Planning an Advertising Campaign The Flamingo Grill is an upscale restaurant located in St. Petersburg, Florida.

 Planning an Advertising Campaign

The Flamingo Grill is an upscale restaurant located in St. Petersburg, Florida. They have asked you to help them plan their advertising campaign for the coming season. They requested your recommendation concerning how the advertising budget should be distributed across television, radio, and newspaper advertisements. The budget has been set at $300,000.

In a meeting with Flamingo management you are provided the following information about the industry exposure effectiveness rating per ad, their estimate of the number of potential new customers reached per ad, and the cost for each ad.

Advertising Media	Exposure Rating per Ad	New Customers per Ad	Cost per Ad
Television	90	4000	$10,000
Radio	25	2000	$3000
Newspaper	10	1000	$1000

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 nw 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 declined 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 management team accepted maximizing the total exposure rating, across all media, as the objective function 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. To balance the advertising campaign and make use of all media, Flamingo's management team also adopted the following guidelines.

• Use at least as twice as many radio advertisements as television advertisements.
• Use no more than 20 television advertisements.
• The television budget must be at least $140,000.
• The radio advertising budget is restricted to a maximum of $99,000.
• The newspaper budget is to be at least $30,000.

HJ agreed to work with these guidelines and provide a recommendation as how the $279,000 advertising budget should be allocated among TV, Radio, and newspaper advertising.

Develop a model that can be used to determine the advertising budget allocation for Flamingo Grill. Include a discussion of the following in your report.

• 1- A schedule showing the recommended number of TV, Radio, and Newspaper advertisements and the budget allocation for each medium. Show the total exposure and indicate the total number of potential new customers reached.
• 2- A discussion of how the total exposure would change if an additional $10,000 were added to the advertising budget.

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	Shadow Price
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	Allowable	Allowable
Coefficient	Increase	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	Allowable	Allowable
Value	Increase	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 shadow price shows that total exposure increases 0.0055 points for each one dollar increase in the advertising budget. Right Hand Side Ranges show this shadow price applies for a budget increase of up to $15,000. Thus, the shadow price 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.