ASSIGNMENT

Case Problem 1: Planning an Advertising Campaign

GROUP:
NAMES
PART A: Decision Variables
T1 - no. of television ads with an exposure rating of 90 and 4000 new customers
T2 - no. of television ads with an exposure rating of 55 and 1500 new customers
R1 - no. of radio ads with an exposure rating of 25 and 2000 new customers
R2 - no. of radio ads with an exposure rating of 20 and 1200 new customers
N1 - no. of newspaper ads with an exposure rating of 10 and 1000 new customers
N2 - no. of newspaper ads with an exposure rating of 5 and 800 new customers

PART B: Formulation
MAX: 90T1 + 55T2 + 25R1 + 20R2 + 10N1 + 5N2
Objective is to maximize the total exposure rating across all the advertising media.

Constraint:
1. 10000T1 + 10000T2 +3000R1 + 3000R2 + 1000N1 + 1000N2 <= 279000 (Budget)

2. 4000 T1 + 1500 T2 +2000 R1 + 1200 R2 + 1000N1 + 800N2 >= 100000 (Customer Reach)

3. T1 <=10 (First 10 Television ads.)

4. R1 <=15 (First 15 Radio ads.)

5. N1 <=20 (First 20 Newspaper ads.)

6. R1 + R2 - 2T1 - 2T2 >= 0 (Radio ads.)

7. T1 + T2 <= 20 (TV ads.)

8. 10000T1 + 10000T2 >= 140000 (TV ads. budget)

9. 3000R1 + 3000R2 <= 99000 (Radio ads. Budget)

10. 1000N1 + 1000N2 >= 30000 (Newspaper ads. budget)

11. T1, T2, R1, R2, N1, N2 >= 0 (Non-Negativity constraint)

PART C: Solution
1. Optimum Objective Function Value: 2160
It is the maximum exposure rating that can be achieved.
Optimal Solution

Variables T1 T2 R1 R2 N1 N2
Coefficients 90 55 25 20 10 5
10 5 15 18 20 10
PART D: Sensitivity Report Summary
Table 1:
# Decision Variable Range of Optimality
1 T1 (55 , Infinity)
2 T2 (50 , 66.6667)
3 R1 (20 , Infinity)
4 R2 (16.5 , 25)
5 N1 (5 , Infinity)
6 N2 (-Infinity, 5.5)

Table 2:
# Constraint Shadow Price Range of Feasibility
1 Budget 0.0055 (269000 , 294000)
2 Customer Reach 0.0000 (-Infinity, 127100)
3 First 10 Television ads. 35.0000 (0 , 15)
4 First 15 Radio ads. 5.0000 (0 , 33)
5 First 20Newspaper ads. 5.0000 (0 , 30)
6 Radio ads. 0.0000 (-Infinity, 3)
7 TV ads. 0.0000 (15 , 1E+30)
8 TV ads. budget 0.0000 (-Infinity, 150000)
9 Radio ads. Budget 0.0012 (93375 , 109000)
10 Newspaper ads. budget -0.0005 (20000 , 40000)
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 $2,79,000

 Total Exposure Rating: 2160

 Total New Customers Reached: 127100
Item 2
Shadow price for constraint 1 is 0.0055 for every $ one increase in budget. So, the shadow
price is applicable for the increase in budget of $10,000 as upper limit for constraint is
15000.
Total Exposure Rating increase by 10,000 * 0.0055 = 55 points, Percentage increase in
advertising budget is 3.6 %, Percentage increase in exposure rating is 2.546 %
So exposure rating improves by 2.546% with increase of 3.58% budget

Item 3
From Part D Table 1 and Sensitivity report, Range of optimality for objective coefficient for
first 5 variables are not very sensitive to coefficients proposed by HJ Consultants.

But , Range of optimality for Objective coefficient for 6th Variable N2 is sensitive to
coefficients proposed by HJ Consultants.
For N2 5 optimality range is (-Infinity, 5.5), So a rating of 5.5 or above will change the
current optimal solution.

Item 4
MAX(Z): 4000 T1 + 1500 T2 +2000 R1 + 1200 R2 + 1000N1 + 800N2

S.T. Constraints:

1. 10000T1 + 10000T2 +3000R1 + 3000R2 + 1000N1 + 1000N2 <= 279000

2. 4000 T1 + 1500 T2 +2000 R1 + 1200 R2 + 1000N1 + 800N2 >= 100000
3. T1 <=10
4. R1 <=15
5. N1 <=20
6. R1 + R2 - 2T1 - 2T2 >= 0
7. T1 + T2 <= 20
8. 10000T1 + 10000T2 >= 140000
9. 3000R1 + 3000R2 <= 99000
10. 1000N1 + 1000N2 >= 30000
11. T1, T2, R1, R2, N1, N2 >= 0

FORMULATION

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

Total Exposure Rating: 2130

Total New Customers Reached: 139600

Item 5
Compared to solution 1 solution results are as below:
Solution 2 increases total advertisements from 78 to 97 (24.35 % Increase), increases
total new customers from 127100 to 139600 (9.83 % Increase) and decrease total exposure
rating from 2160 to 2130 ( - 1.39% decrease)

Recommendation:
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. The solution with objective to maximize
potential new customers reached is recommended.