Question 1

Which of the following is the best approach to promotion budgeting?

Accepted Answer

Objective and task budgeting is the best approach as it involves setting specific promotion objectives and then determining the tasks required to achieve those objectives and the costs associated with each task. This approach ensures that promotion activities are aligned with business objectives and helps to optimize the use of promotion budget. The other budgeting approaches (percentage of sales budgeting, competitive parity budgeting, all-you-can-afford, relative scale budgeting) do not use a systematic approach and may not consider the specific objectives and tasks required for each promotion activity.

Question 2

The promotion-to-sales ratio can be used by managers to make year-to-year comparisons of their programs, to compare the effectiveness of their program with competitor's programs, or to make comparisons with

Accepted Answer

The promotion-to-sales ratio can be compared with industry averages to determine how well the company is doing in comparison to competitors. Option A is incorrect because break-even points are related to costs and volume, not promotion. Option B is incorrect because estimated return on investment is a measure of profitability, not promotion effectiveness. Option C is somewhat related, but the ratio being used is promotion-to-sales, not promotion-to-expense. Option E is incorrect because we are not comparing advertising to sales promotion ratios, but rather promotion to sales ratios.

Question 3

Which form of promotion budgeting most closely relates to the marketing concept?

Accepted Answer

Objective and task budgeting closely relates to the marketing concept because it involves setting specific goals and determining the tasks and costs necessary to achieve those goals. This approach focuses on achieving the company's marketing objectives by creating a customized budget that is tailored to the specific marketing activities needed to achieve the desired results. It is a strategic approach that ensures that resources are allocated efficiently and effectively to achieve the company's marketing goals.

Question 4

Which method of promotion budgeting would most likely be used by small businesses?

Accepted Answer

Small businesses often use the all-you-can-afford method because it allows them to allocate funds to promotion only after all other expenses are covered, minimizing financial risk.

Question 5

In which of the following situations would use of the competitive parity budget-setting method be most appropriate?

Accepted Answer

The competitive parity budget-setting method is most appropriate when two or more companies are competing with similar products and similar promotional goals. This method involves setting the promotional budget at the same level as competitors in order to maintain market share and prevent losing customers to competitors.

Question 6

Managers often use the promotion-to-sales ratio on their marketing dashboard to assess how effective the integrated marketing communications program expenditures are at generating _________.

Accepted Answer

The promotion-to-sales ratio is a measure of how effective promotional activities are at generating sales. Therefore, the correct answer is A - sales.

Question 7

Imagine you have overheard the owner of a medium-sized manufacturing company saying, "We had a good year, and I think next year will be even better.I'm going to raise this year's promotion budget to 4.5 percent of last year's gross sales.That will let me do more advertising than the 3.5 percent I budgeted last year." From this information, you know the small manufacturer used __________ budgeting.

Accepted Answer

The statement indicates that the owner of the manufacturing company is basing their promotion budget on a percentage of last year's gross sales. This is characteristic of percentage of sales budgeting, where the budget is calculated as a percentage of past or expected sales.

Question 8

In setting this sales budgeting approach (__________), the amount of money spent is based on a calculation on past or anticipated sales.

Accepted Answer

The percentage of sales approach involves setting the sales budget as a fixed percentage of past or anticipated sales. This approach is based on the assumption that the amount spent on advertising and promotion should be proportional to the level of sales expected from such spending. As such, it ensures that the budget is directly tied to revenue projections, which can provide a reasonable guideline for the amount of money that can be allocated to advertising and promotion.

Question 9

Integrated marketing communications (IMC) programs coordinate a variety of promotion alternatives to provide

Accepted Answer

Integrated marketing communications (IMC) programs aim to create a consistent message across all audiences by coordinating various promotion alternatives, such as advertising, public relations, personal selling, and sales promotion. The goal is to ensure that all aspects of the promotional mix work together to deliver a unified message to the target audience. Therefore, the appropriate choice is C, which aligns with the main purpose of an IMC program.

Question 10

All-you-can-afford-budgeting refers to

Accepted Answer

All-you-can-afford-budgeting method allocates the funds to promotion only after all other budget items are covered. This method may lead to insufficient promotion spending, but it ensures that the company's other essential expenses are met first.

Question 11

determines the promotion cost of performing these tasks, is referred to as

Accepted Answer

Objective and task method allows a company to determine the promotion cost based on the specific objectives it wants to achieve and the tasks required to achieve them. This method is considered the most logical and effective approach to determining promotion budgets.

Question 12

Competitive parity budgeting refers to

Accepted Answer

Competitive parity budgeting is a method of allocating funds to promotion by matching the competitor's absolute level of spending or the proportion per point of market share. This approach helps companies to achieve or maintain a certain level of presence or competitiveness in the marketplace.

Question 13

Allocation of funds to promotion only after all other budget items are covered is referred to as

Accepted Answer

All-you-can-afford budgeting is a budgeting method where the allocation of funds to promotion only happens after all other budget items are covered. The company spends as much as it can afford on promotion after taking care of other expenses like production, distribution, and administrative costs. This method is not the most effective because it does not prioritize promotion as an essential element of the marketing mix.

Question 14

To calculate a promotion-to-sales ratio, you would compute: Total Promotion Expenditures divided by

Accepted Answer

To calculate the promotion-to-sales ratio, we need to compare the promotion expenditure with the sales generated from the promotion. Therefore, we divide the total promotion expenditures by the total sales to get the promotion-to-sales ratio. Option A provides the correct denominator for the ratio calculation.

Question 15

Which of the following steps in the objective and task approach to promotion budgeting must be done correctly in order for any of the others to have the proper effect?

Accepted Answer

Identifying appropriate objectives is the first step in the objective and task approach to promotion budgeting. Without properly identifying objectives, accurate cost estimation, task allocation, and budgeting cannot be performed effectively.

Question 16

The best approach to budgeting is objective and task budgeting, whereby the company determines its promotion objectives, outlines the tasks to accomplish those objectives, and

Accepted Answer

Objective and task budgeting involves determining the promotion cost of performing specific tasks to accomplish promotional objectives. This approach ensures that the budget directly aligns with the desired outcomes and avoids overspending or underspending. Therefore, the correct answer is C, which suggests determining the promotion cost of performing those tasks.

Question 17

Allocating funds to promotion by matching the competitor's absolute level of spending or the proportion per point of market share is referred to as _________.

Accepted Answer

Competitive parity involves matching the competitor's level of spending on promotion, either in absolute terms or as a proportion per point of market share. This approach is based on the assumption that the competitor's spending reflects a reasonable allocation of resources to achieve its marketing objectives. Therefore, choosing competitive parity ensures that the company is not overspending or underspending on promotion compared to its competitors, which helps to maintain a relative competitive standing in the market.

Question 18

A marketing manager at General Motors computed the promotion-to-sales ratio for GM, for Ford, and for the industry.She found that GM's ratio was 2.6%, Ford's was 3.2% and the industry average was 2.7%.She then realized

Accepted Answer

The answer of A marketing manager at General Motors computed...

Question 19

The best way to assess the effectiveness of all promotion expenditures during the past year is to compute a _________.

Accepted Answer

The answer of The best way to assess the effectiveness...

Question 20

Imagine a small retailer saying, "Well, after budgeting for all of our expenses for next year, we still have about $7500 remaining for emergencies.Let's budget 20 percent of that amount for advertising." What budgeting technique is the small retailer using?

Accepted Answer

The retailer is using the all-you-can-afford budgeting technique, where they allocate funds for advertising based on what is left over after covering all other expenses.

Quiz 15: Integrated Marketing Communications and Direct Marketing