oc10 case.pdf - Haskell Johnson Advertising Budget...

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Haskell & Johnson Advertising Budget Allocation Report MGOC10 LEC 02 Professor Vinh Quan Yash Ghei 1002658527 Junxian Jian 1002515236 Selina Lam 1002410438 Dan Zhu 1002525449 University of Toronto March 5, 2018
Table Of Contents Introduction ------------------------------------------------------------------------------ 2 Analysis ----------------------------------------------------------------------------------- 2 Optimal Budget Allocation -------------------------------------------------------------------------- 4 Adjustments in Budgeting -------------------------------------------------------------------------- 4 Reaching New Customers -------------------------------------------------------------------------- 6 Recommendations --------------------------------------------------------------------- 7 Conclusion ------------------------------------------------------------------------------- 8 Appendixes ------------------------------------------------------------------------------ 10 Appendix A: LINGO Input Equation --------------------------------------------------------------- 10 Appendix B: LINGO Output Solution ------------------------------------------------------------- 11 Appendix C: LINGO Output Range Analysis ---------------------------------------------------- 12 Appendix D: LINGO Input Solutions with $10,000 extra advertising budget ---------- 13 Appendix E: LINGO Output Solutions with $10,000 extra advertising budget -------- 14 Appendix F: LINGO Input Solution for New Objective Function -------------------------- 15 Appendix G: LINGO Output Solutions for New Objective Function ----------------------16 1
Introduction Flamingo’s Management team granted Haskell & Johnson a budget of $279,000 and asked them to prepare an analytical report with recommendations concerning how The Flamingo Grill should utilize and distribute their budget among different advertising strategies. The main objective for Haskell & Johnson (H&J) is to maximize the total exposure ratings through all the mediums of advertising. The exposure ratings is viewed as a measure of the value of the ad to both existing customers and potential new customers. In fact, it is a function of images, message recall, visual and audio appeal within the advertisement. There are three advertising media methods that The Flamingo Grill uses: television, radio and newspaper. Each different advertising media has a different exposure rate. Typically, the higher the rating the more costly the advertising media is. Television ranks first with the highest rating rate score, followed by radio and then newspaper. The exposure rating also changes based on the number of ads a type of advertising medium is conducting. Analysis Allocation of Television, Radio, and Newspaper Advertising Media Exposure Rating per Ad New Customers Per Ad Cost Per Ad Television (T1) 90 4,000 $10,000 Television (T2) 55 1,500 Radio (R1) 25 2,000 $3,000 Radio (R2) 20 1,200 Newspaper (N1) 10 1,000 $1,000 Newspaper(N2) 5 800 2
Defining Decision Variables Let T1 be the number of television advertisements that are exposed to 4000 new customers with the exposure rating of 90 per ad Let T2 be the number of television advertisements that are exposed to 1500 new customers with the exposure rating of 55 per ad Let R1 be the number of radio advertisements that are exposed to 2000 new customers with the exposure rating of 25 per ad Let R2 be the number of radio advertisements that are exposed to 1200 new customers with the exposure rating of 20 per ad Let N1 be the number of Newspaper advertisements that are exposed to 1000 new customers with the exposure rating of 10 per ad Let N2 be the number of Newspaper advertisements that are exposed to 800 new customers with the exposure rating of 5 per ad Objective Function Max: Z = 90T1 + 55T2 + 25R1 + 20R2 + 10N1 + 5N2 Constraints 1. 10000(T1+T2) + 3000(R1+R2) + 1000(N1+N2) <= 279000 (Budget) 2. T1 <= 10 (Prevent Decline for TV) 3. R1 <= 15 (Prevent Decline for Radio) 4. N1 <= 20 (Prevent Decline for Newspaper) 5. 4000T1 + 1500T2 + 2000R1 + 1200R2 + 1000N1 + 800N2 >= 100 000 (Reach New

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