Operation Research

Operation ResearchOperation ResearchApplication Problem - Application Problem -

MarketingMarketing

ByByAnitha ChandranAnitha Chandran

Chitra.RChitra.RRadha.RRadha.R

Sudhit SethiSudhit Sethi

MEDIA MEDIA SELECTIONSELECTION

INTRODUCTIONINTRODUCTION

QuestionQuestion

Relax and Enjoy Lake Development Corporation is Relax and Enjoy Lake Development Corporation is

developing a lakeside community at a privately developing a lakeside community at a privately

owned lake.Their primary market includes all the owned lake.Their primary market includes all the

middle and upper income families. Relax and Enjoy middle and upper income families. Relax and Enjoy

Lake Development Corporation has employed the Lake Development Corporation has employed the

advertising firm of Boone, Phillips and Jackson advertising firm of Boone, Phillips and Jackson

(BP&J) to design the promotional campaign.(BP&J) to design the promotional campaign.

BP&J have recommended that the first months BP&J have recommended that the first months

advertising be restricted to only 5 media.advertising be restricted to only 5 media.

BP&J have collected data on BP&J have collected data on

- Number of Potential Customers Reached- Number of Potential Customers Reached

- Cost per advertisement- Cost per advertisement

- Maximum number of times each medium is - Maximum number of times each medium is

availableavailable

- Exposure quality rating for each 5 media- Exposure quality rating for each 5 media

Advertising Media Alternatives for Relax and Advertising Media Alternatives for Relax and EnjoyEnjoy

Advertising Advertising MediaMedia

Number of Number of Potential Potential Customers Customers ReachedReached

Cost per Cost per advertisemeadvertisementnt

($)($)

Maximum Maximum number of number of times each times each medium is medium is available available per monthper month

Exposure Exposure quality quality rating rating (units)(units)

Daytime Daytime TVTV

(1 min)(1 min)

10001000 15001500 1515 6565

Evening Evening TV(30 sec)TV(30 sec)

20002000 30003000 1010 9090

Daily Daily NewspaperNewspaperss

(1/2 page)(1/2 page)

15001500 400400 2525 4040

Sunday Sunday NewspaperNewspaperss

(1/2 page)(1/2 page)

25002500 10001000 44 6060

RadioRadio 300300 100100 3030 2020

Relax and Enjoy provided BP&J with the Relax and Enjoy provided BP&J with the

advertising budget of $30,000 for the first advertising budget of $30,000 for the first

month’s campaign. In addition there were some month’s campaign. In addition there were some

restrictions.restrictions.

- At least 10 TV commercials must be used- At least 10 TV commercials must be used

- At least 50,000 potential customers must be - At least 50,000 potential customers must be

reachedreached

- Not more than $18,000 may be spent on TV ads- Not more than $18,000 may be spent on TV ads

Decision VariableDecision Variable

The decision to be made is how many times to The decision to be made is how many times to

use each medium. The decision variables are:use each medium. The decision variables are:

DTVDTV – number of times daytime TV is used – number of times daytime TV is used

ETVETV - number of times daytime TV is used - number of times daytime TV is used

DNDN - number of times daytime TV is used - number of times daytime TV is used

SNSN - number of times daytime TV is used - number of times daytime TV is used

RR - number of times daytime TV is used - number of times daytime TV is used

Objective FunctionObjective Function

Objective –Objective – To maximize the total exposure To maximize the total exposure quality units for the overall media selection plan.quality units for the overall media selection plan.


Max Z = Max Z = 65DTV+90ETV+40DN+60SN+20R65DTV+90ETV+40DN+60SN+20R

ConstraintsConstraints

Availability of MediaAvailability of Media

DTV<=15DTV<=15

ETV<=10ETV<=10

DN<=25DN<=25

SN<= 4SN<= 4

R<=30R<=30

BudgetBudgetAdvertising budget is not more than $30,000Advertising budget is not more than $30,000

1500DTV+3000ETV+400DN+1000SN+100R<=300001500DTV+3000ETV+400DN+1000SN+100R<=30000

Television RestrictionsTelevision Restrictions

DTV+ ETV >=10DTV+ ETV >=10

1500DTV + 3000ETV <=18,0001500DTV + 3000ETV <=18,000

Customers ReachedCustomers Reached

1000DTV+2000ETV+1500DN+2500SN+300R>=500001000DTV+2000ETV+1500DN+2500SN+300R>=50000

Non-NegativityNon-Negativity

DTV,ETV,DN,SN,R>=0DTV,ETV,DN,SN,R>=0

MARKETING MARKETING RESEARCHRESEARCH

IntroductionIntroduction

Market research is conducted to Market research is conducted to learn consumer characteristics, learn consumer characteristics, attitudes and preferences.attitudes and preferences.

Market research firms include Market research firms include designing study, conducting market designing study, conducting market surveys, analyzing the data collected surveys, analyzing the data collected and providing summary reports and and providing summary reports and recommendations.recommendations.

QUESTIONQUESTION

Market survey,Inc (MSI), specializes in Market survey,Inc (MSI), specializes in evaluating consumer reaction to new product, evaluating consumer reaction to new product, services and advertising campaigns. A client services and advertising campaigns. A client firm has requested MSI’s assistance in firm has requested MSI’s assistance in ascertaining consumer reaction to a recently ascertaining consumer reaction to a recently marketed household product. During meetings marketed household product. During meetings with the client, MSI agreed to conduct door-with the client, MSI agreed to conduct door-to-door personal interviews to obtain to-door personal interviews to obtain responses from households with children and responses from households with children and households without children. In additional, households without children. In additional, MSI agreed to conduct both day and evening MSI agreed to conduct both day and evening interviews. Specifically, the client’s contract interviews. Specifically, the client’s contract called for MSI to conduct 1000 interviews called for MSI to conduct 1000 interviews under the following quota guidelines:under the following quota guidelines:

Interview at least 400 households with children.Interview at least 400 households with children.

Interview at least 400 households without Interview at least 400 households without children.children.

The total number of households interviewed The total number of households interviewed during the evening must be at least as great as during the evening must be at least as great as the number of households interviewed during the number of households interviewed during the day.the day.

At least 40% of the interview for households with At least 40% of the interview for households with children must be conducted during the evening.children must be conducted during the evening.

At least 60% of the interviews for households At least 60% of the interviews for households without children must be conducted during the without children must be conducted during the evening.evening.

Because the interviews for Because the interviews for households with children households with children take additional interviewers take additional interviewers time and because evening time and because evening interviewers are paid more interviewers are paid more than the daytime than the daytime interviewers, the cost varies interviewers, the cost varies with the type of interview. with the type of interview. Based on previous research Based on previous research studies, estimates of the studies, estimates of the interview costs are as interview costs are as follows:follows:

HouseholHouseholdd DayDay

EveninEveningg

ChildrenChildren $20 $20 $25 $25

No No ChildrenChildren $18 $18 $20 $20

What is the household, time What is the household, time of day interview plan that of day interview plan that will satisfy the contract will satisfy the contract requirements at a minimum requirements at a minimum total interviewing cost?total interviewing cost?

Decision VariablesDecision Variables

DCDC = No of daytime interviews of = No of daytime interviews of households with children.households with children.

ECEC= No of evening interviews of = No of evening interviews of households with childrenhouseholds with children

DNCDNC= No of daytime interviews of = No of daytime interviews of households without childrenhouseholds without children

ENCENC= No of evening interviews of = No of evening interviews of households without children.households without children.


Min 20DC+ 25 EC + 18DNC + Min 20DC+ 25 EC + 18DNC + 20ENC20ENC

Constrain 1Constrain 1

“ “the client’s contract called for MSI the client’s contract called for MSI to conduct 1000 interviews”to conduct 1000 interviews”

DC+ EC + DNC + ENC + 1000DC+ EC + DNC + ENC + 1000


Interview at least 400 households Interview at least 400 households with children.with children.

DC+ EC >= 400DC+ EC >= 400


Interview at least 400 households Interview at least 400 households without children.without children.

DNC + ENC >= 400DNC + ENC >= 400


The total number of households The total number of households interviewed during the evening must interviewed during the evening must be at least as great as the number of be at least as great as the number of households interviewed during the households interviewed during the day.day.

EC + ENC >= DC + DNCEC + ENC >= DC + DNC -DC + EC -DNC + ENC >= 0-DC + EC -DNC + ENC >= 0


At least 40% of the interview for At least 40% of the interview for households with children must be households with children must be conducted during the evening.conducted during the evening.

EC>= 0.4( DC + EC ) or EC>= 0.4( DC + EC ) or -0.4DC + 0.6 EC >= 0-0.4DC + 0.6 EC >= 0


At least 60% of the interviews for At least 60% of the interviews for households without children must be households without children must be conducted during the evening.conducted during the evening.

ENC >= 0.6 ( DNC + ENC ) orENC >= 0.6 ( DNC + ENC ) or -0.6 DNC + 0.4 ENC >= 0-0.6 DNC + 0.4 ENC >= 0

Non Negativity Non Negativity

DC ,EC ,DNC ,ENC >= 0DC ,EC ,DNC ,ENC >= 0

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