Trisha P. Casiple II-AMA
CASE PROBLEM
ABC Computer 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 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 announcement cannot be less than the number of television
announcements.
The television station has quoted a cost of P2,400 per announcement, and the ratio
station has quoted a cost of P600 per spot announcement. ABC’s advertising budget has
been at P51,000. The marketing services form 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 ABS spot
announcement on its highly rated evening news program (at the same cost) if ABD 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 not limit
your discussion to) a consideration of the following:
1. The recommended number of television and radio spot announcements
Based on the result from STORM software, ABC Computers should use
fifteen (15) Televisions and twenty-five (25) Radio Spot Announcements to
maximize the overall rating of the advertising campaign.
2. The relative merits of each advertising medium RATINGS:
TELEVISION: 600 (T) = 600 (15) = 9,000 Ratings
RADIO: 200 (R) = 200 (25) = 5,000 Ratings
ANNOUNCEMENT COSTS:
TELEVISION: 2400 (T) = 2400 (15) = ₱36,000 overall announcement cost
RADIO: 600 (R) = 600 (25) = ₱15,000 overall announcement cost
Based on the computation above on the number of ratings, even though
there is a lesser television spot announcement, it can still give higher ratings
compare to radio spot announcement which has a greater number of spots. Since
the goal of ABC Computer is to maximize the overall rating, it is more beneficial to
increase the number of television spot announcements to achieve a higher rating.
When it comes to the overall announcement cost, television spots are more costly
than radio spots. Therefore, the company can reduce announcement costs if they
provide more radio spot announcements than the television.
Also, we should look further into what are the merits of using television over
radio and using radio over television as a mode of advertisement.
Benefits of Television over Radio
The company brand is easily
recognized
More engaging and persuasive to
subscribe as there are visual elements
like print and audio
Benefits of Radio over Television
Lesser overall announcement cost
Reach a wider audience/viewers
Faster delivery of messages for
promotion of current business
products and services
Express creativity in advertising that
can target viewers’ emotions through
stories within advertisements
Easily reach audiences when they
are in their cars, local stores, or
outside of their homes.
Enable potential customers to have a
look at newly introduce products
Radios are easily carried therefore
can reach listeners at any time
People spend more often on television,
therefore easy access to audiences
Audiences can easily recall as they can
hear and see the advertisement at the
same time
Audiences are more attentive when
watching
Able to reach listeners who don’t have
the means to buy televisions as
radios are more affordable
3. The news program rating that would be necessary before it would make
sense to increase the number of television spots.
According to the sensitivity analysis of cost coefficients, the television
announcement is currently rated at 600, the allowable minimum is at negative
infinity and the allowable maximum is rated at 800. Therefore, the news program
rating should be above the rate of 800 before increasing the number of television
spot announcements.
Also, the radio announcement is currently rated at 200 with an allowable
minimum at 150 and an allowable maximum at positive infinity. Therefore, if the
news program rating of radio is below 150, it will result in a lesser radio spot
announcements.
ILLUSTRATION:
Objective Function: Z = 900T + 200R
Constraints:
1T + 1R ≥ 30
R≥T
0T + 1R ≤ 25
2400T + 600R = 51000
-T + R
≥0
TABLEAU 1
Cj
900
200
-0
0
0
PM
Q
T
R
St
Sr
Sz
0
St
30
1
1
-1
0
0
0
Sr
25
0
1
-0
1
0
0
Sz
51000
2400
600
-0
0
1
Zj
0
0
0
0
0
0
Cj-Zj
-
900
200
0
0
0
TABLEAU 2
Cj
900
200
-0
0
0
PM
Q
T
R
St
Sr
Sz
0
St
35/4
0
¾
-1
0
-1/2400
0
Sr
25
0
1
0
1
0
900
T
85/4
1
¼
0
0
1/2400
Zj
19125
900
225
0
0
3/8
Cj-Zj
-
0
-25
0
0
-3/8
900
200
-0
0
0
TABLEAU 3
Cj
PM
Q
T
R
St
Sr
Sz
200
R
35/3
0
1
-4/3
0
-1/1800
0
Sr
40/3
0
0
4/3
1
1/1800
900
T
55/3
1
0
1/3
0
1/1800
Zj
18833.33
900
200
100/3
0
7/18
Cj-Zj
-
0
0
-100/3
0
-7/18
Z = 18,833.33 total rating
T = 55/3 or 18.33
R = 35/3 or 11.67
TELEVISION: 900 (T) = 900 (55/3) = 16,500 Ratings
RADIO: 200 (R) = 200 (35/3) = 2,333.33 Ratings
ANNOUNCEMENT COSTS:
TELEVISION: 2400 (T) = 2400 (55/3) = ₱44,000 overall announcement cost
RADIO: 600 (R) = 600 (35/3) = ₱7,000 overall announcement cost
Base on the tabulation, when the television ratings increased to 900 or any
number above the allowable maximum of 800, there will be a need to increase the
number of television spot announcements from 15 to 18. Also, if the radio rating
remains at 200, the number of radio spot announcements will decrease from 25 to
12. Meanwhile, one of the constraints is not met in which the number of radio spot
announcements became lesser than the television spot announcement when it
should be the other way around. On the other hand, ABC computer will be able to
increase its overall ratings from 14,000 to 18,333.33, maximizing its overall budget.
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 available
The current coefficient of the first constraint states that the number of
television and radio spot announcements should be greater than or equal to 30.
The second constraint states that radio spot announcements should be less than
or equal to 25. The third constraint states that the total number of television and
radio spot announcements should be greater than or equal to zero. Lastly, the
fourth constraint states that the current budget allotted for the overall
announcement cost is ₱51,000.
According to the sensitivity analysis of right-hand-side values, for the first
constraint, the number of television and radio spot announcements has an
allowable minimum at negative infinity with an allowable maximum at 40. For the
second constraint, the number of radio spot announcements has an allowable
minimum of 14 with an allowable maximum at 85. For the third constraint, the
number of television and radio spot announcements has an allowable minimum at
negative infinity with an allowable maximum at 10. For the fourth constraint, the
budget for announcement cost has an allowable minimum of ₱27,000 with an
allowable maximum of ₱75,000.
ORIGINAL SOLUTION:
Cj
600
200
-0
0
0
PM
Q
T
R
St
Sr
Sz
200
R
25
0
1
0
1
0
-0
Sr
10
0
0
1
¾
1/2400
600
T
15
1
0
0
-1/4
1/2400
Zj
14000
600
200
0
50
¼
Cj-Zj
-
0
0
0
-50
-¼
900
200
-0
0
0
Z = 14,000 total rating
T = 15 spot announcements
R = 25 spot announcements
NEW SOLUTION:
Cj
PM
Q
T
R
St
Sr
Sz
200
R
35/3
0
1
-4/3
0
-1/1800
0
Sr
40/3
0
0
4/3
1
1/1800
900
T
55/3
1
0
1/3
0
1/1800
Zj
18833.33
900
200
100/3
0
7/18
Cj-Zj
-
0
0
-100/3
0
-7/18
Z = 18,833.33 total rating
T = 55/3 or 18.33 spot announcements
R = 35/3 or 11.67 spot announcements
Based on the tabulation, due to an increase in the television rating from 600
to 900, which is beyond the allowable maximum rating, there is a need to purchase
an additional three (3) television spot announcements. With that, the overall rating
will increase by 4,000 as the budget is maximized.
5. The restrictions placed on the advertising strategy that ABC might want to
consider relaxing or altering
ABC Computer should consider altering the current restriction for the total
of television and radio spot announcement for at least 30 but less than or equal to
40. Moreover, for the radio spot announcement ranging from a minimum of 14 to
a maximum of 85 with an advertisement budget of a minimum of ₱27,000 to a
maximum of ₱75,000.
6. The best use of any possible increase in the advertising budget
With an increase in the advertising budget ranging from ₱51,000 to
₱75,000, ABC Computers' best way to use it is to purchase more of the
Advertisement Spot announcement, which can increase and maximize the overall
rating of their advertising campaign. The president may also consider entering
digital/online advertisement along with television and radio spot announcements
to reach more audiences as it is proven that online advertisement is less expensive
but an effective way to advertise and reach viewers easily.
7. Any other information that may help ABC’s president make an advertising
strategy decision
Other than increasing the Advertising budget to increase the number of
Television and Radio spots purchased to maximize the overall rating of the
advertising campaign, ABC Computer could effectively utilize its advertising
budget on online or digital advertising. As of today, people tend to be using
gadgets, such as smartphones, laptops, etc. It is pretty easier to reach a wider
audience around the globe through digital advertising. Digital advertising is
cheaper as it is “pay per click”, easy to generate and control, brand awareness,
able to promote social media accounts which they can like and follow and keep
their customers updated regarding special discounts, new products or services,
new coupons, and products available. Furthermore, businesses can continue
interacting with their clients after the sale. It targets all types of audiences and it is
easier to communicate with them if they are interested in a product and the
company itself can immediately address the customer’s concerns and inquiries.
Digital marketing provides powerful tools to help grow a company’s reputation and
image. By fully utilizing the advantages of online marketing through tools such as
content marketing, social media, email marketing, online video, and more, a
company will have greater profitability and success.