Advanced Decision Science Jojo P.

Javier
Flamingo Grill - Linear Programming Case October 24, 2015

Introduction
The Flamingo Grills management team hired the advertising firm Haskell & Johnson to recommend the
optimal advertising mix of television, radio and newspaper ads given a budget of $279,000.00. The following
information was provided by H&J:

Media New
Advertising Medium No of Ads Exposure Customers Cost per Ad
Rating per Ad
TV1 1ST 10 90 4,000 $ 10,000
TV2 Television > 10 55 1,500 10,000
RD1 1ST 15 25 2,000 3,000
Radio
RD2 >15 20 1,200 3,000
NP1 1ST 20 10 1,000 1,000
Newspaper
NP2 >20 5 800 1,000

The objective of the advertising campaign is to maximize the total exposure rating across all media.

Z = 90TV1 + 55TV2 + 25RD1 + 20RD2 +10NP1 + 5NP2

Constraints:

TV budget 10,000TV1 + 10,000TV2 140,000

Radio budget 3,000RD1 + 3,000RD2 99,000
Newspaper budget 1,000NP1 + 1,000NP2 30,000
TV Ads TV1 + TV2 20
Radio and TV RD1 + RD2 2TV1 2TV2 0
1ST 10 TV Ads TV1 10
1ST 15 Radio Ads RD1 15
1ST 20 News Ads NP1 20
Total budget 10,000TV1 + 10,000TV2 +
3,000RD1 + 3,000RD2+ 279,000
1,000NP1 + 1,000NP2
Exposure 4,000TV1 + 1,500TV2 +
2,000RD1 + 1,200RD2 + 100,000
1,000NP1 + 800NP2
Non-negativity TV1, TV2, RD1, RD2, NP1, NP2 0
1. A schedule showing the recommended number of television, radio, and newspaper advertisements and
the budget allocation for each media. Show the total exposure and indicate the total number of potential new
customers reached.

Medium Total Ads No of Ads New Customers Exposure Budget

10 40,000 900 $100,000
T.V. 15
5 7,500 275 50,000
15 30,000 375 45,000
Radio 33
18 21,600 360 54,000
20 20,000 200 20,000
Newspaper 30
10 8,000 50 10,000
Total 78 127,100 2,160 $279,000

2. How would the total exposure change if an additional $10,000 were added to the advertising budget?

The exposure rating would increase to 2,215 from 2,160. Based on the LP solution, only one TV ad will be
added given the additional $ 10,000.

3. A discussion of the ranges for the objective function coefficients. What do the ranges indicate about how
sensitive the recommended solution is to HJ's exposure rating coefficients?

The degree of sensitivity for the maximum exposure coefficient is low because it is a non-binding
(constraint 10 =0). Furthermore, the shadow price of the radio and newspaper ads are in small multiples (.0012
and -.0005) to even make a significant impact on the maximum exposure.
4. After reviewing HJ's recommendation, the Flamingo's management team asked how the recommendation
would change if the objective of the advertising campaign was to maximize the number of potential new
customers reached. Develop the media schedule under this objective.

Change Z to 4,000TV1 + 1,500TV2 + 2,000RD1 + 1,200RD2 + 1,000NP1 + 800NP2

Medium Total Ads No of Ads New Customers Exposure Budget

10 40,000 900 $100,000
T.V. 14
4 6,000 220 40,000
15 30,000 375 45,000
Radio 28
13 15,600 260 39,000
20 20,000 200 20,000
Newspaper 55
35 28,000 175 35,000
Total 97 139,600 2,130 $279,000

5. Compare the recommendations from parts 1 and 4. What is your recommendation for the Flamingo Grill's
advertising campaign?

Maximizing the number of new customers is the best option because the potential new customers will
increase from 127,100 to 139,600. That is a total of 12,500 new customers. This is despite a drop in exposure
rating to 2,130.