Deck 3: The Business of Advertising

Question 1

One of the ways to organize a centralized advertising department is by the sub-function of advertising.

Answer 1

True

Question 2

Local newspapers typically charge all advertisers the same commission-no matter what the size of the company.

Answer 2

False

Question 3

One of the primary purposes of co-op advertising is to build the manufacturer's brand image.

Answer 3

True

Question 4

International media that serve several countries are limited to newspapers and magazines.

Question 5

One of the distinct groups in the advertising business is the suppliers who act as the communications vehicles paid to present an advertisement to their target audience.

Question 6

Creative boutiques work for advertisers and occasionally subcontract to ad agencies.

Question 7

The retainer method of pricing the services of an ad agency is also called the negotiated commission method.

Question 8

In a decentralized advertising system, the company sets up separate ad departments for different divisions, subsidiaries, regions, brands, or other categories that suit the company's needs.

Question 9

The account planner defends the consumer's point of view and the creative strategy in the debate between the agency's creative team and the client.

Question 10

One of the primary differences between national and local advertisers is that national advertisers plan strategically and local advertisers think tactically.

Question 11

Institutional advertising is primarily used to locate and recruit new employees.

Question 12

Effective advertising copy should contain all the information intended to be communicated in a few pertinent, succinct points.

Question 13

Multinational companies that use a customized approach to marketing and advertising in all countries are considered global marketers.

Question 14

The traffic department coordinates all phases of production and makes sure everything is completed before deadlines.

Question 15

Local advertising is sometimes called cooperative advertising.

Question 16

Dissatisfaction with agency conduct is the most commonly cited reason for agency switches.

Question 17

Advertising agencies work for the media.

Question 18

Some of the nonadvertising services performed by full-service agencies are performing research, selecting media, designing packages and producing sales promotions.

Question 19

Most agencies prefer giving a speculative presentation to potential clients than highlighting past accomplishments because speculative presentations are quick and inexpensive.

Question 20

The basic principles of advertising are the same for both local and national advertising.

Question 21

Which of the following is a function of cooperative advertising?

A) Utilizing social media marketing
B) Ensuring that franchisees advertise
C) Building the manufacturer's brand image
D) Lowering the manufacturer's variable costs
E) Reducing dependence on institutional advertising

Question 22

Surveys indicate that most local businesses take full advantage of the benefits of social media, like Twitter and Facebook and employ individuals whose function is to manage social media marketing.

Question 23

Ford, GE, and McDonald's are global advertisers that use a standardized approach to marketing and advertising in all countries.

Question 24

Local advertisers and national advertisers most likely differ in terms of:

A) autonomy.
B) ad penetration.
C) available resources.
D) advertising vehicles.
E) consumer credibility.

Question 25

Helen Jackson operates a retail store that specializes in children's clothing in a local strip mall. She faces many promotional and advertising decisions on a daily basis, such as what kind of a sale she should conduct after Christmas, for how many days the sale should be held, and what kind of items should be placed on sale. Jackson's advertising focus is on _____ because of its short-term nature.

A) strategy
B) tactics
C) narrowcasting
D) broadcasting
E) relationships

Question 26

Which of the following statements about local advertising is most likely true?

A) Retail advertising is always local.
B) There are only two categories of local advertisers.
C) Local advertising refers to advertising done by stores like PetSmart and Target.
D) Local advertising is critical because most consumer sales are made or lost locally.
E) Ninety percent of the money advertisers spend each year is spent on local advertising.

Question 27

An advertising agency that earns more money if an ad campaign attains specific, agreed-upon goals is most likely being compensated through an incentive system.

Question 28

Advertising is organized around four distinct groups. Which group includes the photographers, the illustrators, video production houses, and digital service bureaus?

A) Encoders
B) Clients
C) Agencies
D) Suppliers
E) Creators

Question 29

Pathmark Stores Inc. operates 142 supermarkets in the New York-New Jersey and Philadelphia metropolitan areas. Pathmark Stores only advertises in those states where it has stores. The form of advertising that best describes Pathmark's approach to advertising is:

A) institutional.
B) adjacency.
C) regional.
D) national.
E) local.

Question 30

Advertisers use _____ advertising in the newspaper to locate and recruit new employees, to offer services, or to sell or lease new and used merchandise.

A) classified
B) product
C) generic
D) relationship
E) media

Question 31

When the Ace Hardware Store located in Franklin, Tennessee, mails an advertising flyer to all the residents in the community, it is an example of _____ advertising.

A) local
B) institutional
C) interactive
D) interregional
E) dealer

Question 32

Which of the following is an example of product advertising?

A) An ad for Circuit City explaining how to help the environment by recycling printer cartridges
B) An ad for American Express explaining how important small businesses are to national economic health
C) An ad for Toyota announcing that new car buyers can receive $3,000 off any new model
D) An ad announcing GE provides appliances for homes built by Habitat for Humanity
E) An ad for Avon cosmetics announcing that it will donate $100,000 to breast cancer research

Question 33

Which of the following is an example of institutional advertising?

A) A magazine ad containing recipes using Swanson's chicken broth
B) An ad announcing a furniture sale at Macy's department store
C) An ad sponsored by Avon promoting breast cancer prevention
D) A radio ad for Linda's Mexican Restaurant
E) A coupon for a box of Pampers diapers

Question 34

Toys 'R' Us has divided its advertising department into two sections: Toys 'R' Us United States and Toys 'R' Us International. Toys 'R' Us International is further divided into individual overseas locations including Italy, Germany, France, Hong Kong, Singapore, and Canada. Given these facts, it would appear that the Toys 'R' Us ad department is organized by:

A) product.
B) brand.
C) end user.
D) media.
E) geography.

Question 35

In-house advertising agencies typically attract the best creative people, who prefer the stability of such settings and the lack of internal politics and managerial criticism.

Question 36

Tex-Oil runs commercials asking consumers how they would improve and preserve the natural environment. After each individual's responses, an announcer explains how Tex-Oil protects the environment. These commercials are examples of _____ advertising.

A) organizational
B) generic
C) product
D) institutional
E) agency

Question 37

_____ advertising attempts to create a favorable long-term perception of the business as a whole, not just of a particular good or service.

A) Institutional
B) Interactive
C) Organizational
D) Product
E) Relationship

Question 38

Many small and lesser-known agencies solicit new business by making cold calls, writing letters, and participating in advertising competitions.

Question 39

Hudson Pool and Spa, owned by Jill and Joel Hudson, sells and installs above-ground swimming pools and Beachcomber brand hot tubs. The manufacturer of the Beachcomber hot tub has sent the Hudsons a letter in which it offers to pay 50 percent of the advertising cost if the Hudsons will run a newspaper ad featuring the Beachcomber hot tubs. What type of advertising is the Beachcomber manufacturer suggesting they use?

A) Cooperative advertising
B) Horizontal advertising
C) Vertical advertising
D) A franchise promotion
E) A strategic promotion

Question 40

Retailers like The Home Depot use television, catalogs, the Internet, and magazines to transmit advertising messages to consumers. Which term refers to this advertising group?

A) Clients
B) Media
C) Suppliers
D) Creative boutiques
E) Communication networks

Question 41

Account executives are:

A) brokers of advertising services to small firms.
B) the liaisons between the agency and the client.
C) typically employed by nonprofit organizations.
D) agents that handle multiple, noncompeting accounts.
E) the sole media buyers at most in-house advertising agencies.

Question 42

One of the advantages that a company has when it uses a decentralized advertising department is:

A) a highly compact structure.
B) consolidated expenditures.
C) exceptional communication.
D) increased divisional flexibility.
E) a narrower span of management.

Question 43

As defined by the American Association of Advertising Agencies, the _____ is an independent organization of creative people and business people that specialize in developing and preparing advertising plans, advertising, and other promotional tools.

A) creative boutique
B) promotional facilitator
C) facilitating intermediary
D) advertising agency
E) advertising supplier

Question 44

At one time Parker Pens were advertised in 30 different countries with 30 different ad themes in 30 different languages. At that time, Parker Pens would have been a user of:

A) viral marketing.
B) foreign media.
C) global advertising.
D) standardized advertising.
E) international media.

Question 45

Which of the following statements is most likely true about account planning?

A) It is a method used to benchmark competitors' promotions.
B) It bridges the gap between management and creatives.
C) It rarely involves conducting consumer research.
D) It restructures an advertiser to improve its image.
E) It is a service provided by B2B creative boutiques.

Question 46

General consumer agencies:

A) provide advertising primarily for trade publications.
B) concentrate on institutional advertising accounts.
C) represent the widest variety of accounts.
D) are not paid on a commission basis.
E) do not operate internationally.

Question 47

Organizations that use a standardized approach to marketing and advertising in all countries in which they do business are called:

A) foreign marketers.
B) multinational corporations.
C) global marketers.
D) international exporters.
E) transnational corporations.

Question 48

A(n) _____ is an organization of talented artists who work for advertisers and occasionally subcontract to advertising agencies. Its mission is to develop exciting creative concepts and to produce fresh, distinctive advertising messages.

A) promotional facilitator
B) interactive agency
C) entrepreneurial agency
D) creative boutique
E) IMC agency

Question 49

Flex Co. manufactures rivets used on heavily loaded conveyor belts which carry ore in underground and surface mining operations. Flex would most likely hire a(n) _____ agency to create the company's advertising.

A) general consumer
B) intermediary
C) institutional
D) noncommissioned
E) business-to-business

Question 50

What is the most likely advantage of using an independent advertising agency instead of an in-house agency?

A) Reduced overhead
B) Organizational vision
C) Distribution control
D) Greater experience
E) Lower commissions

Question 51

Interactive agencies:

A) use customer relationship marketing to work with customers.
B) create ads for nontraditional media like shopping carts.
C) design Web pages and ads for the Internet.
D) purchase media time and space in bulk.
E) facilitate refunds and rebate offers.

Question 52

Western International Inc. purchases unsold television and radio media and resells the time and space to advertisers and agencies. Western International is most likely a(n):

A) entrepreneurial agency.
B) promotional facilitator.
C) creative boutique.
D) media-buying service.
E) promotional broker.

Question 53

An advertiser who uses international media most likely:

A) uses the same ad in several countries.
B) relies on an in-house advertising group.
C) has a highly decentralized advertising department.
D) develops a different ad for the local media of each country.
E) typically produces its ads in the language of each country in which it advertises.

Question 54

A company that uses a(n) _____ system sets up separate ad departments for different divisions, subsidiaries, regions, brands, or other categories that suit the company's needs.

A) centralized
B) pyramid-based
C) organizational
D) decentralized
E) managerial

Question 55

_____ must have the skill to condense all that can be said about a product into a few salient and pertinent points.

A) Account directors
B) Advertising supervisors
C) Copywriters
D) Communication specialists
E) Advertising planners

Question 56

DDB Needham, one of the world's largest ad agencies, formed a company with director Spike Lee called Spike DDB. The purpose of the new company was to develop ways to tap into urban trends and to increase minorities' use of its client's brands. The company relied on the creative abilities of director Spike Lee to produce fresh, distinctive advertising messages. Spike DDB would be categorized as a(n):

A) promotional facilitator.
B) interactive agency.
C) entrepreneurial agency.
D) creative boutique.
E) IMC agency.

Question 57

A manufacturer of _____ would be most likely to use a business-to-business agency.

A) greeting cards
B) X-ray machines
C) personal laptops
D) designer apparel
E) monogrammed towels

Question 58

A full-service advertising agency:

A) supplies both advertising and nonadvertising services in all areas of communications and promotion.
B) is unlikely to produce annual reports, trade show exhibits, or sales-training material.
C) is normally classified as generic, specialist, or entrepreneurial.
D) works on a contractual basis and does not accept commissions.
E) focuses on local and regional advertising needs.

Question 59

The modern _____ advertising agency supplies both advertising and nonadvertising services in all areas of communications and promotion for its clients.

A) entrepreneurial
B) institutional
C) organizational
D) full-service
E) multi-tasking

Question 60

Ericsson, an international telecommunications supplier, manufactures radio communication systems, defense systems, components, and cable and network television systems. If a media representative wants to sell ad space to the company, he or she must meet with representatives from each of the product lines. Ericsson's ad department is organized by:

A) product.
B) service.
C) end user.
D) media.
E) geography.

Question 61

Research is closely allied to advertising and an important tool for marketing professionals. Most firms do not maintain a fully staffed research department. Instead, they use independent:

A) Web data agencies.
B) research production houses.
C) research suppliers.
D) research intermediaries.
E) data boutiques.

Question 62

Which of the following creates online ads?

A) Production houses
B) Art houses
C) Internet boutiques
D) Art agencies
E) Web design houses

Question 63

Which of the following statements about the speculative presentation is most likely true?

A) Agencies often ask prospective customers if they would like to see a speculative presentation.
B) The speculative presentation is the preferred method among small firms for acquiring new clients.
C) Speculative presentations involve showing what the agency intends to do for the client.
D) In-house agencies are frequently asked to develop speculative presentations.
E) Speculative presentations are required under AAAA guidelines.

Question 64

As few agencies have the capability to produce television ads in-house, most rely on independent:

A) production houses.
B) ad intermediaries.
C) art agencies.
D) Internet boutiques.
E) art studios.

Question 65

What is the most critical factor in the agency-client relationship?

A) The competitive relationship between the in-house and the outside agencies
B) The level and type of communication between the client and the agency
C) The ethical conduct and history of the advertising agency
D) The dynamic nature of the environment in which the client operates
E) The personal chemistry between the client's employees and the agency's staff

Question 66

If the Tomlinson Inc., an ad agency, were to buy an ad in Western Horseman magazine for the manufacturer of Reins saddles, the ad would cost $3,000. How much money would the advertising agency bill the saddle manufacturer?

A) $2,250
B) $2,850
C) $3,000
D) $3,150
E) $3,750

Question 67

What is probably the greatest disadvantage associated with in-house ad agencies?

A) Loss of revenues
B) Adherence to the organizational mission
C) Reluctant acknowledgement by the mass media
D) Loss of objectivity
E) Staff-line relationships

Question 68

JWT Co., an ad agency, has designed a quarter-page magazine ad for Promise vegetable-oil spray. The job required the services of a photographer to produce photographs of various foods that will "taste better with Promise." The invoice for the artwork from the photographer was for $200. If JWT uses the traditional markup, how much did the advertising agency bill Promise vegetable-oil spray company?

A) $170
B) $200
C) $230
D) $235
E) $250

Question 69

In the advertising agency business, _____ are people and organizations that provide specialized services.

A) ad distributors
B) media agencies
C) advertising brokers
D) suppliers
E) ad intermediaries

Question 70

Some advertisers ask for or imply that they want to see what the agency will do before they sign on. The agencies thus must create a:

A) speculative presentation.
B) provisional showing.
C) portfolio of previous campaigns.
D) summarized storyboard.
E) three-dimensional advertising plan.

Question 71

An ad agency's traffic department:

A) makes sure there is no unplanned replication of the advertising effort.
B) maintains the agency's position as a facilitating intermediary.
C) develops the client's channel of distribution.
D) coordinates all phases of ad production.
E) negotiates long-term media deals.

Question 72

A large advertising agency that is divided into a number of "little" agencies is most likely structured according to:

A) industry.
B) the group system.
C) media availability.
D) the departmental system.
E) geographical location.

Question 73

Which of the following is a current trend in advertising?

A) An increased use of commissions by large advertisers
B) The creation of small specialty advertising agencies
C) A decline in the use of integrated marketing communications
D) An increase in the importance of traditional media
E) The decrease of audience empowerment

Question 74

The primary reason that some advertisers set up a wholly owned in-house ad agency is to:

A) attract the best photographers and graphic artists.
B) save money and tighten control over their advertising.
C) stimulate external creative efforts on the part of the marketing staff.
D) meet the challenges of mass media with respect to creative incentives.
E) utilize inexpensive social media tools in their online advertising efforts.

Question 75

_____ supply agencies with artwork and illustrations for advertisements.

A) Ad intermediaries
B) Art studios
C) Art agencies
D) Production houses
E) Art directors

Question 76

An ad for Calvin Klein's Eternity fragrance for men and women contains a black-and-white full-size photograph of an attractive, young couple in a romantic embrace. Who is in charge of the photograph portion of the ad, its placement on the page, and the location and appearance of the product in the ad?

A) Ad illustrator
B) Advertising planner
C) Media specialist
D) Art director
E) Communication specialist

Question 77

In advertising, a retainer is:

A) the same as a straight fee.
B) a commission that is paid on a monthly rate.
C) a form of markup paid by nonprofit organizations.
D) the cost for reserving TV and radio time.
E) a commission paid to media-buying services.

Question 78

When the advertising agency of Lopez and White purchased several hours of television time for its customers' commercials from KLOX-TV, the agency received 15 percent of the gross amount charged by the station. The 15 percent is known as a(n):

A) spiff.
B) retainer.
C) markup.
D) slotting allowance.
E) media commission.

Question 79

An agency that earns a _____ charges a basic monthly fee for all of its services to the client and retains any media commissions earned.

A) retainer
B) salary-plus-commission
C) media markup
D) fee-commission combination
E) negotiated fee

Question 80

The most commonly cited reason for changing agencies is:

A) internal environmental changes.
B) poor communication.
C) the loss of subjectivity.
D) dissatisfaction with agency conduct.
E) a static competitive environment in the agency.