CASE PROBLEM

ABC Computers has hired a marketing service firm to develop an advertising strategy for promoting
ABC’s computer software sales. The marketing firm has recommended that ABC use spot
announcements on both television and radio as the advertising media for the proposed promotional
campaign. Advertising strategy guidelines are expressed as follows:

1. Use at least 30 announcements for combined television and radio coverage.

2. Do not use more than 25 radio announcements.
3. The number of radio announcements cannot be less than the number of television
announcements.

The television station has quoted a cost of P2400 per announcement, and the radio station has quoted a
cost of P600 per spot announcement. ABC’s advertising budget has been set at P51000. The marketing
services firm has rated the various advertising media in terms of audio coverage and recall power of the
advertisement. For ABC’s media alternatives, the television announcement is rated at 600, and the radio
announcement is rated at 200. ABC’s president would like to know how many television and how many
radio spot announcements should be used to maximize the overall rating of the advertising campaign.

ABC’s president believes the television station will consider running the ABC spot announcement on its
highly rated evening news program (at the same cost) if ABC will consider using additional television
announcements.

Managerial Report

Perform an analysis of advertising strategy for ABC Computers and prepare a report to ABC’s president
presenting your findings and recommendations. Include ( but do not limit your discussion to) a
consideration of the following:

1.) The recommended number of television and radio spot announcements

OPTIMAL SOLUTION – SUMMARY REPORT

<NONZERO VARIABLES>
Variable Value Cost
1 VAR 1 (Televsion) 15.0000 600.0000
2 VAR 2 (Radio) 25.0000 200.0000
Slack Variables
4 CONSTR 2 10.0000 0.0000
6 CONSTR 4 10.0000 0.0000
Objective Function Value = 14000
This recommended number for television and radio spot announcements are 15 and 25. This
result is based from the STORM software.
 2.) The relative merits of each advertising medium

TELEVISION: 600 (T) = 600 (15) = 9,000 ratings

RADIO: 200 (R) = 200 (25) = 5,000 ratings

According to the computation above, fewer TV spots can still give a higher rating compared to
the radio. Therefore, having more TV spots is more advantageous than radio and increasing the
number of TV spots can make the company’s ratings be higher BUT we need to take into
consider the following constraints regarding this matter.

Aside from that here are some advantages of TV over Radio and vice versa.
Advantages of TV over radio Advantages of Radio over TV
Can reached to those people who can’t afford a
Can reach a larger audience
television
It has visual and sound elements that makes an Radio ads can be produced very quickly with
high impact to consumers only low costs
Qualities of television allow advertisers to
It allows you to target your message to specific
create a long lasting and memorable brand and
groups
corporate image.
Ability to show products in action can easily
Its portability
introduce new products to consumers

3.) The news program rating that would be necessary before it would make sense to
increase the number of television spots
4.) The number of television spots that should be purchased if the news program is rated
highly enough to make increasing the number of television spots advisable
5.) The restrictions placed on the advertising strategy that ABC might want to consider
relaxing or altering
6.) The best use of any possible increase in the advertising budget

7.) Any other information that may help ABC’s president make the advertising strategy
decision.
Include a copy of your linear programming model and the solution using the provided software (STORM)