A brand manager for ColPal Products must determine how much of its budget to all

Question

A brand manager for ColPal Products must determine how much of its budget to allocate between various online platforms: Google AdWords, YouTube ads, and Facebook ads during the next month. Market research has provided estimates of various parameters for advertising in each medium. Google AdWords and Facebook ads are pay-per-click, while YouTube Ads are pay-per-view. The firms wants to maximize the traffic to their website (that is, the number of clicks). The company estimates that one click results from 10 views in YouTube. The total budget has been limited to $75,000. In addition, there are some requirements in terms of how much to allocate to each platform. Management wants to have a presence in all three platforms so at least 10% of the budget needs to be allocated to each platform. The traffic from Google AdWords has been found to be twice as profitable as the traffic from Facebook so Google AdWords budget should be at least twice as much as Facebook’s.

Type of Ad

Cost Per Click

Cost Per View

Google AdWords

$1.50

YouTube

$0.20

Facebook

$0.27

A. Identify the decision variables, objective function, and constraints in simple verbal expressions.

Type of Ad

Cost Per Click

Cost Per View

Google AdWords

$1.50

YouTube

$0.20

Facebook

$0.27

Explanation / Answer

Please find the answer below:

Decision variables:

Let the advertising budget of Google Adwords be : B(gw)

Similarly,

Let the budget of Facebook be : B(fb)
Let the budget of YouTube be : B(yt)

Constraints:

#1:
As per the Management decision that they want to have a presence in all three platforms so at least 10% of the budget needs to be allocated to each platform.

at least 10% of total budget = 75000 % 10 = 7500

so

B(gw) >= 7500

Similarly,

B(fb) >= 7500

B(yt) >= 7500

#2:

The total budget has been limited to $75,000,total budget cannot exceed $75,000.

So,

B(gw) + B(fb) + B(yt) <= 75,000

#3:

The traffic from Google AdWords has been found to be twice as profitable as the traffic from Facebook so Google AdWords budget should be at least twice as much as Facebook’s.

B(gw) >= 2*B(fb)

Objective function is:
maximize the traffic to their website (that is, the number of clicks)

As per the table the number of clicks would be:

Maximize number of clicks

i.e

B(ga) / 1.50 + B(fb) / 0.27 + B(yt) / 2.00

should be maximum, based on the above conditions.

Note that we can buy 1 view at $0.20. Given the fact that 10 views result in 1 click effective cost per click in Youtube i.e effective click cost is= 10* 0.20 = $2.00         

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