NON
BINDING constraints with certain slack. THREE of them are BINDING constraints,
which means the limits are exhaustive.
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EGMP 49 || RESOURCE OPTIMIZATION CASE STUDY || GROUP-20
3. SUMMARY
2. If additional USD 10k is added to the advertising budget (which is within the
range of feasibility), the exposure quality increases by 10000*(Shadow Price) =
10000*0.0055 = 55, which is equivalent to 2215.
X1 X2 X3
14 28 55
No. of Television advertisements = 14
No. of Radio advertisements = 28
No. of Newspaper advertisements = 55
With the change in objective, the total exposure quality = 2130
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EGMP 49 || RESOURCE OPTIMIZATION CASE STUDY || GROUP-20
4. OTHER RECOMMENDATION(S)
(NOT MENTIONED IN THE CASE PROBLEM)
4.1. RECOMMENDATION 1
- With the following media scheduling, reach to new potential customers and
exposure quality can be increased by 6.68% and 3.47% respectively without
compromise in total advertising budget.
- If there are no contractual agreements with the media partners, we think that this
scheduling would be optimal solution.
X1 X2 X3
10 53 20
4.2. RECOMMENDATION 2
-Rather than maximizing the exposure quality or reach to new potential customers,
minimizing the overall advertising budget without any individual budget allocation
restrictions and minimum exposure quality of 2130, Reach to new potential
customers could be more than 100K.
- With the following media scheduling, the total advertising budget could be reduced
by 2.15% from the allotted value.
- If there are no contractual agreements with the media partners, we think that this
scheduling would be optimal solution.
X1 X2 X3
15 33 24
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EGMP 49 || RESOURCE OPTIMIZATION CASE STUDY || GROUP-20
6. APPENDICES
Constraints
Constraint2 1 15 <= 20
Constraint1 -2 1 3 >= 0
Constraints
Constraint2 1 14 <= 20
Constraint1 -2 1 0 >= 0
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EGMP 49 || RESOURCE OPTIMIZATION CASE STUDY || GROUP-20
Constraints
Constraint2 1 10 <= 20
Constraint1 -2 1 33 >= 0
Minimizing Budget
Objective
10000 3000 1000 273000 Minimize
Constraints
Constraint2 1 15 <= 20
Constraint1 -2 1 3 >= 0
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