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.