Deck 3: Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations

Question 1

______ is the functional area or department in an organization most likely to be involved in the promotional planning process.

A)Accounting
B)Media relations
C)Corporate affairs
D)Finance
E)Marketing

Answer 1

E

Question 2

From the perspective of a promotional planner,the primary purpose of most media is to:

A)entertain consumers
B)inform consumers
C)provide a way of reaching consumers with the company's marketing communications message
D)help the company understand the marketplace
E)do all of the above

Answer 2

C

Question 3

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 for the brand managers
C)conduct marketing research
D)develop sales programs
E)do none of the above

Answer 3

B

Question 4

Under a centralized organizational arrangement,which of the following is NOT a responsibility of the advertising manager?

A)budgeting
B)coordinating the creation and production of ads
C)planning the media schedule
D)administering sales promotion programs
E)sales and sales management

Question 5

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

Question 6

The ______ primary function is to provide information or entertainment to an audience.

A)client's
B)advertising agency's
C)media's
D)customer's
E)advertiser's

Question 7

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

Question 8

_____ are NOT one of the major participants in the integrated marketing communications process.

A)Advertising agencies
B)Advertisers or clients
C)Media organizations
D)Public relations firms
E)New-product development firms

Question 9

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

Question 10

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

Question 11

A brand manager in a decentralized marketing system has responsibilities for ______ for his or her brand.

A)planning of the marketing program
B)developing and coordinating the budget
C)tracking profit performance
D)implementing and controlling the marketing program
E)doing all of the above

Question 12

_____ include difficulty with coordination and less understanding of the marketing goals for individual products or brands.

A)decentralized marketing system
B)in-house agency
C)centralized marketing system
D)brand management system
E)creative boutique

Question 13

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
C)purchaser of the consumer product advertised
D)market for consumer products
E)advertising agency

Question 14

The _____ 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

Question 15

The opening vignette "Nike Wants More than Great Ads" shows

A)compelling ads are the key to marketing success
B)marketers are using less traditional and more digital advertising
C)efforts to maximize television advertising reach offers increased full service consumer satisfaction
D)celebrity spokespeople are critical to institutional success
E)integrated marketing communications is being replaced by Internet marketing communications See opening vignette.

Question 16

Nike and many other marketers are finding that as the media landscape becomes more fragmented and the number of integrated marketing communication options increases:

A)traditional advertising outlets are becoming more important
B)public relations is being replaced with infomercials
C)it is becoming more difficult to reach consumers
D)advertising agencies are colluding to prevent the loss of key clients
E)Internet-based sponsorships are offsetting media fragmentation See opening vignette.

Question 17

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

Question 18

Which of the following statements about the role of top management in the advertising and promotion decision making process is true?

A)Top management is usually very involved in the day-to-day decision making and operations of advertising and promotion.
B)Top management never has any input into the advertising and promotion process.
C)Top management is usually interested in how the advertising program represents the organization even though this is not an area in which it has much involvement.
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.

Question 19

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

Question 20

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 mangers 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.

Question 21

____ are the amounts of money agencies spend on media purchases and other equivalent activities.

A)Billings
B)Media commissions
C)Retainers
D)Activity fees
E)Traffic compensation

Question 22

The agency person who is the focal point of the agency-client relationship is the:

A)media buyer
B)product manager
C)copywriter
D)brand manager
E)account executive

Question 23

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)all of the above

Question 24

All of the following are advantages of in-house agencies EXCEPT:

A)more objectivity
B)cost savings
C)increased coordination
D)more overall control
E)easy access to pertinent personnel

Question 25

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

Question 26

An ad agency that offers its clients a complete range of marketing,communication,and promotion services is known as a:

A)creative boutique
B)media buying service
C)in-house agency
D)full-service agency
E)integrated marketing organization

Question 27

Account planning has become a very important and demanding function in many agencies as:

A)public relations replaces advertising for achieving global integrated marketing communications
B)budgeting services reduces the redundancy associated with on-task account planning
C)marketing research expands the creative capacity of ad agencies
D)the number of marketing communication channels and ways of contacting customers increases
E)all of the above have increased the importance and demands upon account planners

Question 28

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)better understand how advertising works
D)win advertising awards that will enhance the image of their brands
E)do all of the above

Question 29

The communications link between the ad agency and its clients is:

A)account services
B)marketing services
C)the media
D)creative services
E)the sales promotions department

Question 30

Which of the following statements about advertising agencies is true?

A)Agencies must be used since companies do not have the capabilities of developing their own advertising.
B)Agencies are often used because of the skill,expertise,and experience they can offer in the advertising area.
C)Most large,national advertisers use in-house agencies.
D)Most large agencies offer only creative services to their clients.
E)Most large advertisers are totally content with the current commission system of compensation.

Question 31

A full-service agency offers its clients:

A)account services
B)research
C)creative development
D)public relations expertise
E)all of the above

Question 32

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.

Question 33

In the mid-1990s,a number of mid-sized ad agencies formed alliances with larger agencies:

A)to save money
B)to offer greater media buying capabilities
C)because clients want agencies with integrated marketing communications capabilities worldwide
D)so they can specialize in a particular area of integrated marketing communications
E)all of the above

Question 34

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)traffic coordinator

Question 35

Superagencies were formed:

A)because advertisers were disenchanted with large agencies
B)because advertisers wanted agencies were more flexible and responsive
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

Question 36

Which of the following statements explains why an organization would want to use an outside advertising agency?

A)An outside advertising agency saves money for the client.
B)An outside advertising agency helps the client gain more prestige and a better image.
C)An outside advertising agency has media experts.
D)An outside advertising agency provides research expertise.
E)An outside advertising agency provides the client with the services of highly skilled individuals who are experts in a number of areas including creative,media,and research.

Question 37

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)All of the above are equally likely to provide assistance in all areas.

Question 38

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 full-service system
E)as a self-sufficient agency

Question 39

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,fresh look at its advertising situation by someone outside the company who can come up with different creative ideas
D)make coordination of the advertising and promotional process easier
E)do all of the above

Question 40

The function of gathering,analyzing and interpreting information that will be useful in developing advertising is the responsibility of the agency's _____ department.

A)production
B)traffic
C)media
D)account management
E)research

Question 41

Which department within an advertising agency would assume the responsibility for hiring outside persons such as printers,engravers,photographers,or other vendors to turn a layout into a finished product?

A)media department
B)art department
C)copywriters
D)traffic department
E)production department

Question 42

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

Question 43

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)can 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)are accurately described by all of the above

Question 44

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 buying services
E)media boutiques

Question 45

IMC Perspective 3-2 "The Changing Role of Account Reps" suggests:

A)advertising is a better career choice than accounting
B)accounts reps are becoming increasingly important in integrated marketing communications
C)clients want account executives to be able to do more things and work across a variety of areas
D)the biggest ad agencies provide the best opportunities for young advertising majors
E)all of the above See IMC Perspective

Question 46

The traditional method of compensating ad agencies is with:

A)the commission system
B)hourly billings
C)the fee system
D)the straight salary method
E)the objective-and-task compensation system

Question 47

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

Question 48

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 system
B)group system
C)matrix system
D)boutique system
E)dedicated system

Question 49

_____ structure.

A)group system
B)departmental system
C)creative boutique
D)in-house
E)decentralized

Question 50

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

Question 51

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

Question 52

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

Question 53

Which of the following statements about the role of ad agency media departments is true?

A)Many large advertisers use media departments in a variety of different agencies to purchase media time and space.
B)A media department's ability to negotiate prices and make effective use of the vast array of media options has become very important.
C)The media department of an ad agency reviews information on demographics,magazine and newspaper readership,radio listenership,and consumers' television viewing habits.
D)Many large advertisers are consolidating their media buying with one or a few agencies' media departments to save money and improve media efficiency.
E)All of the above statements about the role of ad agency media departments are true.

Question 54

An advertising agency might use a group system organizational structure to:

A)allow agency personnel to become very knowledgeable about a particular client's market and business
B)ensure continuity in servicing a particular account
C)provide better service to a key account
D)create a long-term relationship with its clients
E)do all of the above

Question 55

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)The media department of an ad agency reviews information on demographics,magazine and newspaper readership,radio listenership,and consumers' television viewing habits.
D)Consolidating media buying is not cost effective and may reduce media efficiency.
E)All of the above statements about the role of ad agency media departments are true.

Question 56

_____ are the individuals who conceive the ideas for the ads and write the advertising message.

A)Copywriters
B)Art directors
C)Traffic coordinators
D)Account executives
E)Media planners

Question 57

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.

Question 58

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

Question 59

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

Question 60

_____ 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

Question 61

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 save money on advertising
D)to encourage its agencies to look beyond traditional mass media advertising and develop other ways of reaching consumers
E)to accomplish all of the above objectives

Question 62

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.
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)All of the above statements about changes in the way ad agencies are being compensated are true.

Question 63

Which of the following would be a valid reason for a company to switch advertising agencies?

A)dissatisfaction over the quality of the advertising produced by the agency
B)conflicts over compensation policies
C)a change in the company's marketing strategy
D)a stagnation or decline in sales of the product
E)all of the above

Question 64

Why are negotiated commission structures becoming more common?

A)to keep from paying the traditional 25 percent commission system
B)to ensure that agencies do not make too much money
C)to consider the needs of clients as well as the amount of time and effort the agency spends on an account
D)to encourage agencies to cut back on buying network TV for their clients
E)to support the creation of a transactional relationship between agency and client

Question 65

_____ compensation system.

A)fee arrangement
B)media commission
C)incentive-based
D)fee-combination
E)cost-plus

Question 66

______ 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 media commissions against this monthly rate.

A)fixed fee
B)negotiated commission
C)cost-plus agreement
D)incentive-based compensation
E)fee-commission combination

Question 67

_____ compensation system.

A)fixed-fee
B)mediated
C)incentive-based
D)cost-plus system
E)fee-commission

Question 68

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

Question 69

Percentage charges on market research,artwork,printing photography,and other services agencies purchase for their clients:

A)are reasonable since suppliers of these services do not offer commissions to agencies
B)are markups on costs
C)allow an agency to cover its administrative costs for acquiring and handling these services and make a reasonable profit
D)usually range from 17.65 to 20 percent
E)are accurately described by all of the above

Question 70

Which of the following is NOT a valid criticism of the commission compensation system as it is currently used to compensate ad agencies?

A)It is difficult to administer.
B)Media costs have risen more rapidly than inflation.
C)There is an incentive to avoid noncommissionable media.
D)Media costs do not relate directly to effort or expertise expended by agencies.
E)It keeps the emphasis in agency competition on nonprice factors.

Question 71

What form of compensation is used to pay the advertising agency when the client's advertising program does not involve a large amount of media billings?

A)a 15 percent commission
B)a negotiated fee
C)a rebate from the media
D)a share of the profits
E)a 17.65 percent mark up on costs

Question 72

Ad agencies lose clients due to:

A)personality conflicts
B)unrealistic demands by clients
C)changes in the size of the client or agency
D)personnel changes
E)all of the above

Question 73

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

Question 74

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

Question 75

A client's evaluation of its advertising agency's performance should take into account:

A)financial considerations,such as how the agency conducts its business
B)qualitative considerations,such as the quality of the agency's efforts in creative,media,etc.
C)performance of account representatives
D)market performance measures,such as sales and market share
E)all of the above

Question 76

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

Question 77

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

Question 78

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

Question 79

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

Question 80

Which of the following statements about agency commissions is true?

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.