Test Bank For Advertising and Promotion An Integrated Marketing Communications Perspective 11Th Edition By George Belch

Chapter 03 Test Bank Student: ___________________________________________________________________________ 1. The primary function of promotional planners is to provide information or entertainment to their subscribers, viewers, or readers. True False 2. Digital/interactive agencies and public relations firms are examples of organizations that provide specialized marketing communication services. True False 3. While many people both inside and outside the organization have some input into the advertising and promotion process, direct responsibility for administering the program must be assumed by someone within the firm. True False 4. In the most common example of a centralized system, the advertising or marcom manager controls the entire promotions operation. True False 5. An advantage of the centralized system is that each brand receives concentrated managerial attention, resulting in faster response to both problems and opportunities. True False 6. Retail giant Target has an internal creative department that handles the design of its weekly circulars, direct-mail pieces, in-store displays, promotions, and other marketing materials. This is an example of an in-house agency. True False 03-1 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 7. A decentralized organizational system is often used when companies do not have many different divisions, product or service lines, or brands to advertise. True False 8. A disadvantage of the decentralized system is that each brand does not receive concentrated managerial attention, resulting in slower response to both problems and opportunities. True False 9. In-house agencies are preferred by some companies because they keep the marketing communications function more closely tied to top management. True False 10. Nearly two-thirds of the domestic billings are handled by 900 of the smallest agencies in the United States. True False 11. Superagencies were formed when large advertising organizations disintegrated to form separate, more specialized individual agencies. True False 12. The role of account representatives is likely to disappear as agencies and their clients are beginning to liaise directly with each other. True False 13. Account planners work with the client as well as other agency personnel, including the account executives, creative team members, research department personnel, and media specialists. True False 14. The creative services department of an agency analyzes, selects, and contracts for space or time in the media that will be used to deliver the client's advertising message. True False 03-2 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15. The layout of a print ad is known as a storyboard. True False 16. Media buying services have found a niche by specializing in the analysis and purchase of advertising time and space. True False 17. Programmatic buying has declined in recent years. True False 18. Proponents of the commission system argue that the system is more flexible than it appears as agencies often perform other services for large clients at no extra charge. True False 19. A cost-plus system requires that the agency keep detailed records of the costs it incurs in working on a client's account. True False 20. The agency evaluation is often done on a subjective, informal basis, particularly in smaller companies where ad budgets are low. True False 21. The qualitative audit focuses on how the agency conducts its business. It is designed to verify costs and expenses, the number of personnel hours charged to an account, and payments to media and outside suppliers. True False 22. Loyalty to a single agency is becoming more common as marketers seek new ways of connecting with consumers. True False 23. A typical direct-marketing agency does not include a creative department. True False 03-3 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 24. One of the more widely used collateral service organizations is the marketing research firm. True False 25. An agency with integrated marketing capabilities can create a single image for the product or service and address everyone, from wholesalers to consumers, with one voice. True False 26. According to marketing executives, the biggest obstacle to implementing integrated marketing communications (IMC) is the lack of people with the broad perspective and skills to make it work. True False 27. _____ are the major participants in the integrated marketing communications process who pay for advertising campaigns and promotions. A. Collateral service providers B. Clients C. Advertising agencies D. Media organizations E. Special service organizations 28. Momentum Automobiles, an automobile manufacturer, hires Dreams Inc. to cater to its advertising needs. Momentum is only required to provide the necessary finances and does not take part in any decision making. In the given scenario, Momentum Automobiles would be classified as a(n) A. client. B. illustrator. C. full-service agency. D. advertising agency. E. media organization. 29. In the ad agency industry, clients refer to A. an advertiser or organization that has the product, service, or cause that needs to be marketed. B. the media, which plays a crucial role in the process of marketing communication. C. a purchaser of the consumer product advertised. D. a market for business or consumer products. E. an advertising agency that specializes in the creation of the communications message. 03-4 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 30. A(n) _____ is an outside firm that specializes in the creation, production, and/or placement of the communications message and that may provide other marketing and promotions-related services. A. media organization B. sales promotion firm C. research organization D. advertising agency E. creative boutique 31. From the perspective of a promotional planner, the primary purpose of media is to A. represent the company's senior management in negotiations with an ad agency. B. provide the company with strategic recommendations and analysis. C. provide an environment for the firm's marketing communications message. D. help conduct a SWOT analysis. E. provide appropriate funding for all marketing activities. 32. The primary function of most media is to A. assist the market research organization by conducting market surveys. B. coordinate their activities with direct-marketing agencies. C. provide information and entertainment to their audience. D. prepare the budget for the advertising and promotion process. E. compensate ad agencies through a commission system. 33. Creative Networks is a major participant in the advertising and promotion process. It attracts various companies to buy space and time with them by providing the same at discounted rates. Creative Networks helps these companies reach their target market effectively by communicating their message. In this scenario, Creative Networks is a(n) A. advertiser. B. collateral service provider. C. media organization. D. creative boutique. E. sales promotion agency. 03-5 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 34. With respect to the major participants in the advertising and promotions process, which of the following participants include sales promotion agencies, digital/interactive agencies, and public relations firms? A. advertising agencies B. media organizations C. collateral service agencies D. specialized marketing communications services agencies E. bait-and-switch marketing service agencies 35. Basic functions of the manager and staff in advertising and marketing communications include all of the following A. administration and execution. B. coordination with other departments. C. preparing materials for the sales force. D. managing the sales force. E. coordination with outside agencies and services. 36. In companies that follow a centralized organizational system, who among the following is likely to be given the title "marketing communications manager"? A. art director B. brand manager C. advertising manager D. product manager E. copywriter 37. Which of the following statements is true about the role of top management in the advertising and promotion decision-making process? A. The top management's day-to-day responsibilities usually include decision making and operations of advertising and promotion. B. The top management does not provide input in the advertising and promotion process. C. The top management is usually interested in how the advertising program represents the organization. D. The top management is only interested in the amount of money that must be allocated to advertising and promotion. E. The top management is more interested in tactical planning than strategic planning. 03-6 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 38. Under a centralized organizational system, the responsibility for planning and controlling the advertising and promotional functions lies with the A. brand manager. B. marketing communications manager. C. product manager. D. art director. E. account planning supervisor. 39. Which of the following is true of the role of an advertising manager, under a centralized management system? A. It includes budgeting and planning media schedule. B. It primarily involves checking the accuracy of financial reports and records. C. It includes employee compensation management. D. It involves administering the firm's sales and sales promotion programs. E. It ensures that day-to-day sales targets are met. 40. Which of the following is true about the functions of the advertising manager in a centralized system? A. The advertising manager is responsible for all sales and sales management activities. B. The advertising manager has the final say in determining the sales forecasts. C. The role of an advertising manager is similar to the role of an art director in a decentralized organization. D. The advertising manager controls the entire promotions operation. E. The advertising manager does not deal with planning and budgeting. 41. In a centralized organizational structure, the _____ department is responsible for developing promotional plans that will be approved by management and recommending a promotions program based on the overall marketing plan, objectives, and budget. A. production B. finance C. auditing D. advertising E. product planning 42. A company often uses a centralized organizational system when A. it has many different divisions within the company. B. it does not want to involve the top management in the decision-making process. C. it does not have many product lines or brands to advertise. D. it wants to involve a large number of people in making program decisions. E. it wants to have a category management system in place. 03-7 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 43. Which of the following differentiates a centralized organization from a decentralized organization? A. In a centralized organization, the advertising manager is responsible for all promotions activities including sales, whereas in a decentralized organization, the advertising manager is responsible for all promotions activities except sales. B. A centralized organizational system is used in large companies with more than 1,000 employees, whereas a decentralized organizational system is used only in smaller companies with no more than 500 employees. C. In a centralized organization, an advertising manager controls the entire promotions operation for all the products of a company, whereas in a decentralized organization, each product is assigned to a different brand manager. D. A centralized organizational structure includes a category management system, whereas a decentralized organizational structure does not include one. E. In a centralized organization, the efforts of all the brand managers are coordinated by the category managers, whereas in a decentralized organization, the efforts of all the brand managers are coordinated by the advertising managers. 44. Which of the following is true of the problems associated with the centralized organizational structure? A. It does not enable a transfer of functions and responsibilities associated with advertising and promotions to the brand manager. B. It does not facilitate coordination with external advertising agencies. C. It makes it difficult for the advertising department to understand the overall marketing strategy of the brand. D. It makes it difficult for the brand manager to coordinate with the various departments within the organization. E. It facilitates disassociation of advertising managers from the category management system. 45. In a decentralized system, a(n) _____ is responsible for the total management of the brand, including planning, budgeting, sales, and profit performance. A. brand manager B. media manager C. collateral services provider D. account executive E. sales manager 46. Under a decentralized system, the advertising department is generally a part of A. finance. B. sales. C. product development. D. marketing services. E. research and development. 03-8 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 47. Jim, an employee of CL Inc., is responsible for planning, marketing, budgeting, sales, and profit performance of a specific brand. He has two assistants who help in planning, implementing, and controlling the marketing program. In this scenario, Jim is an example of a(n) A. product manager. B. art director. C. account executive. D. copywriter. E. account director. 48. When Procter & Gamble, Unilever, PepsiCo, Google, and Nestle assign each product/service or brand to a brand manager who is responsible for the total management of the brand, including planning, budgeting, sales, and profit performance, these companies are using a _____________________________ system. A. finance B. sales C. decentralized D. centralized E. product 49. In a decentralized system, individuals who oversee management of the entire product category and focus on the strategic role of the various brands in order to build profits and market share are known as A. category managers. B. art directors. C. account executives. D. account supervisors. E. media planners. 50. A company often uses a decentralized organizational system when A. it has multiple divisions and many different products. B. it does not facilitate a manufacturing or industrial operation. C. it wants one advertising manager to handle the promotional activities of all the products. D. it has a top management that is actively involved in day-to-day decision making. E. it lacks the ability to handle multiple brands. 03-9 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 51. Which of the following describes a limitation associated with the decentralized organizational structure for advertising? A. Brand managers are often overqualified and tend to feel superior to product managers. B. Brand managers are typically from nonmanagement backgrounds. C. Brand managers do not devote enough attention to short-term planning and administrative tasks. D. Brand managers often end up competing for management attention, marketing budgets, and other resources. E. Brand managers typically rely on intuition and often jeopardize the creative activities of the advertising agency. 52. Diva Boutique, located in Manhattan, relies on external advertising agencies for its advertising needs, but due to its growing global presence, it is now worried that using external agencies may lead to inconsistency in delivery of its brand image. It also wants to maintain tighter control over its advertising and promotional activities. Which of the following advertising agencies should it adopt? A. collateral service agency B. buzz marketing agency C. in-house agency D. Centralized agency E. creative boutique 53. Which of the following is true of an in-house advertising agency? A. It avoids top management involvement with the marketing communications function. B. It increases advertising and promotion costs. C. It provides greater stability. D. It provides more objectivity and range of services in comparison to outside agencies. E. It offers more access to top creative talent. 54. A major reason why some companies choose to use an in-house agency is to A. maintain creative freshness. B. reduce advertising and promotions costs. C. reduce the threat of potential lawsuits. D. make use of top creative talent. E. dissimilate brand management and advertising from under one roof. 55. Which of the following is a potential benefit of an in-house advertising agency? A. greater control B. access to more highly skilled specialists C. potential to obtain varied perspective on advertising problems D. greater flexibility E. greater objectivity 03-10 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 56. A company that uses an in-house agency might turn its advertising and promotion tasks over to an outside agency in order to A. obtain greater control over the advertising process. B. reduce costs. C. obtain greater objectivity. D. make coordination of the advertising and promotional process easier. E. save media commissions. 57. Which of the following is a disadvantage of using a centralized organizational system? A. longer response time B. very little top-management involvement C. involvement of many people in making program decisions D. lack of communication E. discontinuity in staff 58. Which of the following is an advantage of a decentralized organizational system? A. effective decision making B. Rapid response to problems and opportunities C. lack of internal conflicts D. enhanced authority E. external rather than internal focus 59. Which of the following is a disadvantage of a decentralized organizational system? A. inability to handle multiple product lines B. ineffective decision making C. longer response time D. lack of flexibility E. lack of managerial attention 60. Lack of long-term objectivity, flexibility, and creativity are a few of the reasons why a company might move away from A. a decentralized marketing system. B. an in-house agency. C. the use of full-service advertising agencies. D. a centralized marketing system. E. the use of creative boutiques. 03-11 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 61. Which of the following is a disadvantage of using an in-house advertising agency? A. external focus rather than internal B. limited access to top-level talent C. reduced cost savings D. less stability E. decreased coordination 62. Which of the following refers to the amount of client money that agencies spend on media purchases and other equivalent activities? A. billings B. media commissions C. retainers D. activity fees E. ad traffic compensation 63. Superagencies were formed A. because advertisers were disenchanted with large agencies. B. because advertisers wanted agencies to be more flexible and responsive than traditional agencies. C. to save money for clients. D. so that agencies could provide their clients with integrated marketing communications services worldwide. E. to lessen the need for competitive pricing. 64. Which of the following statements is true about superagencies? A. They were formed when large advertising agencies were broken down into smaller, more specialized agencies. B. Advertisers who became disenchanted with the superagencies moved to smaller agencies that were flexible and more responsive. C. They were formed so that agencies could provide clients with effective supply chain management. D. Advertisers who generally worked with superagencies converted them into in-house agencies to gain greater flexibility and objectivity. E. They were formed so that agencies could provide clients with just-in-time inventory management systems. 65. Which of the following statements explains why an organization would want to use an external advertising agency? A. It reduces advertising and promotional costs for the client. B. It enables the client to gain more control of the promotional activities. C. It allows more access to the top management of the client firm. D. It helps provide a consistent and integrated global brand image. E. It provides the client with the services of highly skilled individuals. 03-12 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 66. Which of the following statements is true about outside advertising agencies? A. Typically, external ad agencies do not use media analysts and researchers. B. External agencies are often preferred for their greater skill and expertise levels. C. Generally, most external ad agencies do not offer creative services. D. External ad agencies are generally cheaper than in-house agencies. E. Unlike in-house agencies, outside agencies can be used to portray a singular global image. 67. Which type of ad agency is most likely to offer its clients an extensive range of marketing, communications, and promotions services, including planning, creating, and producing the advertising; performing research; and selecting media? A. a creative boutique B. a full-service agency C. a media buying service D. a collateral agency E. a switch marketing agency 68. An ad agency that offers its clients a complete range of marketing, communication, and promotion services is known as a(n) A. creative boutique. B. media buying service. C. account service agency. D. full-service agency. E. buzz marketing agency. 69. Mars Inc., a San Diego–based advertising agency, offers various services, such as sales promotion, marketing research, package design, direct marketing, and publicity as well as planning, creation, and advertising production. In this scenario, Mars is an example of a(n) A. creative boutique. B. full-service agency. C. media buying organization. D. account service organization. E. media specialist company. 03-13 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 70. Gerald is responsible for keeping track of his agency's ________________, or the amount of client money his agency spends on media purchases and other equivalent activities. A. billings B. publicity C. promotions D. media buying E. direct marketing 71. Which of the following statements is true about account services? A. It is an in-house service for the advertisement agency that is independent of its clients' obligations. B. It is an advertising agency that solely provides media space and time. C. It provides the creative team with in-depth storyboards. D. It is a research department in the advertising agency that assists in creating the advertising message for the client. E. It is the link between the advertising agency and its clients. 72. A(n) _____ is responsible for understanding the advertiser's marketing and promotional needs and interpreting them to agency personnel. A. account executive B. database manager C. media specialist D. copywriter E. art director 73. Which of the following is true of the role of an account executive? A. It is primarily considered a research function. B. It is used only by centralized organizations. C. It is generally considered a subsidiary function. D. It includes an extensive creative aspect. E. It is the focal point of agency-client relationships. 74. In a full-service agency, the function of gathering, analyzing, and interpreting information that is useful in developing advertising is the responsibility of the _____ department. A. audit B. personnel C. media D. account management E. research 03-14 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 75. Greg is hired into the marketing services department of a full-service advertising agency. His job profile includes gathering information relating to the client's product and service that can be used in the development of the creative strategy. He has to collect information from various other departments in the firm to gain a better understanding of the client's target audience. In this scenario, Greg has been hired as a(n) A. art director. B. account planner. C. illustrator. D. media specialist. E. account executive. 76. The _____ is a document that the agency's creative department uses to guide the development of advertising ideas and concepts. A. tagline brief B. product data sheet C. creative brief D. copywriter collateral E. marketing plan 77. Account planning has become a very important and demanding function in many agencies because A. it facilitates organizations in reducing the number of effective communication channels. B. it enables organizations with a centralized management to reduce costs. C. it provides greater value to the final consumer. D. it provides the creative team with more insight into consumers. E. it has replaced brand management as the primary marketing function. 78. Which of the following departments of a full-service agency analyzes, selects, and contracts for space or time to publish or broadcast the client's advertising message? A. research department B. media department C. account management department D. creative services department E. art department 03-15 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 79. Which of the following statements is true of media departments? A. Their brief is primarily creative. B. They lack the ability or the authority to negotiate prices. C. They review information on demographics and radio listenership. D. They are in charge of creating the clients' advertising message. E. They are generally headed by an account planner. 80. _____ are the individuals in the creative services department of an ad agency who conceive the ideas for the ads and compose the advertising message. A. Copywriters B. Art directors C. Account planners D. Account executives E. Media planners 81. Which of the following statements is true of media departments? A. Their brief is primarily creative. B. They lack the ability or the authority to negotiate prices. C. They review information on demographics and radio listenership. D. They are in charge of creating the clients' advertising message. E. They are generally headed by an account planner. 82. _____ are drawings that show what the print ad will look like and from which the final artwork will be produced. A. Creative briefs B. Packshots C. Layouts D. Art infusions E. Product sheets 83. Which department within an advertising agency supervises the casting of people to appear in the ad and the setting for the scenes? A. account services department B. art department C. traffic department D. media department E. production department 03-16 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 84. The _____ department coordinates all phases of production to see that the ads are completed on time and that all deadlines for submitting the ads to the media are met. A. research B. production C. art D. traffic E. personnel 85. With respect to the creative services department of a full-service agency, the layout for TV commercials is known as a(n) A. storyboard. B. logo. C. art infusion. D. packshot. E. creative brief. 86. Which of the following is true of the traffic department in a full-service agency? A. It is headed either by an art director or a graphic designer who produces the final artwork for the ad. B. It can be located only within the research department and is used to gather information through primary or secondary sources. C. It gathers, analyzes, and interprets information that will be useful in developing advertising for the agency's clients. D. It may be located in the creative services area of the agency or be a part of media or account management. E. It is headed either by a copywriter or a media planner who selects and contracts for space and time in media. 87. Which of the following departments in a full-service agency is responsible for the development and execution of advertisements? A. traffic department B. account services department C. media planning department D. creative services department E. production department 88. Within the creative services department of a full-service agency, once the copy, layout, illustrations, and mechanical specifications of the ad have been completed and approved, the ad is turned over to the _____ department. A. traffic B. account planning C. production D. research E. art 03-17 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 89. A sequence of frames or panels that depict a TV commercial in still form is called a(n) A. screenplay. B. creative brief. C. storyboard. D. placard. E. art infusion. 90. The majority of an advertising agency's expenses are in the area of A. media costs. B. salaries and benefits for employees. C. sales promotions. D. production overheads. E. market research. 91. J&J is an advertising agency that handles each of its clients by assigning individuals from various departments to work together as a team on their accounts. With respect to the organizational structures employed by a full-function advertising agency, J&J is using a _____ organizational system. A. departmental B. group C. matrix D. creative boutique E. media boutique 92. With respect to the types of organizational structures, some advertising agencies prefer the departmental system because A. it completely avoids the usage of a commission system to compensate ad agencies. B. it gives employees the opportunity to develop expertise in servicing a variety of accounts. C. it converts a full-function advertising agency into a creative boutique. D. it avoids the involvement of the top management in the decision-making processes. E. it allows the creative team and the media team to work together as a group. 93. With respect to the types of organizational structures, many advertising agencies prefer the group system because A. it completely avoids the usage of the incentive-based compensation system. B. it leads to continuity in client servicing. C. it avoids the involvement of the top management in the decision-making processes. D. it converts a full-service agency into a media specialist agency. E. it keeps the departments within an organization independent of each other. 03-18 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 94. Which of the following is true of a creative boutique? A. They lack media, research, and account planning capabilities. B. They lack creative personnel such as copywriters and artists. C. They are headed by a media buying director. D. They have an inherent disadvantage of being cumbersome and time-consuming. E. They have lesser access to creative talent. 95. Pluto Inc. is a small agency that employs writers, artists, and other innovative personnel. It is a specialized agency and does not deal with research, account planning, or television and radio space buying. In this scenario, Pluto Inc. is an example of a(n) A. creative boutique. B. media specialist company. C. account services organization. D. media procurement specialist. E. content management specialist. 96. Which of the following statements is true about creative boutiques? A. They generally have media, research, and account planning capabilities. B. They are large ad agencies that provide all types of advertising and promotion services. C. They often subcontract work to full-service agencies. D. They tend to provide quicker innovative services due to less bureaucracy. E. They are generally characterized by extensive internal politics. 97. Independent companies that exclusively help in the purchase of radio and television time are known as A. creative boutiques. B. SMM organizations. C. macro-marketing agencies. D. media specialist companies. E. storyboard specialists. 98. Under which type of compensation system might an agency be more inclined to recommend expensive media such as network television and national magazines to its clients? A. commission system B. fee arrangement system C. cost-plus system D. incentive-based compensation system E. objective-and-task compensation system 03-19 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 99. A major development in the purchasing of advertising media in recent years has been the rapid growth of _________________________, which refers to a wide range of technologies that are automating the buying, placement, and optimization of advertising media. A. commission systems B. programmatic buying C. cost-plus systems D. incentive-based systems E. objective-and-task systems 100. Defenders of the commission system argue that A. it is generally easier to administer and keeps the emphasis in agency compensation on nonprice factors. B. it encourages agencies to recommend direct mail, sales promotion, and public relations to their clients. C. it does not tie agency compensation to media costs. D. it helps in reducing skyrocketing media costs. E. it is similar to the fixed-fee method. 101. CL Ads, an ad agency, provides media services for its clients. It prepares and places ads in local and national magazines at a specified cost. However, the agency bills its clients a flat 15 percent of the ad cost as revenue. In this scenario, the agency is using a(n) _____ system. A. incentive-based B. flexible revenue C. cost-plus D. commission E. fixed-fee 102. _____ is a system whereby the commissions average from 8 to 10 percent or are based on a sliding scale that becomes lower as the clients' media expenditures increase. A. Negotiated commission system B. Fixed-fee commission system C. Cost-plus commission system D. Incentive commission system E. Pro-rata commission system 03-20 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 103. Which of the following statements is true about agency commissions? A. The negotiated commission system is increasingly replacing the traditional commission system. B. Agencies are increasingly relying on mass media for their income. C. Agencies rely on incentive-based commission as companies are expanding their IMC programs. D. Typically, agencies are unwilling to negotiate their commission rates. E. Generally, agencies receive their highest commissions from direct mail and sales promotions. 104. Negotiated commission rates for advertising agencies A. average between 8 and 10 percent. B. are usually set between 15 and 25 percent. C. are typically not based on a sliding scale. D. are rarely used by consumer-products advertisers. E. are designed primarily to benefit agencies. 105. A(n) _____ is a type of compensation arrangement where an agency charges a client a basic monthly amount for all of its services and credits to the client any media commissions earned. A. fixed-fee method B. negotiated commission method C. cost-plus agreement method D. incentive-based compensation system E. objective-and-task compensation system 106. Fixed-fee method of compensation is also called A. objective-and-task method. B. value-based compensation. C. incentive-based compensation. D. cost-plus fee method. E. straight-fee method. 107. Under the _____ system of compensation, the client agrees to pay the agency a fee based on the price of its work along with some agreed-on profit margin. A. fixed-fee B. negotiated commission C. straight-fee D. incentive-based E. cost-plus 03-21 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 108. Under which of the following compensation systems is the agency compensation tied to performance? A. fixed-fee system B. incentive-based system C. cost-plus system D. negotiated commission system E. straight-fee system 109. Dynamic Inc., an advertising agency in Manhattan, receives compensation from its clients based on Dynamic's sales and market share performance. This is an example of a(n) _____ compensation system. A. fixed-fee B. straight-fee C. value-based D. cost-plus E. objective-and-task 110. Thirty-seven percent of companies surveyed in an ANA study used a combination of fees and commissions to compensate agencies, which is a _____ compensation system. A. fixed-fee B. straight-fee C. value-based D. cost-plus E. blended 111. Which of the following is the reason why companies are increasingly choosing to opt for an incentive-based system? A. to encourage agencies to use more mass-media advertising B. to encourage agencies to stop using network TV advertising C. to avoid the involvement of top management in the decision-making process D. to demand more accountability and pay the agencies based on their performance E. to encourage agencies to keep detailed records of the costs incurred while working with clients 112. As more companies adopt the integrated marketing communications approach to their advertising and promotions A. they are increasingly concentrating on a mass-media strategy as it is relatively cheaper. B. they are reducing their reliance on mass-media advertising, which is leading to changes in the way they compensate their agencies. C. they are likely to move completely to cost-plus compensation systems. D. incentive systems are becoming less important in compensating agencies. E. fee agreements and cost-plus systems are generally being avoided in favor of the traditional compensation method. 03-22 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 113. A(n) _____ audit of an agency is designed to verify costs, expenses, and payments to outside suppliers. A. financial B. operational C. departmental D. qualitative E. grant and contract 114. A _____ audit focuses on the agency's efforts in planning, developing, and implementing the client's advertising programs and considers the results achieved. A. quantitative B. social C. financial D. qualitative E. contract-grant 115. Pluto Inc., a new ad agency, primarily obtains clients through cold calls, promotional letters, and following up on known leads. The company maintains a separate department which is responsible for bringing in new accounts. In this scenario, the company is obtaining clients through A. referrals. B. solicitation. C. public relations. D. publicity. E. reputation management. 116. A(n) _____ is an individual who specializes in helping clients choose their advertising agencies. A. social media consultant B. ad agency review consultant C. ad agency account representative D. brand manager E. ad agency compensation specialist 117. The most effective way for an agency to acquire new business is through A. its image and reputation. B. solicitation. C. a qualitative audit. D. presentations. E. its pricing strategy. 03-23 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 118. _____ are agencies that specialize in offering services, such as database management, and the ability to create, produce, and disseminate different types of communications that go straight to target customers. A. Digital-interactive agencies B. Sales promotion agencies C. Direct-marketing agencies D. Public relations firms E. Creative boutiques 119. Venus Corp. is an agency that specializes in providing media services, direct mail, database management, and research services. It also offers creative and production services to its clients. In this scenario, Venus is an example of a _____ agency. A. creative boutique B. public relations C. digital-interactive D. direct-marketing E. sales promotion 120. _____ specialize in the development and management of sweepstakes, refund and rebate offers, and incentive programs. A. Sales promotion agencies B. Direct-response agencies C. Creative boutiques D. Interactive agencies E. Collateral agencies 121. WriteOn Stationery is new in the market. They have hired a specialized agency to promote their products in the market. Which type of specialized service would help them coordinate a program to allow consumers to mail in Universal Product Codes from three WriteOn products to receive a free Redbox movie rental? A. sales promotion agency B. collateral agency C. creative boutique D. interactive agency E. direct-response agency 03-24 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 122. Rapp and Wunderman are subsidiaries of large agency holding companies that provide services for companies that want to communicate with consumers through telemarketing, direct mail, television, the Internet, and other forms of direct-response advertising. They are examples of ___________________ agencies. A. direct-marketing B. collateral C. boutique D. interactive E. sales promotion 123. Organizations that specialize in the creation of marketing tools such as websites for the Internet, banner ads, search engine optimization, mobile marketing, and social media campaigns are known as A. sales promotion agencies. B. public relations firms. C. creative boutiques. D. interactive agencies. E. direct-response agencies. 124. A _____ is the type of firm an organization would hire to develop and implement programs to manage the organization's image and affairs with consumers and other relevant audience. A. PR agency B. sales promotion agency C. media mix organization D. creative boutique E. direct-response agency 125. A client wants to organize a concert to raise funds for The Little Ones, an orphanage in Houston. Which specialized service would be responsible for preparing news releases and promoting and managing the concert? A. a digital agency B. a marketing research firm C. an interactive agency D. a public relations firm E. a sales promotion agency 03-25 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 126. Interactive agencies are also called A. digital agencies. B. public relation firms. C. creative boutiques. D. sales promotion agencies. E. collateral agencies. 127. Package design firms, market research companies, photographers, and printers are examples of A. sales promotion agencies. B. interactive agencies. C. collateral service providers. D. companies that assist in media buying. E. creative boutiques. 128. Which of the following is considered to be a collateral services provider? A. public relation firms B. sales promotion agencies C. digital marketing agencies D. full-service interactive agencies E. market research firms 129. Which of the following is likely to conduct in-depth interviews and focus groups, as well as market surveys in order to gather objective information that is valuable to the advertiser's promotional programs? A. market research companies B. media specialist organizations C. media buying organizations D. creative boutiques E. sales promotion agencies 130. Marketing research firms A. seldom conduct qualitative research for ad agencies. B. are one of the most widely used types of collateral service organizations. C. typically do not provide quantitative market research services. D. are not typically used by ad agencies. E. can gather only subjective information. 03-26 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 131. Which of the following is true about integrated services? A. They help in eliminating the requirement for economies of scale. B. They help in maintaining control of the entire promotional process. C. They create individual branding for varied products or services. D. They make it difficult for the client to coordinate all of its marketing efforts. E. They reduce synergy in the promotional process. 132. Which of the following is considered to be the greatest obstacle in implementing integrated marketing communications (IMC)? A. IMC often results in greater economies of scale. B. Since each communication discipline has the same cost structure, the concept of IMC itself becomes invalid. C. IMC is only compatible with smaller organizations and surveys have witnessed compatibility issues when the process is scaled up. D. The implementation of IMC is most likely to result in interdepartmental budget allocations problems. E. The lack of people with the requisite broad perspective and skills to implement IMC presents the biggest obstacle. 03-27 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 133. Which of the following is an statement about integrated marketing communications firms? A. IMC often results in greater economies of scale. B. An agency that has all marketing operations in-house is usually perceived as best in breed. C. Having one agency in control of the entire IMC process achieves greater synergy among each of the communications program elements. D. One challenge to IMC is a lack of people with the requisite broad perspective and skills to make it work. E. IMC agencies make it convenient for the client to coordinate all of its marketing efforts through one agency. 03-28 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education Chapter 03 Test Bank Key 1. The primary function of promotional planners is to provide information or entertainment to their subscribers, viewers, or readers. FALSE The primary function of media organizations is to provide information or entertainment to their subscribers, viewers, or readers. But from the perspective of the promotional planner, the purpose of media is to provide an environment for the firm's marketing communications message. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-01 Describe how companies organize for advertising and integrated marketing communications functions. Topic: IMC 2. Digital/interactive agencies and public relations firms are examples of organizations that provide specialized marketing communication services. TRUE Organizations that provide specialized marketing communication services include direct-marketing agencies, sales promotion agencies, digital/interactive agencies, and public relations firms. These organizations provide services in their areas of expertise. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 1 Easy Learning Objective: 03-01 Describe how companies organize for advertising and integrated marketing communications functions. Topic: IMC 03-29 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 3. While many people both inside and outside the organization have some input into the advertising and promotion process, direct responsibility for administering the program must be assumed by someone within the firm. TRUE While many people both inside and outside the organization have some input into the advertising and promotion process, direct responsibility for administering the program must be assumed by someone within the firm. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 1 Easy Learning Objective: 03-01 Describe how companies organize for advertising and integrated marketing communications functions. Topic: The Steps in an Advertising Campaign 4. In the most common example of a centralized system, the advertising or marcom manager controls the entire promotions operation. TRUE In the most common example of a centralized system, the advertising or marcom manager controls the entire promotions operation, including budgeting, coordinating creation and production of ads, planning media schedules, and monitoring and administering the sales promotions programs for all the company's products or services. AACSB: Analytical Thinking Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-02 Compare the advantages and disadvantages of different ways to organize for advertising and promotion. Topic: Role of the Marketing Manager 5. An advantage of the centralized system is that each brand receives concentrated managerial attention, resulting in faster response to both problems and opportunities. FALSE An advantage of the decentralized system is that each brand receives concentrated managerial attention. is also more flexible. The brand manager system AACSB: Analytical Thinking Blooms: Remember Difficulty: 2 Medium Learning Objective: 03-02 Compare the advantages and disadvantages of different ways to organize for advertising and promotion. Topic: Role of the Marketing Manager 03-30 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 6. Retail giant Target has an internal creative department that handles the design of its weekly circulars, direct-mail pieces, in-store displays, promotions, and other marketing materials. This is an example of an in-house agency. TRUE An in-house agency is an advertising agency that is set up, owned, and operated by the advertiser. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-02 Compare the advantages and disadvantages of different ways to organize for advertising and promotion. Topic: The Steps in an Advertising Campaign 7. A decentralized organizational system is often used when companies do not have many different divisions, product or service lines, or brands to advertise. FALSE A centralized organizational system is often used when companies do not have many different divisions, product or service lines, or brands to advertise. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-02 Compare the advantages and disadvantages of different ways to organize for advertising and promotion. Topic: The Steps in an Advertising Campaign 8. A disadvantage of the decentralized system is that each brand does not receive concentrated managerial attention, resulting in slower response to both problems and opportunities. FALSE An advantage of the decentralized system is that each brand receives concentrated managerial attention, resulting in faster response to both problems and opportunities. The brand managers have full responsibility for the marketing program, including the identification of target markets as well as the development of integrated marketing communications programs that will differentiate the brand. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-02 Compare the advantages and disadvantages of different ways to organize for advertising and promotion. Topic: The Steps in an Advertising Campaign 03-31 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 9. In-house agencies are preferred by some companies because they keep the marketing communications function more closely tied to top management. TRUE In-house agencies are preferred by some companies because they keep the marketing communications function more closely tied to top management. Another reason is the stability an in-house agency provides because external agencies have much higher turnover levels, which can take a toll on the client–agency relationship. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 1 Easy Learning Objective: 03-02 Compare the advantages and disadvantages of different ways to organize for advertising and promotion. Topic: The Steps in an Advertising Campaign 10. Nearly two-thirds of the domestic billings are handled by 900 of the smallest agencies in the United States. FALSE Nearly two-thirds of the domestic billings are handled by the top 500 agencies. total volume done by the top 900 agencies in the United States. Just 10 U.S. agencies handle nearly 30 percent of the AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 2 Medium Learning Objective: 03-03 Identify the types of advertising agencies and the roles they play. Topic: The Role of Advertising 11. Superagencies were formed when large advertising organizations disintegrated to form separate, more specialized individual agencies. FALSE During the late 1980s and into the 1990s, the advertising industry underwent major changes as large agencies merged with or acquired other agencies and support organizations to form large advertising organizations, or superagencies. These superagencies were formed so that agencies could provide clients with integrated marketing communications services worldwide. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-03 Identify the types of advertising agencies and the roles they play. Topic: The Role of Advertising 03-32 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 12. The role of account representatives is likely to disappear as agencies and their clients are beginning to liaise directly with each other. FALSE Account representatives will continue to serve an important role in managing the relationships between agencies and their clients. The account executive is responsible for understanding the advertiser's marketing and promotions needs and interpreting them to agency personnel. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-03 Identify the types of advertising agencies and the roles they play. Topic: The Steps in an Advertising Campaign 13. Account planners work with the client as well as other agency personnel, including the account executives, creative team members, research department personnel, and media specialists. TRUE Account planners work with the client as well as other agency personnel including the account executives, creative team members, media specialists, and research department personnel to collect information that can be helpful in gaining a better understanding of the client's target audience and the best ways to communicate with them. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-03 Identify the types of advertising agencies and the roles they play. Topic: The Steps in an Advertising Campaign 14. The creative services department of an agency analyzes, selects, and contracts for space or time in the media that will be used to deliver the client's advertising message. FALSE The media department of an agency analyzes, selects, and contracts for space or time in the media that will be used to deliver the client's advertising message. AACSB: Analytical Thinking Blooms: Remember Difficulty: 2 Medium Learning Objective: 03-03 Identify the types of advertising agencies and the roles they play. Topic: The Steps in an Advertising Campaign 03-33 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 15. The layout of a print ad is known as a storyboard. FALSE For print ads, the art director and graphic designers prepare layouts, which are drawings that show what the ad will look like and from which the final artwork will be produced. For TV commercials, the layout is known as a storyboard, a sequence of frames or panels that depict the commercial in still form. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-03 Identify the types of advertising agencies and the roles they play. Topic: The Steps in an Advertising Campaign 16. Media buying services have found a niche by specializing in the analysis and purchase of advertising time and space. TRUE Media buying services have found a niche by specializing in the analysis and purchase of advertising time and space. The task of purchasing advertising media has grown more complex due to the fragmentation of media audiences and the growth of digital media. 17. Programmatic buying has declined in recent years. FALSE AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-03 Identify the types of advertising agencies and the roles they play. Topic: The Steps in an Advertising Campaign Programmatic buying has grown, in part because of the wide range of technologies that are automating the buying, placement, and optimization of advertising media. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-03 Identify the types of advertising agencies and the roles they play. Topic: Promotion Budget 03-34 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 18. Proponents of the commission system argue that the system is more flexible than it appears as agencies often perform other services for large clients at no extra charge. TRUE Proponents of the commission system argue that the system is more flexible than it appears as agencies often perform other services for large clients at no extra charge as a way of justifying the large commission they receive. recommend high-priced media to their clients to increase commission levels. Critics suggest it encourages agencies to AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-04 Explain how to select, compensate, and evaluate advertising agencies. Topic: Promotion Budget 19. A cost-plus system requires that the agency keep detailed records of the costs it incurs in working on a client's account. TRUE The cost-plus system requires that the agency keep detailed records of the costs it incurs in working on the client's account. Direct costs (personnel time and out-of-pocket expenses) plus an allocation for overhead and a markup for profits determine the amount the agency bills the client. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-04 Explain how to select, compensate, and evaluate advertising agencies. Topic: Promotion Budget 20. The agency evaluation is often done on a subjective, informal basis, particularly in smaller companies where ad budgets are low. TRUE The agency evaluation is often done on a subjective, informal basis, particularly in smaller companies where ad budgets are low or advertising is not seen as the most critical factor in the firm's marketing performance. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-04 Explain how to select, compensate, and evaluate advertising agencies. Topic: Role of the Marketing Manager 03-35 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 21. The qualitative audit focuses on how the agency conducts its business. It is designed to verify costs and expenses, the number of personnel hours charged to an account, and payments to media and outside suppliers. FALSE The qualitative audit focuses on the agency's efforts in planning, developing, and implementing the client's advertising programs and considers the results achieved. AACSB: Analytical Thinking Blooms: Remember Difficulty: 2 Medium Learning Objective: 03-04 Explain how to select, compensate, and evaluate advertising agencies. Topic: Role of the Marketing Manager 22. Loyalty to a single agency is becoming more common as marketers seek new ways of connecting with consumers. FALSE While many successful agency-client relationships go on for years, loyalty to a single agency is becoming less common as marketers seek new ways of connecting with consumers. In recent years, a number of long-standing client relationships have been terminated. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-04 Explain how to select, compensate, and evaluate advertising agencies. Topic: Role of the Marketing Manager 23. A typical direct-marketing agency does not include a creative department. FALSE A typical direct-marketing agency is divided into three main departments: account management, creative, and media. Some agencies also have a department whose function is to develop and manage databases for their clients. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-05 Identify the role and functions of specialized marketing communication organizations. Topic: The Role of Advertising 03-36 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education 24. One of the more widely used collateral service organizations is the marketing research firm. TRUE One of the more widely used collateral service organizations is the marketing research firm. Companies are increasingly turning to marketing research to help them understand their target audiences and to gather information that will be of value in designing and evaluating their advertising and promotions programs. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-05 Identify the role and functions of specialized marketing communication organizations. Topic: The Role of Advertising 25. An agency with integrated marketing capabilities can create a single image for the product or service and address everyone, from wholesalers to consumers, with one voice. TRUE An agency with integrated marketing capabilities can create a single image for the product or service and address everyone, from wholesalers to consumers, with one voice. It is convenient for the client to coordinate all of its marketing efforts—media advertising, direct mail, special events, sales promotions, and public relations—through one agency. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-06 Compare the pros and cons of using an integrated marketing services agency. Topic: IMC 26. According to marketing executives, the biggest obstacle to implementing integrated marketing communications (IMC) is the lack of people with the broad perspect