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87) When a company introduces a new product under a strongly established brand name, the
length of time to reach the threshold point where advertising becomes effective is normally
longer.
Question Tag: Definition (Concept)
AACSB Category: Reflective thinking
Objective: 5-2
88) A sales-response function curve shows when diminishing returns on advertising expenditures
are present.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-2
89) A marginal analysis is used to portray how returns on additional advertising expenditures are
related to incremental increases in sales.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-2
90) A threshold effect means that an ad has been shown often enough so that the consumer will
remember the company or brand when it is time to buy the product.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-2
91) Decay effects occur when a company's advertisements have become old or boring.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-2
21
92) Advantages of an in-house advertising department include all of the following except:
A) greater expertise and talent on creating ads.
B) lower costs.
C) the message can be aligned with the brand and other company communications.
D) the CEO and upper management can work closely with the marketing team.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
93) All of the following are advantages of using an in-house advertising department except:
A) a better understanding of the product and mission of the company.
B) produce ads faster.
C) a better understanding of consumers and consumer trends.
D) greater consistency in ads because of lower turnover among the creative team.
Question Tag: Critical Thinking
AACSB Category: Reflective thinking
Objective: 5-3
94) Advertising agencies offer all of the following advantages except:
A) potentially lower costs due to efficiency.
B) better understanding of the product and how it is used by consumers.
C) greater expertise and access to top creative talent.
D) perspective of an outsider.
Question Tag: Critical Thinking
AACSB Category: Reflective thinking
Objective: 5-3
95) A boutique-type advertising agency:
A) offers a wide array of services.
B) is designed to handle smaller accounts.
C) serves in-house clients.
D) offers one or a few specialized service or works with one type of client.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
22
96) A media service company:
A) negotiates contract rates between the agency and the client.
B) negotiates pay rates for creatives and advertising performers.
C) negotiates and purchases media packages.
D) handles direct marketing efforts.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
97) Media buys are normally made by the:
A) creative.
B) account executive.
C) traffic manager.
D) media service company.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
98) If a company's managers want to use a boutique agency for developing a special contest or
sweepstakes event, who should be contacted?
A) Media service agency
B) Consumer promotion agency
C) Direct marketing agency
D) Trade promotion agency
Question Tag: Critical Thinking
AACSB Category: Application of knowledge
Objective: 5-3
99) If a company received negative press, the marketing department may hire a:
A) boutique specialty agency.
B) media service company.
C) public relations firm.
D) direct-marketing agency.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
23
100) If company leaders wanted to make sure an integrated approach is used in marketing
communications, the best approach would be to:
A) hire a full-service agency.
B) use a boutique agency.
C) use a media service company to buy media time, but do the creative with freelancers.
D) utilize different companies for each aspect of the advertising campaign.
Question Tag: Critical Thinking
AACSB Category: Reflective thinking
Objective: 5-3
101) With regard to the account size in determining whether to use an external agency or perform
the work in-house, all of the following statements are true except:
A) a small account is not usually attractive to a large agency.
B) if 75 percent of the advertising budget cannot be used to buy media time and space, it is better
to perform the work in-house.
C) if the agency charges more than 25 percent of the money to design and create the ads, then the
account is too small to use an external agency.
D) a small agency is not a viable choice, even for a small account, because the agency will lack
the necessary resources to do the work.
Question Tag: Critical Thinking
AACSB Category: Reflective thinking
Objective: 5-3
102) In terms of the 75-15-10 rule, the 75 percent represents the:
A) money spent on media time or space.
B) money spent on ad production.
C) money spent for the creative work.
D) percentage of the work that must be completed before the client can be billed.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
24
103) In terms of the 75-15-10 rule, the 15 percent represents the:
A) money spent on media time or space.
B) money spent on ad production.
C) money spent for the creative work.
D) fee for the media planner.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
104) In terms of the 75-15-10 rule, the 10 percent represents the:
A) money spent on media time or space.
B) money spent on ad production.
C) money spent for the creative work.
D) fee for the media buyer.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
105) If a company's media budget numbers are 85-10-5 and uses an external ad agency, this
means the company:
A) is spending too much money on creative work.
B) should continue using an external advertising agency.
C) should discontinue using an external agency and perform the work in-house.
D) is spending too much money on media buys.
Question Tag: Critical Thinking
AACSB Category: Analytical thinking
Objective: 5-3
106) In terms of money spent on developing an advertising campaign, a company should spend
at least what percent of the money on buying media time or space?
A) 25
B) 40
C) 50
D) 75
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
25
107) Crowdsourcing is the process of:
A) outsourcing the creative aspect of an advertisement to the public.
B) outsourcing the production aspect of an advertisement to the public.
C) outsourcing both the creative and production aspect of an advertisement to the public.
D) selecting creatives from the public domain rather than from an advertising agency.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
108) Using crowdsourcing to develop advertisements includes all of the following advantages
except:
A) creating buzz surrounding a contest or the consumer-generated ad.
B) getting consumers involved.
C) lower costs.
D) getting ideas from individuals who purchase and use the product.
Question Tag: Critical Thinking
AACSB Category: Reflective thinking
Objective: 5-3
109) One important decision in advertising management is the choice between an in-house
advertising group and an external advertising agency.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
110) Part of the reasoning for using an in-house advertising department is that internal
organizational members have a better sense of the company's mission and message.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
111) One of the advantages of an external advertising agency over an in-house marketing group
is that the external agency offers greater expertise and has access to top creative talent.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
26
112) An in-house advertising department is likely to be more objective than an external
advertising agency and also have a better understanding of consumers and trends.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
113) An external advertising agency may actually cost less than doing advertising work in-house.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
114) A media service company negotiates and purchases media packages, which are also known
as media buys.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
115) A boutique agency provides a full range of advertising services.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
116) When the majority of a company's advertising budget is spent on media buys, rather than
producing the advertisement, the marketing team should be inclined to complete the work in-
house.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
117) In terms of the 75-15-10 rule, 75 percent of the money spent on advertising should be spent
for media buys.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
27
118) In terms of the 75-15-10 rule, the 15 represents the amount of money that is spent on
producing the actual advertisement or campaign.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
119) In terms of the 75-15-10 rule, the 10 represents the amount of money that is spent on
creating or designing the ads.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
120) To be effective in terms of using an external agency, at least 75 percent of the advertising
budget should be spent on media buys.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
121) Crowdsourcing is the process of outsourcing the production aspect of an advertisement to
the public.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
122) Consumer-generated advertising works best for customers with a low level of brand loyalty.
Question Tag: Critical Thinking
AACSB Category: Reflective thinking
Objective: 5-3
28
123) Contrast the advantages of using an in-house advertising or marketing department to hiring
an external advertising agency.
Question Tag: Synthesis
AACSB Category: Reflective thinking
Objective: 5-3
124) Name and describe other types of agencies that serve client firms, besides advertising
agencies.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-3
125) The first step in selecting an advertising agency is to:
A) set goals.
B) screen an initial list of applicants.
C) request client references.
D) select the process to be used and the criteria for selection.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-4
29
126) In selecting an advertising agency, after corporate goals are set, the next step in the process
is to:
A) request a creative pitch.
B) screen an initial list of applicants.
C) request client references.
D) select the process to be used and the criteria for selection.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-4
127) In terms of selecting an advertising agency, company leaders at Atco Electronics do not
have a clear idea of what they want to accomplish and therefore disagree as to what type of
agency should be hired. This situation occurred because the company failed to:
A) develop selection criteria to be used in the ad selection process.
B) set goals before starting their search for an agency.
C) solicit client references before discussing what type of agency they want.
D) ask for a creative pitch.
Question Tag: Critical Thinking
AACSB Category: Reflective thinking
Objective: 5-4
128) All of the following are important evaluation criteria that should be considered in selecting
an advertising agency except:
A) size of the agency.
B) relevant experience of the agency.
C) governmental regulations.
D) conflicts of interest.
Question Tag: Definition (Concept)
AACSB Category: Application of knowledge
Objective: 5-4
30
