Case Study: Linear Programming PLANNING A DIGITAL MARKETING STRATEGY Sunrise Grill is an upscale restaurant located in Key Largo, Florida. To help plan the marketing plan for the coming season, Sunrise’s management team hired the advertising firm of Kaynan & Keiser (KK). The management team requested KK’s recommendation concerning how the advertising budget should be distributed across Internet Radio (eg. Pandora), Social Media Marketing, and SiriusXM Radio. The budget has been set at $350,000. In a meeting with Sunrise’s management team, KK consultants provided the following information about the industry exposure effectiveness rating per ad, their estimate of the number of potential new customers reached per ad, and the cost for each ad. MEDIA SiriusXM Social Media Internet Radio Exposure Rating per New Customers per Cost per Ad Ad Ad 100 4000 $10,000 30 2000 $4,000 15 1000 $1,000 The exposure rating is viewed as a measure of the value of the ad to both existing customers and potential new customers. It is a function of such things as image, message, recall, visual and audio appeal, and so on. As expected, the more expensive Sirius XM Radio advertisements has the highest exposure effectiveness rating along with the greatest potential for reaching new customers. At this point, the KK consultants pointed out that the data concerning exposure and reach were only applicable to the first few ads in each medium. For SiriusXM, KK stated that the exposure rating of 100 and the 4000 new customers reached per ad were reliable for the first 12 Sirius XM ads. After 12 ads, the benefit is expected to decline. For planning purposes, KK recommends reducing the exposure rating to 65 and the estimate of the potential new customers reached to 1500 for any Sirius XM ads beyond 12. For Social Media ads, the preceding data are reliable up to a maximum of 18 ads. Beyond 18 ads, the exposure rating declines to 20 and the number of new customers reached declines to 1200 per ad. Similarly, for Internet Radio, the preceding data are reliable up to a maximum of 25; the exposure rating declines to 8 and the potential number of new customers reached declines to 200 for additional ads. Sunrise Grill’s management team accepted maximizing the total exposure rating, across all media, as the objective of the advertising campaign. Because of management’s concern with attracting new customers, management stated that the advertising campaign must reach at least 100,000 new customers. To balance the advertising campaign and make use of all advertising media, Sunrise Grill’s management team also adopted the following guidelines:    Use at least twice as many Social Media advertisements as SiriusXM radio advertisements Use no more than 20 SiriusXM radio advertisements. The SiriusXM radio budget should be at least $160,000   The Social Media advertising budget is restricted to a maximum of $140,000 The Internet Radio budget is to be at least $30,000 KK agreed to work with these guidelines and provide a recommendation as to how the $350,000 advertising budget should be allocated among the choices. Develop a linear programming model that can be used to determine the advertising budget allocation for the Sunrise Grill. (HINT: you should define two variables for each media option (eg. S1 = number of SiriusXM advertisements with rating of 100 and 4000 new customers and S2 = number of SiriusXM advertisements with rating of 65 and 1500 new customers, and so on). Enter the problem into Excel and use Solver to solve for the optimal solution. In addition to the Excel file, also prepare an executive summary managerial report. The Executive Summary should be approximately 1 to 2 pages (plus Excel file) and include the following sections: 1. (20 points) Case Synopsis (include a brief summary of the case and the business issue(s)being studied) 2. (20 points) Methodology (including a discussion of what information was provided and how you used this information to analyze the problem) organize the available data and type out your full mathematical programming model including defining your decision variables. 3. (40 points) Findings and Conclusions (include summary of analysis results) Based on your analysis, what is Sunrise Grill’s (complete) optimal marketing decision? A schedule showing the recommended number of SiriusXM, Social Media, and Internet Radio advertisements and the budget allocation for each medium. Show the total exposure rate and indicate the total number of potential new customers reached. Also address the following two questions: a. How would the total exposure change if an additional $20,000 were added to the advertising budget? b. After reviewing KK’s recommendation, the Sunrise Grill 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. Show the total exposure and indicate the total number of potential new customers reached. 4. (20 points + up to 10 points extra credit) Recommendations. What other factors need to be considered in making the recommendations? Do you agree with the decisions from your quantitative analysis? Why or why not? Using both of these recommendations you made in the findings and conclusions section and your own management perspective (other issues to consider), what is your recommendation for the Sunrise Grill’s advertising campaign?. For extra credit, you can also do some outside research on Digital Marketing campaigns and/or base your opinion on your knowledge and/or experience with Digital Marketing (be sure to site any outside sources used). *Based on a case problem from Anderson, Sweeney, Williams, Camm, Cohran, Fry, Ohlmann, An Introduction to Management Science, 14th Edition.
Purchase answer to see full attachment