Case study - The Sayang Homestay

Ernie and Wai, owners of The Sayang Homestay, business has been good. Ernie and Wai are turning their attention to improving their marketing strategy. They were impressed with your previous report and have commissioned you to prepare another one on their new plans.
Wai has found research suggesting that offering an incentive to guests who book well in advance of their planned stay will reduce variability of occupancy. Wai would like you to analyse the impact of introducing an incentive scheme.

Ernie and Wai want to undertake some local advertising for The Sayang Homestay. They have a limited budget but want to ensure that they reach a sufficient number of TV viewers and newspaper readers to make their campaign a success. They need your help to determine the best mix among the advertising media.

Perform the necessary quantitative analyses and prepare a business report for Ernie and Wai, where you describe your findings and make appropriate recommendations. Specifically, perform the tasks outlined in this document and include FULL details of your working out in the Appendices. You will need to do the analysis and calculations that go in the appendices BEFORE you write your report.

Introduction

• Purpose
• Qualitative description of report contents/problems addressed

Just ensure you have explained what the report will contain. One paragraph will be sufficient.

1. Offering an incentive for early bookings

Write a report-style discussion of the main results of your analysis in Appendix 1. You may use subsections, tables etc. as you see fit.

Do not include numerical calculations. These should be placed in Appendix 1.

Do quote quantitative results.

Bookings for The Sayang Homestay are made anywhere from a couple of days to several weeks in advance. To reduce the uncertainty, Ernie and Wai are considering offering an incentive to guests who book well in advance of their stay. Ernie and Wai want you to analyse the impact on the number of days in advance that bookings are made if an incentive is offered. Detailed instructions are in Appendix 1.

Discussion in the report:

• Introduce the aim of this section of the report including an explanation of the data to be analysed.

• Use Excel to produce a box and whisker plot for the two sets of booking data. Include the box and whisker plot in your report. Briefly describe for Ernie and Wai what the box and whisker plot show.

• Interpret the appropriate measures of central tendency and dispersion in non-statistical terms and compare these values for the data before and after the incentive was introduced (based on your analysis in Appendix 1. What effect did the introduction of the incentive have on the number of days in advance that bookings were made?)

2. Advertising the Sayang Homestay

Write a report-style discussion of the main results of your analysis in Appendix 2. You may use subsections, tables etc. as you see fit.
Do not include numerical calculations. These should be placed in Appendix 2.

Do quote quantitative results.

Ernie and Wai have decided to embark on an advertising campaign through local media, specifically: community TV and newspaper advertisements. To be effective, they think they should reach an audience of at least 175,000 people but would like the advertising campaign to cost as little as possible. The most Ernie and Wai can afford to spend is RM8000. Ernie and Wai have some ideas on how they would like to spread their advertising among the two types of media.

See Appendix 2 for a detailed description of the problem. Model this optimisation problem as a linear program - instructions are in Appendix 2. Use graphs to find optimal solutions.

Discussion in the report:

• Introduce the aim of this section of the report.

• Using mainly the graphs, describe the optimal solutions. Your variable names will not appear here. Rather, you will make statements like:

‘To conduct an effective marketing campaign while minimising costs, The Sayang Homestay should purchase ten minutes of TV advertising,

• Comment on which constraints appear to determine the optimal solution.

Discuss the results of the other question asked in Appendix 2.

• What is the optimal mix of advertising if the budget is limited to RM7000? How many people will be reached by the campaign?

Conclusions and Recommendations

Conclusions:

• Summarise the main findings of your report. Base this on your discussion.

• Do not introduce new information in the conclusions.

• Do not use direct quotes.

• Indicate whether the report fulfilled the purpose as stated in the introduction.

Recommendations:

• Base these on your conclusions.

• Do not introduce new information in the recommendations.

• Present options for resolving the issue (purpose) presented in the introduction.

Appendix 1

Problem 1 - Offering an incentive for early bookings

Bookings for The Sayang Homestay are made anywhere from a couple of days to several weeks in advance. To reduce the uncertainty, Ernie and Wai are considering offering an incentive (for example, a lower nightly tariff or a complimentary breakfast) to guests who book well in advance of their stay.

Ernie and Wai want you to analyse the impact on the number of days in advance that bookings are made if an incentive is offered. You have been able to obtain two sets of data from a similar accommodation venture that introduced an incentive scheme. The first set of data describes the number of days in advance that bookings were made before the introduction of the incentive scheme. The second set of data describes bookings information after the introduction of the incentive scheme.

Note: you are not required to undertake an assessment of whether this is a financially viable proposal.

All non-Excel specific calculations can either be typed in Word or performed in Excel. In either case, make sure to show your full working for full marks.

(a) Using Excel, produce a summary table for each set of booking data in Assignment1Data.xls. Summary table include Mean, Lower limit and Upper limit [please refer the formula in 1(c)] Quartile 1, Quartile 3, Median and Interquartile Range (IQR).

(b) Using Excel, produce a box and whisker plot for the two sets of booking data in Assignment1Data.xls. Ensure that the box and whisker plot has a meaningful title and labels. Your box and whisker plot can either be vertically or horizontally (hint: days of booking must be positive).

(c) Calculations for outliers, using the 1.5 x IQR rule.

(d) By referring to the quantitative analysis in (a)-(c), discuss the skewness of each data set; whether there are outlier(s) present and for what value(s) these outlier(s) occur.

(e) Based on this data, comment on any differences between the two distributions. Does it appear that the incentive scheme has increased the ‘typical' number of days in advance that a booking is made? Is there any apparent difference between the amount of dispersion in each of the distributions?

Appendix 2

Problem 2 - Advertising the Treetop Retreat

Ernie and Wai have decided to spend up to RM8000 in local advertising. The money is to be allocated among two promotional media: community TV and newspaper advertisements. TV ads is purchased in minutes but may have several airplays of shorter duration (for example, 30 seconds) - this is determined by the TV stations. Newspaper ads are sold in blocks, but smaller ads are possible.

To be effective, Ernie and Wai think they should reach an audience of at least 175,000 people but would like to minimise the cost of the advertising campaign. The number of people reached and the cost for each advertisement is given in the table below.

Audience reached Cost (RM)

Newspaper (per block) 8750 275

TV (per minute) 7000 345

Ernie and Wai would like to use a variety of promotional media, and think that a minimum of ten minutes of TV ads. The number of newspaper ads is limited to six blocks due to available space.

(a) Formulate the linear programming model. Specifically:

• Determine the two decision variables required.
• Name the decision variables and write down clear and explicit definitions for them.
• Formulate the constraints.
• Write down a formula for the objective function.
• Include the full model in the appendix but not in your report.

Important: in part (a) you do not require, and should not use, Excel.

(b) Use graph to obtain a solution to the linear programming model from part (a).

(c) Upon reviewing their budget, Ernie and Wai have decided to only spend up to RM7000 in local advertising. Explain why this means that their optimal solution from (b) is no longer feasible. Ernie and Wai decide to reach as large an audience as possible (the minimum of 175,000 no longer applies), while spending no more than RM7000 and complying with all other constraints from (a). This effectively changes the linear programming problem from one of minimising cost to one of maximising audience reach, with the help of a graph and some changes to constraints, comment on the optimal solution in your report.