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LP 6

The document discusses modeling market allocations with linear programming. It provides an example of a company, MegaMarketing, that wants to determine how to optimally allocate advertising spending across TV and magazine outlets to reach targets for teenage boys, affluent women, and retired men. It presents the reach and costs for each outlet, as well as the segment targets, and notes the company wants to know the optimal allocation to minimize costs while meeting targets. It also mentions the company wants to understand the costs of reaching additional people in each segment.

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Nirmal Subudhi
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266 views1 page

LP 6

The document discusses modeling market allocations with linear programming. It provides an example of a company, MegaMarketing, that wants to determine how to optimally allocate advertising spending across TV and magazine outlets to reach targets for teenage boys, affluent women, and retired men. It presents the reach and costs for each outlet, as well as the segment targets, and notes the company wants to know the optimal allocation to minimize costs while meeting targets. It also mentions the company wants to understand the costs of reaching additional people in each segment.

Uploaded by

Nirmal Subudhi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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62

CHAPTER 5. MODELING WITH LINEAR PROGRAMMING

We next add the constraints. Press the 1Add..." button to add constraints. The dialog box
has three parts for the left hand side, the type of constraint, and the right hand side. Put the
cell references for a constraint in the form, choose the right type, and press 1Add". Continue
until all constraints are added. On the @nal constraint, press 1OK".
We need to explicitly include nonnegativity constraints.
Helpful Hint: It is possible to include ranges of constraints, as long as they all have the same
type. c1..e1 $= c3..e3 means c1 $= c3, d1 $= d3, e1 $= e3. a1..a10 *= 0 means each
individual cell must be greater than or equal to 0.
Push the options button and toggle the 1Assume Linear Model" in the resulting dialog box.
This tells Excel to call a linear rather than a nonlinear pgrogramming routine so as to solve
the problem more eIciently. This also gives you sensitivity ranges, which are not available
for nonlinear models.
Push the Solve button. In the resulting dialog box, select 1Answer" and 1Sensitivity". This
will put the answer and sensitivity analysis in two new sheets. Ask Excel to 1Keep Solver
values", and your worksheet will be updated so that the optimal values are in the variable
cells.
5.2 Second Example: Market Allocations

MegaMarketing is planning a concentrated one week advertising campaign for their new CutsEverything SuperKnife. The ads have been designed and produced and now they wish to determine
how much money to spend in each advertising outlet. In reality, they have hundreds of possible
outlets to choose from. We will illustrate their problem with two outlets: Prime-time TV, and
newsmagazines.
The problem of optimally spending advertising dollars can be formulated in many ways. For
instance, given a @xed budget, the goal might be to maximize the number of target customers
reached Ra target customer is a customer with a reasonable chance of purchasing the productS.
An alternative approach, which we adopt here, is to de@ne targets for reaching each market
segment and to minimize the money spent to reach those targets. For this product, the target
segments are Teenage Boys, AUuent Women Rages 40-49S, and Retired Men. Each minute of
primetime TV and page of newsmagazine advertisement reaches the following number of people Rin
millionsS:
Outlet Boys Women Men Cost
TV 5
1
3 600
Mag 2
6
3 500
Target 24 18 24
Again, MegaMarketing is interested in straightforward answers like how many units of each
outlet to purchase to meet the segment goals. They are also interested in such questions as 1How
much will it cost to reach an extra million retired men?", 1One radio spot reaches 1 million boys, 1
million women, and 1 million men: how much are we willing to pay for such a spot?", and similar
questions.

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