ASSIGNMENT

Case Problem 1: Planning an Advertising Campaign

GROUP: N/A
NAMES: Harsh Khubchandani
BITS ID: 2019MC21018
PART A: Decision Variables
 TH – Reach of first 10 Television ads, i.e. High exposure rating of 90 and 4000 new
customers
 TL – Reach after 10 Television ads i.e. Low exposure rating of 55 and 1500 new
customers
 RH – Reach of first 15 Radio ads i.e. High exposure rating of 25 and 2000 new
customers
 RL - Reach after 15 Radio ads i.e. Low exposure rating of 20 and 1200 new
customers
 NH - Reach of first 20 Newspaper ads i.e. High exposure rating of 10 and 1000 new
customers
 NL - Reach after 20 Newspaper ads i.e. Low exposure rating of 5 and 800 new
customers

PART B: Formulation
Objective: To maximize the total exposure rating through TV, Radio, and Newspaper
advertisement media channels

Max (Z): 90TH + 55TL + 25RH + 20RL + 10NH + 5NL

Constraint:
1. 10000 TH + 10000 TL +3000 RH + 3000 RL + 1000 NH + 1000 NL <= 279000: Total Budget

2. 4000 TH + 1500 TL +2000 RH + 1200 RL + 1000 NH + 800 NL >= 100000: Total New
Customers

3. RH + RL - 2TH - 2TL >= 0: Total Radio Ad Count

4. TH + TL <= 20: Total TV Ad Count

5. 10000 TH + 10000TL >= 140000: Total TV Ad Budget

6. 3000 RH + 3000 RL <= 99000: Total Radio Ad. Budget

7. 1000 NH + 1000 NL >= 30000: Total Newspaper Ad. budget

8. NH <=20: High Reach Newspaper Ad Count.

9. TH <=10: High Reach Television Ad Count

10. RH <=15: High Reach Radio Ad Count

11. TH, TL, RH, RL, NH, NL >= 0: Non-Negativity constraint

PART C: Solution
Optimum Objective Function Value: The exposure rating can reach to its maximum
point i.e. 2160, satisfying the given constraints, by using the optimal variable values
listed in the below table

Optimal Solution:

Variables TH TL RH RL NH NL
Coefficients 90 55 25 20 10 5
Values 10 5 15 18 20 10
PART D: Sensitivity Report Summary
Table 1:
# Decision Variable Range of Optimality
1 TH (55, ∞)
2 TL (50, 66.6667)
3 RH (20, ∞)
4 RL (16.5, 25)
5 NH (5, ∞)
6 NL (-∞, 5.5)

Table 2:
# Constraint Shadow Price Range of Feasibility
1 Total TV Ad Budget LHS 0 (-∞,150000)
2 Total TV Ad Count LHS 0 (15, ∞)
3 Total Budget LHS 0.0055 (269000,294000)
4 Total Radio Ad Budget LHS 0.001166667 (93375,109000)
5 High Reach Newspaper Ad Count.
LHS 5 (0,30)
6 Total Radio Ad Count LHS 0 (-∞,3)
7 High Reach Television Ad Count.
LHS 35 (0,15)
8 High Reach Radio Ad Count. LHS 5 (0,33)
9 Total Newspaper Ad Budget LHS -0.0005 (20000,40000)
10 Total New Customers LHS 0 (-∞,127100)
11 Non-Negativity Constraint LHS 0 (-∞,78)
PART E: The Five Items
Item 1
Advertising Schedule:
Media Number of Ads Budget
Television 15 $1,50,000
Radio 33 $99,000
Newspaper 30 $30,000
Totals 78 $2,79,000

 Total Exposure Rating: 2,160

 Total New Customers Reached: 1,27,100

Item 2
i) There will be an improvement of 0.55 points in the exposure rating for every 1$
added to the Total Budget. Therefore, adding $10,000 will increase the exposure
by (10,000*0.55) 55 points.
Since the allowable increase is $15000 for total budget (as per the sensitivity
report) therefore, the shadow price can be applied for this increase
ii) Increase in budget: 10,000/2,79,000*100 = 3.58%
Increase in total exposure: 55/2160*100 = 2.54%

Since, the percentage increase in total exposure is less than the percentage
increase of budget, addition of budget would not be a beneficial decision

Item 3
As per the Range of Optimality in Table Part D (Table 1), we observe that all the variables
are not much sensitive to the exposure rating EXCEPT NH variable (i.e. Newspaper with
High Reach) as 0.5 increase in the exposure rating (i.e. changing coefficient from 5 to 5.5)
can change the optimal solution.

Item 4
MAX(Z): 4000 TH + 1500 TL +2000 RH + 1200 RL + 1000NH + 800NL
Constraints:
1. 10000 TH + 10000 TL +3000 RH + 3000 RL + 1000 NH + 1000 NL <= 279000

2. RH + RL - 2TH - 2TL >= 0

3. TH + TL <= 20
 4. 10000 TH + 10000TL >= 140000

5. 3000 RH + 3000 RL <= 99000

6. 1000 NH + 1000 NL >= 30000

7. NH <=20

8. TH <=10

9. RH <=15

10. TH, TL, RH, RL, NH, NL >= 0

FORMULATION:

Advertising Schedule:
Media Number of Ads Budget
Television 14 $1,40,000
Radio 28 $84,000
Newspaper 55 $55,000
Totals 97 $2,79,000

Total Exposure Rating: 90(10) + 55(4) + 25(15) + 20(13) + 10(20) + 5(35) = 2130
Total New Customers Reached (Z): 1,39,600

Item 5

Maximizing Exposure Rating vs Maximizing Customers

Maximizing potential new customers increases total advertisements by 24.35 %, and
increases total new customers by 83% but decreases total exposure rating by 1.39%

Recommendation:
Maximizing total exposure will be the recommended option as restaurant falls into a
category of business where maintaining brand value is of highest priority and maximizing
the exposure rating involves providing value not just to the new customers but also to the
existing customers, in terms of issues of image, message recall and appeal to customers.
Considering the above facts, maximizing the exposure rating per ad will be the worthwhile
option.