Chapter 4: Case Problem 1—Planning an Advertising Campaign

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Chapter 4: Case Problem 1—Planning an Advertising Campaign Variables are as follows: T1 - Number of TV Ads with rating of 90 and 4000 new customers. T2 - Number of TV Ads with rating of 55 and 1500 new customers. R1 - Number of Radio Ads with rating of 25 and 2000 new customers. R2 - Number of Radio Ads with rating of 20 and 1200 new customers. N1 - Number of Newspaper Ads with rating of 10 and 1000 new customers. N1 - Number of Newspaper Ads with rating of 5 and 800 new customers.

MAX 90T1 + 55T2 + 25R1 + 20R2 + 10N1 + 5N2 S.t.! 1T1 ≤ 10

! ! ! ! ! ! ! ! !

1R1 ≤ 15 1N1 ≤ 20 10,000T1 + 10,000T2 + 3,000R1 + 3,000R2 + 1,000N1 + 1,000N2 ≤ $279,000 4000T1 + 1500T2 + 2000R1 + 1200R2 + 1000N1 + 800N2 ≥ 100,000 -2T1 - 2T2 + 1R1 + 1R2 ≤ 0 T1 + T2 ≤ 20 10,000T1 + 10,000T2 ≥ $140,000 3,000R1 + 3,000R2 ≤ $99,000 1,000N1 + 1,000N2 ≥ $30,000

Questions 1. See Excel sheets. 2. Additional $10,000 would be ideally invested in Radio because it has the highest rating per dollar, however, we have reached our budget maximum for radio so we would have to allocate the 10,000 to either TV or Newspaper. Since TV has a slightly higher rating per dollar than newspaper does I would suggest investing the additional funds in TV. Investing $10,000 more in TV would increase the rating by 55 points. An increase of $10,000 would increase the budget by 3.5% compared to a 2.5% increase in rating points. Management could decide that the additional cost is not worth the rating increase. It should be discussed. 3. The highest rating points is 90 for the first 10 TV ads. After 10 Ads, ratings bump down to 55, but stay there indefinitely. Same goes for Radio and Newspaper. They both go down to 20 and 5 respectively and stay there indefinitely. This means that the exposure rating coefficients that HJ provided are not very sensitive. Flamingo can count on the segment 2 ratings to stay the same, according to the information provided. 4. See Excel sheets. 5. I would suggest to go for the option in...
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