Ch 3 organizing for advertising and promotion

B. Advertisers and media organizations
1. (p. 69) _____ are the major participants in the integrated marketing communications process.
A. Advertising agencies and new product development firms
B. Advertisers and media organizations
C. Media organizations and marketing information systems
D. Travel agencies and public relations firms
E. New-product development firms and public relation firms
A. client.
Company A has hired company B to take care of its advertising needs. All company A has to do is provide its products and funds to company B to execute its advertising requirements.
Company A is known as a(n):
A. client.
B. creative boutique.
C. full service agency.
D. advertising agency.
E. media organization
A. advertiser or organization that has the product, service or cause that needs to be marketed.
3. (p. 69) The term client, in the ad agency industry, refers to the:
A. advertiser or organization that has the product, service or cause that needs to be marketed.
B. media, which plays a crucial role in the process of marketing communication.
C. purchaser of the consumer product advertised.
D. market for business or consumer products.
E. advertising agency that specializes in the creation, production, and/or placement of the communications message.
D. advertising agency
4. (p. 69) 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
C. provide an environment for the firm’s marketing communications message.
5. (p. 70) From the perspective of a promotional planner, the primary purpose of most media is to:
A. provide information or entertainment to their subscribers, viewers, or readers.
B. assume major responsibility for developing the marketing program.
C. provide an environment for the firm’s marketing communications message.
D. help the company understand the marketplace.
E. provide the funds that pay for advertising and promotions.
C. media’s
6. (p. 70) A(n) ______ primary function is to provide information or entertainment to its audience.
A. client’s
B. advertising agency’s
C. media’s
D. customer’s
E. advertiser’s
C. media organization
7. (p. 70) Company A is a major participant in the advertising and promotion process. It attracts various others companies who buy space and time with them which they can provide at discounted rates. Company A helps these companies reach the target market effectively with the message. Company A is a(n):
A. advertiser.
B. advertising agency.
C. media organization.
D. full service agency.
E. consultancy.
D. specialized marketing communication services.
8. (p. 70) Direct-marketing agencies, sales promotion agencies and public relations firms are examples of:
A. different types of advertising agencies.
B. media organizations.
C. collateral services.
D. specialized marketing communication services.
E. in-house agencies.
C. Collateral services
9. (p. 70) _____ perform specialized functions that the various participants in integrated marketing communication process use in planning and executing advertising and other promotional functions.
A. Media services
B. Compensation services
C. Collateral services
D. Traffic services
E. In-house agencies
C. Top management is usually interested in how the advertising program represents the organization.
10. (p. 71) Which of the following statements is true about the role of top management in the advertising and promotion decision making process?
A. Top management is usually involved in the day-to-day decision-making and operations of advertising and promotion.
B. Top management does not provide input in the advertising and promotion process.
C. Top management is usually interested in how the advertising program represents the organization.
D. Top management is only interested in the amount of money that must be allocated to advertising and promotion.
E. Top management is more interested in tactical planning than strategic planning.
B. advertising manager.
11. (p. 71) Under a centralized organizational system, the responsibility for planning and controlling the advertising and promotional function lies with the:
A. brand manager.
B. advertising manager.
C. product manager.
D. in-house agency.
E. vice president of marketing.
C. centralized system
15. (p. 71) When a _____ is used, most of a company’s advertising and promotional activities will be the responsibility of the advertising manager.
A. brand manager system
B. decentralized marketing system
C. centralized system
D. media buying service
E. creative boutique
A. product manager.
20. (p. 72) In a decentralized system of advertising organization, the responsibility of planning, implementing, and controlling the marketing program for an individual brand belongs to the:
A. product manager.
B. creative director.
C. account executive.
D. layout editor.
E. communications team.
A. category managers.
21. (p. 74) Individuals who have the responsibility of coordinating efforts of various product or brand managers for a particular product class are known as:
A. category managers.
B. superordinate managers.
C. account executives.
D. account supervisors.
E. media planners.
D. Brand managers often end up competing for management attention, marketing budgets, and other resources.
24. (p. 74) Which of the following describes a limitation associated with the decentralized organizational structure for advertising?
A. Brand managers are often overqualified and want too much input into advertising.
B. Brand managers are typically highly experienced in advertising and understand exactly what advertising can do for a brand.
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. With their reliance on intuition, brand managers often jeopardize the creative activities of the advertising agency.
C. in-house agency
25. (p. 75) A(n) _____ is an advertising agency that is set up, owned, and operated by the advertiser.
A. creative boutique
B. full service agency
C. in-house agency
D. self sufficient agency
E. collateral agency
C. as an in-house agency.
26. (p. 75) When the client assumes the entire promotional function, it is said to operate:
A. on a client management basis.
B. on a creative and functional basis.
C. as an in-house agency.
D. as a collateral service provider.
E. as a self-sufficient agency.
A. Lower advertising costs
27. (p. 75) Which of the following is an advantage associated with an in-house advertising agency?
A. Lower advertising costs
B. More highly skilled specialists
C. More varied perspective on advertising problems
D. Greater flexibility
E. Disseminate control to outside agencies.
B. reduce advertising and promotions costs.
28. (p. 75) 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. compete with external advertising agencies.
D. win advertising awards that will enhance the image of their brands.
E. disseminate control to outside agencies.
A. Increased coordination and cost savings
29. (p. 78) Which of the following is an advantage of an in-house agency?
A. Increased coordination and cost savings
B. Different brand images and large number of marketing partners
C. Increased coordination and greater cost savings
D. More overall control and freshness in ideas and work
E. Greater flexibility and more objectivity
C. In-house agency
30. (p. 75) Company A used to rely on outside advertising agencies for its advertising needs but since it is a global company, it is now worried that using external agencies may lead to non-consistency of its brand image. The years on experience with outside agencies has made it realize that it results in wastage of both time and money. It also wants to maintain tighter control over its advertising and promotion activities. Which of the following advertising agencies should it adopt?
A. Collateral service agency
B. Full service agency
C. In-house agency
D. Democratic agency
E. Creative boutique
B. an in-house agency.
31. (p. 78) 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.
C. get an objective.
32. (p. 78) A company that uses an in-house agency might turn its advertising and promotion tasks over to an outside agency to:
A. get more control over the advertising process.
B. save money.
C. get an objective.
D. make coordination of the advertising and promotional process easier.
E. save media commissions.
A. Billings
34. (p. 79) Which of the following is 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. Traffic compensation
D. full-service agency.
40. (p. 82) 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. in-house agency.
D. full-service agency.
E. integrated marketing organization
E. It is the link between the ad agency and its clients.
42. (p. 82) Which of the following statements is true about account services?
A. It is an in-house service for the agency which is independent of its clients’ obligations.
B. It provides the creative team with more insight on how to use advertising and other IMC tools to communicate with customers.
C. It provides the creative team with more insight into consumers.
D. It is an advertisement agency service which is not link to its client.
E. It is the link between the ad agency and its clients.
A. account executive
43. (p. 82) The _____ 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. account planner
E. account executive.
44. (p. 82) The agency person who is the focal point of the agency-client relationship is the:
A. media buyer.
B. account planner.
C. copywriter.
D. brand manager.
E. account executive.
E. research
45. (p. 83) The function of gathering, analyzing and interpreting information that is useful in developing advertising is the responsibility of the agency’s _____ department.
A. production
B. traffic
C. media
D. account management
E. research
B. Account planner
46. (p. 83) 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. Which position has Greg been hired for?
A. Research department personnel
B. Account planner
C. Creative team member
D. Media specialist
E. Account executive
C. creative brief
47. (p. 83) The _____ is a document that the agency’s creative department uses to guide the development of advertising ideas and concepts.
A. tagline brief
B. creative boutique
C. creative brief
D. copywriter article
E. marketing plan
D. of the increase in the number of marketing communication channels and ways of contacting consumers.
48. (p. 83) Account planning has become a very important and demanding function in many agencies because:
A. public relations has replaced advertising to achieve global integrated marketing communications.
B. budgeting services have reduced the redundancy associated with on-task account planning.
C. marketing research has expanded the creative capacity of ad agencies.
D. of the increase in the number of marketing communication channels and ways of contacting consumers.
E. of the reducing roles of account executives.
B. Media department
49. (p. 83) Which of the following departments of the full-service agency, analyzes, selects, and contracts for space or time in the media that will be used to deliver the client’s advertising message?
A. Research department
B. Media department
C. Account management department
D. Creative services department
E. Art department
A. Copywriters
51. (p. 85) _____ are the individuals who conceive the ideas for the ads and write the advertising message.
A. Copywriters
B. Art directors
C. Account planners
D. Account executives
E. Media planners
C. Layouts
53. (p. 85) _____ are drawings that show what the print ad will look like and from which the final artwork will be produced.
A. Creative briefs
B. Copywriters
C. Layouts
D. Designs
E. Logos
D. traffic
55. (p. 86) The _____ department coordinates all phases of production to ensure the proper progression of the advertisement.
A. research
B. production
C. art
D. traffic
E. media
B. group
58. (p. 86) Jackson & Morris 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. The agency is using a _____ organizational system.
A. departmental
B. group
C. matrix
D. boutique
E. dedicated
A. creative boutique
60. (p. 87) A(n) _____ is an agency that specializes in and provides only creative services.
A. creative boutique
B. full-service agency
C. in-house advertising agency
D. decentralized organizational system
E. media boutique
D. media specialist companies
63. (p. 87) Independent companies that specialize in the purchase of radio and television time are known as:
A. creative boutiques.
B. mid-sized agencies.
C. full-service agencies.
D. media specialist companies.
E. media boutiques.
A. media specialist companies
64. (p. 87) Clients and creative boutiques that have developed their own media strategies may employ _____ to execute them.
A. media specialist companies
B. full-service agencies
C. in-house agencies
D. media departments
E. product managers
A. a commission system.
66. (p. 88) The traditional method of compensating ad agencies is through:
A. a commission system.
B. hourly billings.
C. a fee system.
D. a straight salary method.
E. an objective-and-task compensation system.
C. a specified percentage of the cost of any advertising time or space the agency purchases for its client
67. (p. 88) Agency compensation under the commission system is based on:
A. total number of hours worked.
B. a percentage of a client’s marketing budget.
C. a specified percentage of the cost of any advertising time or space the agency purchases for its client.
D. a percentage of advertising production costs.
E. the client’s position in the distribution channel.
A. fixed fee
76. (p. 90) A(n) ______ is a type of compensation arrangement where an agency charges a client a fixed monthly amount of money for all of its services and credits to the client any media commissions earned.
A. fixed fee
B. negotiated commission
C. cost-plus agreement
D. incentive-based compensation
E. fee-commission combination
B. Incentive based system
79. (p. 90) Under which of the following compensation arrangement is the agency compensation tied to their performance?
A. Fixed-fee system
B. Incentive based system
C. Cost plus system
D. Negotiated commission system
E. Fee-commission combination system
A. conflict of interest.
84. (p. 96) During a merger or acquisition of the agency by some other larger agency, the main reason for the discontinuation of the agency-client relationship is:
A. conflict of interest.
B. poor performance.
C. poor communication.
D. changes in client’s corporate strategy.
E. declining sales.
A. its image and reputation.
87. (p. 99) Probably the most effective way for an agency to acquire new business is through:
A. its image and reputation.
B. its public relations effort.
C. solicitations.
D. referrals.
E. its pricing strategy.
C. Direct-response agencies
88. (p. 100) _____ are agencies that specialize in offering services, such as database management, and the ability to create, produce, and disseminate direct mail and other types of communications that go straight to target customers.
A. Full function ad agencies
B. Sales promotion agencies
C. Direct-response agencies
D. Public relations firms
E. Creative boutiques
D. manage clients’ databases.
89. (p. 100) Direct-response agencies:
A. manage premium and incentive offers.
B. specialize in the development of Web sites.
C. engage in crisis management.
D. manage clients’ databases.
E. respond directly to the client’s customers.
A. Sales promotion agency
92. (p. 100) Which type of specialized service would have most likely coordinated a program to allow consumers to mail in UPC codes from three Reynolds products to receive a free Blockbuster movie rental?
A. Sales promotion agency
B. Public relations firm
C. Creative boutique
D. Interactive agency
E. Direct-response agency
A. public relations agency
93. (p. 101) A(n) _____ is the type of firm an organization would hire to develop and implement programs to manage the organization’s publicity and affairs with consumers and other relevant publics.
A. public relations agency
B. advertising agency
C. media mix organization
D. creative boutique
E. direct-response agency
D. interactive agencies
95. (p. 102) Organizations that specialize in the creation of interactive media such as CD-ROMs, kiosks, and web sites are known as:
A. sales promotion agencies.
B. public relations firms.
C. creative boutiques.
D. interactive agencies.
E. direct-response agencies
C. companies that provide collateral services.
97. (p. 102) Package design firms, market research companies, photographers, and printers are examples of:
A. sales promotion agencies.
B. interactive agencies.
C. companies that provide collateral services.
D. marketing support agencies.
E. support agencies.
A. Market research companies
99. (p. 103) Which of the following is likely to conduct in depth interviews, market surveys, and focus groups etc. 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. Interactive agencies
B. are one of the most widely used types of collateral service organizations
100. (p. 103) 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. are actually classified as data warehouses because of their relations with ad agencies.
D. are not typically used by ad agencies.
E. can gather only subjective information
B. An agency with integrated marketing capabilities can create a single image for the product or service.
101. (p. 103) Which of the following is true about integrated services?
A. Companies prefer separate agencies for sales promotion, direct marketing, interactive marketing etc. as they are easier to coordinate.
B. An agency with integrated marketing capabilities can create a single image for the product or service.
C. Not many advertisers and agencies feel that integrated marketing is important to their organizations’ success.
D. Most advertisers want their ad agencies to set strategy for and coordinate the integrated marketing communications program for them.
E. Most of the large marketers feel that the agency executives are capable of handling the various elements of an integrated campaign.
A. Budgeting and planning media schedule
12. (p. 71) Under a centralized organizational arrangement, which of the following is the advertising manager responsible for?
A. Budgeting and planning media schedule
B. Coordinating the creation and production of ads and sales
C. Compensation management
D. Administering the firm’s sales and sales promotion programs
E. Sales and sales management
D. The specific role of the advertising manager depends on the size of the firm.
13. (p. 71) Which of the following is true about the functions of the advertising manager in a centralized system?
A. Advertising manager is responsible for all sales and sales management activities.
B. Advertising manager, usually, takes the final decision about allocating funds towards the promotional budget.
C. The advertising manager may not review and approve the promotional plans which are made by the agency.
D. The specific role of the advertising manager depends on the size of the firm.
E. Advertising manager deals only with the advertising department in the organization.
D. advertising
14. (p. 71) In a centralized organizational arrangement, 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. marketing
C. sales
D. advertising
E. product planning
D. advertising
E. product planning
C. centralized marketing system
16. (p. 72) Problems associated with a(n) _____ include difficulty of the advertising department to understand the overall marketing strategy for the brand.
A. decentralized marketing system
B. in-house agency
C. centralized marketing system
D. brand management system
E. creative boutique
D. brand management system
E. creative boutique
A. Planning of the marketing program
17. (p. 72) Which of the following can be stated a responsibility of a brand manager in a decentralized marketing system?
A. Planning of the marketing program
B. Manufacturing the products
C. Compensating all the employees
D. Distributing products
E. Developing departments in the organization
D. marketing
18. (p. 73) Under a decentralized system, the advertising department is generally a part of _____ department.
A. production
B. sales
C. product management
D. marketing
E. research and development
D. marketing
E. research and development
B. provide advertising and promotion related support to the brand managers.
19. (p. 73) The role of the advertising department in a company using a decentralized product management system is to:
A. plan and coordinate the advertising campaign.
B. provide advertising and promotion related support to the brand managers.
C. conduct marketing research based on the problems identified during segmentation.
D. develop sales programs that would be effective against the target market.
E. check manufacturing of the products according to the demand in the market.
B. decentralized
22. (p. 74) A _____ advertising organizational system has the advantages of concentrated managerial attention, rapid response to problems, and increased flexibility.
A. centralized
B. decentralized
C. democratic
D. collateral system
E. functionally-incorporated
B. Decentralized system
23. (p. 74) PrimeTime is a multi-product firm that follows an advertising organizational system where the manager has the 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 brands and ensures that each brand receives concentrated managerial attention. However, each brand may compete against other brands in the same company. Which advertising organizational system is PrimeTime following?
A. Centralized system
B. Decentralized system
C. Creative boutique
D. Collateral system
E. Democratic system
B. Most U.S. ad agencies are individually owned small businesses employing fewer than five people.
33. (p. 79) Which of the following statements about the U.S. advertising agency business is true?
A. Most U.S. ad agencies are large businesses with billings exceeding $100 million per year.
B. Most U.S. ad agencies are individually owned small businesses employing fewer than five people.
C. Nearly all of the U.S. domestic billings are handled by the top 100 agencies.
D. Most of the top U.S. ad agencies are headquartered in Chicago.
E. There are approximately 1,000 agencies listed in the Standard Directory of Advertising Agencies.
D. so agencies could provide their clients with integrated marketing communications services worldwide.
35. (p. 80) 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 agencies could provide their clients with integrated marketing communications services worldwide.
E. to lessen the need for competitive pricing.
B. Advertisers who became disenchanted with the superagencies moved to form smaller agencies that were flexible and more responsive.
36. (p. 80) Which of the following statements is true about superagencies?
A. They were formed when large advertisement agencies were broken down into smaller, more specialized agencies.
B. Advertisers who became disenchanted with the superagencies moved to form 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 became disenchanted with the superagencies moved to form larger agencies that were inflexible and less responsive.
E. They were formed so that agencies could provide clients with just-in-time inventory management system.
E. It provides the client with the services of highly skilled individuals.
37. (p. 81) Which of the following statements explain why an organization would want to use an external advertising agency?
A. It saves money for the client.
B. It helps the client 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 brand image worldwide and reduces the number of marketing partners for the client firm.
E. It provides the client with the services of highly skilled individuals.
B. Agencies are often used because of the skill, expertise, and experience they can offer in the advertising area.
38. (p. 81) Which of the following statements is true about advertising agencies?
A. Most large, national advertisers use in-house agencies.
B. Agencies are often used because of the skill, expertise, and experience they can offer in the advertising area.
C. Most large agencies offer only creative services to their clients.
D. Agencies must be used since companies do not have the capabilities of developing their own advertising.
E. Most large advertisers are totally content with the current commission system of compensation.
B. A full-service agency
39. (p. 82) Which type of ad agency is most likely to assist the client in areas such as marketing strategy and research, campaign planning and execution, and media planning and buying?
A. A creative boutique
B. A full-service agency
C. A media buying service
D. A collateral agency
E. A full time agency
B. full-service agency.
41. (p. 82) AdonDemand, a new advertising agency in San Diego, is offering its clients various services such as marketing, sales promotion, research, promotion, package designing, direct marketing, publicity along with planning, creating, and producing the advertising. Company A is a(n):
A. creative boutique.
B. full-service agency.
C. media buying organization.
D. in-house agency.
E. media specialist company.
C. It reviews information on demographics, and consumers’ television viewing habits.
50. (p. 83) Which of the following statements about the role of ad agency media departments is true?
A. Large advertisers do not use media departments to purchase media time and space.
B. Media departments do not have the ability or the authority to negotiate prices.
C. It reviews information on demographics, and consumers’ television viewing habits.
D. Consolidating media buying is not cost effective and may reduce media efficiency.
E. The media buyer implements the media plan by selling the actual time and space.
E. art department
52. (p. 85) The _____ is responsible for creating the visual portion of an ad such as layouts and the commercial storyboards.
A. account executive
B. copywriter
C. product management department
D. research department
E. art department
E. Production department
54. (p. 86) Which department within an advertising agency supervises the casting of people to appear in the ad and the setting for the scenes?
A. Media department
B. Art department
C. Copywriters
D. Traffic department
E. Production department
B. salaries and benefits for employees.
56. (p. 86) Most of an advertising agency’s expenses are in the area of:
A. media costs.
B. salaries and benefits for employees.
C. personal selling.
D. production facilities.
E. commissions.
A. departmental system
57. (p. 86) A _____ is an agency organizational structure in which each functional area is set up as a separate department. The parts of this structure are called on as needed to perform their particular specialty and serve all of the agency’s clients.
A. departmental system
B. group system
C. creative boutique
D. matrix system
E. media buying service system
B. departmental system
59. (p. 86) An advertising agency that wants its employees to develop expertise in servicing a variety of accounts should use a(n) _____ structure.
A. group system
B. departmental system
C. creative boutique
D. in-house
E. decentralized
A. limit their client service to creative planning and execution.
61. (p. 87) Creative boutiques are agencies that:
A. limit their client service to creative planning and execution.
B. have resulted from advertisers wanting to save money in buying media space.
C. perform the same functions as full-service agencies for their clients, but charge more.
D. are used only when advertising is not important to the marketing success of the company that hired them.
E. that wants its employees to develop expertise in servicing a variety of accounts.
D. They tend to provide quicker creative services due to less bureaucracy.
62. (p. 87) 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 creative services due to less bureaucracy.
E. Large companies visit them when they are looking for a huge range of services and there are cutbacks in the advertising spending.
D. Creative boutiques today are having trouble because clients often want a range of service
65. (p. 87) Which of the following statements about creative boutiques is true?
A. Creative boutiques are more successful today than ever before.
B. The demand for IMC services has had little influence on how creative boutiques do business.
C. Creative boutiques use an aggregated business model instead of niche marketing.
D. Creative boutiques today are having trouble because clients often want a range of services.
E. Consolidation has led to the demise of creative boutiques.
D. $75,000.69.
68. (p. 88) An advertising agency works with its clients under a traditional commission system compensation arrangement. The agency places a 30-second spot for one of its clients on an episode of Friends, which costs $500,000. A reasonable estimate of the agency’s commission on this space buy is:
A. $15,000.
B. $30,000.
C. $45,000.
D. $75,000.
E. $80,000.
C. the agency time spent on an account may not be proportional to the compensation received for it.
69. (p. 89) Opponents of the agency commission system argue this system is not effective because:
A. a commission keeps the emphasis on creative skills not the bottom-line.
B. a commission is simple to administer.
C. the agency time spent on an account may not be proportional to the compensation received for it.
D. a commission encourages agencies to limit their client’s advertising expenditures.
E. a commission does not tie agency compensation to media costs.
A. Most clients do not pay full commissions to their agencies because they prefer to use some type of fee or incentive-based system as they seem more equitable than the commission system.
70. (p. 89) Which of the following statements about changes in the way advertising agencies are being compensated is true?
A. Most clients do not pay full commissions to their agencies because they prefer to use some type of fee or incentive-based system as they seem more equitable than the commission system.
B. With the move toward integrated marketing services, it is likely that there will be a return to the commission system of compensation.
C. From the viewpoints of both the client and the agency, the traditional commission system is much superior to negotiated commissions.
D. Since most clients want their agencies to be in total charge of the integrated marketing communications process, they are willing to compensate them based on media commissions.
E. In a negotiated commission system, commission is usually greater than 15 percent.
D. is simple and keeps the emphasis in agency compensation on non-price factors.
71. (p. 89) A major argument put forth by defenders of the commission system is that a commission:
A. keeps the agencies from placing advertising in expensive media.
B. ties agency compensation to the inflation in media costs.
C. is very complex to administer.
D. is simple and keeps the emphasis in agency compensation on non-price factors.
E. encourages agencies to use noncommissionable media such as direct mail.
D. the commission system
72. (p. 89) Critics argue the use of _____ can encourage agencies to ignore cost accounting systems and avoid media such as direct mail and sales promotions.
A. percentage charges
B. fixed fee arrangements
C. cost-plus agreements
D. the commission system
E. the objective-and-task compensation system
A. Commission system
73. (p. 89) 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
A. Some leading agencies now receive average commissions of 8 to 10 percent.
74. (p. 89) Which of the following statements is true about agency commissions?
A. Some leading agencies now receive average commissions of 8 to 10 percent.
B. Nearly all of the leading agencies still earn a 15 percent commission.
C. Most agencies are earning more of their income from fixed commissions as clients expand their IMC programs to include other forms of promotion.
D. Most agencies are unwilling to negotiate their commission rates.
E. Leading agencies often get 20 percent commissions.
A. are becoming more commonplace.
75. (p. 89) Negotiated commission rates for advertising agencies:
A. are becoming more commonplace.
B. are becoming less common.
C. set a 15 percent minimum commission rate for all agency work.
D. are rarely used by consumer-products advertisers.
E. are designed primarily to benefit agencies.
E. cost plus
77. (p. 90) Under the _____ system of compensation, the client agrees to pay the agency a fee based on the costs of its work plus some agreed-on profit margin.
A. fixed fee
B. negotiated commission
C. fee-commission combination
D. incentive based
E. cost plus
E. cost-plus
78. (p. 90) If an advertiser wants a very detailed accounting of how its advertising and promotional monies are being spent and what it is being charged by its ad agency, it is likely to use a(n) _____ compensation system.
A. fee arrangement
B. media commission
C. incentive-based
D. fee-combination
E. cost-plus
C. value based
80. (p. 90) The DDB Needham advertising agency receives compensation from its clients based on their sales and market share performance. This is an example of a(n) _____ compensation system.
A. fixed-fee
B. mediated
C. value based
D. cost-plus system
E. fee-commission
D. To demand more accountability and pay the agencies based on their performance.
81. (p. 90) Why would General Motors switch to an incentive-based compensation system with several of its agencies?
A. To encourage its agencies to use more mass media advertising.
B. To encourage its agencies to stop using network TV advertising.
C. To reduce control.
D. To demand more accountability and pay the agencies based on their performance.
E. To accomplish all of the above objectives.
B. they are reducing their reliance on mass media advertising and changing their agency compensation system.
82. (p. 91) As more companies adopt the integrated marketing communications approach to their advertising and promotions,
A. they are increasing their reliance on mass media advertising and paying full commissions to agencies.
B. they are reducing their reliance on mass media advertising and changing their agency compensation system.
C. they are likely to move totally to cost-plus compensation systems.
D. incentive systems are becoming less important in compensating agencies.
E. none of the above is occurring.
A. financial; qualitative
83. (p. 92) A _____ audit of an agency focuses on factors such as costs, expenses and payments to outside suppliers while a _____ audit focuses on factors such as the agency’s efforts in planning, development and implementing the advertising program.
A. financial; qualitative
B. qualitative; financial
C. financial; creative
D. qualitative; quantitative
E. fixed costs; variable costs
B. Many agencies do not like to participate in speculative presentations because there is no guarantee they will win the account, and they require time and money.
85. (p. 98) Which of the following statements is true about speculative presentations?
A. Speculative presentations require little time and effort on the part of agencies.
B. Many agencies do not like to participate in speculative presentations because there is no guarantee they will win the account, and they require time and money.
C. Speculative presentations are rarely used in the advertising industry.
D. Most agencies do not participate in speculative presentations to acquire new business.
E. They are also known as storyboards.
B. ad agency review consultant
86. (p. 99) A(n) _____ is an individual who specializes in helping clients choose their advertising agencies.
A. media specialist
B. ad agency review consultant
C. account representative
D. brand manager
E. compensation specialist
D. account management, creative, and media.
90. (p. 100) A typical direct-response agency is divided into three main departments. They are:
A. customer relations, production, and traffic.
B. media, customer relations, and sales.
C. sales, account management, and production.
D. account management, creative, and media.
E. creative, traffic, and financial.
A. Sales promotion agencies
91. (p. 100) _____ 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. Public relations firms
D. A public relations firm
94. (p. 101) Which specialized service would be responsible for promoting and managing the concert a client wants to hold to benefit Habit for Humanity?
A. The traffic department
B. A marketing research firm
C. An interactive agency
D. A public relations firm
E. A sales promotion agency
D. Interactive agencies
96. (p. 102) To implement BMW’s new branding campaign, the decision was made to use short digital films and to create a Web site where consumers could view the films. Which specialized service would have most likely been involved in this campaign?
A. Sales promotion agencies
B. Public relations firms
C. Creative boutiques
D. Interactive agencies
E. Direct-response agencies
E. collateral service; collateral service
98. (p. 102) National Fruit Company makes “WhiteHouse” apple juice. Market research determined that the company needed to mold its bottle so as to make it easier to grasp. Its market research would have been conducted by a(n) _____, and its packaging changes would have been done by a(n) _____.
A. specialized service; interactive agency
B. interactive agency; collateral service
C. collateral service; specialized service
D. interactive service; creative boutique
E. collateral service; collateral service
E. marketers are using numerous partners to access the special talents and expertise as needed.
102. (p. 104) A study by the Corporate Executive Board’s Advertising and Marketing Roundtable found:
A. consumers are more interested in integrated marketing communications.
B. clients prefer full service agencies over brokered advertising services.
C. situational factors are creating a promotional overlay effectively synthesizing.
D. integrated marketing communications in most organizations.
E. marketers are using numerous partners to access the special talents and expertise as needed.