On the synthesis of advertising and relocation decisions for a facility

Demand to a typical service industry facility is known to be sensitive to the number of advertisement dollars spent in promoting the business at the facility, as well as being sensitive to the distance of the facility from potential customers. The dynamic nature of demand may lead the company to consider investing money in both relocation and promotion so as to enhance business. We analyze a relocation promotion model so as to capture these two objectives while assuming that the company is operating under a budget constraint. Exponential decay of demand with distance, and a decreasing marginal return on advertisement dollars in promoting demand is utilized. Polygonal, planar regions for facility relocation, together with a region specific fixed charge is assumed. A Manhattan travel metric is used for distance calculations. Properties of the model are developed, and a globally convergent algorithm is reported. The results of the paper is illustrated via a simple numerical example. An extension to the case of relocation promotion in the presence of other non-competing facilities is discussed. Finally, the incorporation of barriers to travel and forbidden zones for facility location into the basic model framework are discussed.