Chapter 2 – The Promotion Industry
TRUE/FALSE
1. While many facets of advertising have undergone a great deal of change since the early days of
advertising, the goal of the industry has remained constant.
2. The lifting of federal “cross–ownership” restrictions has caused a consolidation of media options.
3. Marketers are looking to the full complement of promotional opportunities in sales promotions, event
sponsorships, new media options, and public relations instead of traditional advertising efforts.
4. Media clutter, once a major problem of the mass media, has intensified as a barrier to quality
advertising messages because of the introduction of new technologies and their contribution to an
increased number of messages.
5. While the amount spent on advertising across the world has increased, it has actually decreased in the
United States.
6. Different types of marketers each use advertising somewhat differently, depending on how big their
budgets are.
7. Advertising by social organizations at the national level is common but not at state and local levels.
8. In-house advertising agencies have the advantage of maintaining objectivity about the brand while
essentially keeping commissions that might have gone to an external agency.
9. Calvin Klein, and Revlon have developed their own in-house agencies because of economic reasons,
and the fact that their in house agencies have brand specific control over and knowledge of their own
marketing activities.
10. Cramer-Kasselt advertising is a mid-sized advertising agency that has a select list of relatively smaller
budget clients including Air-Tran and Bombardier ATVs. The company is nevertheless considered a
“full service” agency because it provides a wide array of promotional services.
11. Interactive agencies help advertisers prepare communications for new media on the world wide web.
12. DeeAnne Watson ensures that research is part of each creative development decision; she is a media
planner.
13. A fee system is much like that used by consultants or attorneys, whereby the advertiser and the agency
agree on a fixed percentage of the media spending amount.
14. Direct marketing agencies and database agencies (sometimes also called direct response agencies)
provide a variety of direct marketing services and maintain and manage large websites as one of their
services.
15. While playing golf, Tom sees a billboard on the adjoining highway for McDonald’s. This is an
example of interactive advertising because Tom responds by having lunch at the Golden Arches.
MULTIPLE CHOICE
1. Which one of the following is not a trend affecting the advertising industry?
a.
Media proliferation and consolidation.
b.
A return to strict 25% commission compensation for advertising agencies.
c.
The undoing of Agency Consolidation and Globalization.
d.
Media evolution and clutter.
OBJ: 2-1
2. Advertisers are shifting some money away from traditional media because they are
a.
interested in consolidating via digital media.
b.
looking to a broader range of promotional tools.
c.
unconvinced in the strengths of promotional tools.
d.
struggling to recover from a depressed economy.
3. O’Reilly Media coined the phrase Web 2.0 to refer to a second generation of Web users and services
that emphasize
a.
online downloads
c.
online collaboration
b.
online privacy
d.
online isolation
4. Today, expenditures worldwide on all forms of promotion exceed:
a.
$25 billion
c.
$200 billion
b.
$50 billion
d.
$1 trillion
5. When one considers the largest manufacturing organizations in the United States, it is clear that they
all have one thing in common. They all
a.
use advertising better than small manufacturers.
b.
are the most prominent users of promotion.
c.
engage in international advertising.
d.
are resellers of products.
6. The United States federal government spends more than $2 billion in IMC expenses. Most of that
money is spent in two areas. Those areas are
a.
social issue advertising and armed forces recruitment.
b.
campaign advertising and armed forces recruitment.
c.
social issue advertising and political campaign advertising.
d.
lottery advertising and armed forces recruitment.
7. The most visible reseller advertisers are:
a.
wholesalers like Simpatico Foods, Inc.
b.
industrial organizations
c.
transportation companies like DHL and Southern Pacific Railroad
d.
retailers that sell in national or global markets like Sears, The Limited and McDonald’s
8. Event sponsorships can be targeted to household consumers or trade markets. The type of agency that
specializes in this form of advertising is called:
a.
An advertising research firm
b.
A client
c.
An event-planning agency
d.
An accounting firm, specializing in the account
9. A regional fast food chain, Chopsticks, features rice bowls as a mainline product and is interested in
expanding into a new market. What type of firm might conduct the research needed to expand into the
new market?
a.
the advertiser because they know the product best
b.
an advertising agency because it is imaginative
c.
an external facilitator like a marketing or advertising research firm
d.
media organizations because they have large datasets available
10. The Seaside Resort & Hospitality Company wants to purchase land and construct a resort hotel on the
shorefront in San Clemente, California next to the Nixon retreat. However, the resort company would
also like to construct a golf course on the property as well and needs help with local political
relationships to accomplish this. The company might hire which of the following to assist in the
project?
a.
A creative boutique
c.
A sports marketing company.
b.
A consultant.
d.
A wholesale company.
11. There are many types of external facilitators in the advertising community. ____ help advertisers help
advertisers prepare communications for new media.
a.
Production facilitators
c.
advertising research firms
b.
Communication organizations
d.
interactive agencies
12. Which of the following is considered to be an element of interactive media?
a.
kiosks
c.
satellite radio
b.
directories
d.
cable television
13. A(n) ____ agency is often referred to as the advertising department within a firm.
a.
in-house
c.
media-buying
b.
interactive
d.
creative boutique
14. The person in an advertising agency who will work with the client in translating cultural and consumer
values into advertising messages is the
a.
account executive.
c.
media services director.
b.
director of production.
d.
administrative executive.
15. ____ is responsible for coming up with the concepts that express the benefits of a brand to a target
audience.
a.
The research department
c.
Account services
b.
Creative and production services
d.
The direct-marketing department
16. One method of agency compensation has been accused of encouraging advertising agencies to
recommend the most costly media vehicles available. This method is
a.
the fee system.
c.
the retainer system.
b.
the markup charge system.
d.
the commission system.
17. When an ad agency uses a compensation system much like that used by consultants or attorneys to bill
clients, it is using
a.
a commission system.
c.
a fee system.
b.
markup charges.
d.
a media commission system.
18. Dooley, Fishback and Waller advertising agency sets an hourly rate for its services. The rate is based
on the average salary of all the members of a particular department. This is an example of
a.
the fee system.
c.
the markup charge system.
b.
the fixed-fee system.
d.
the commission system.
19. Recently, advertising agencies have developed compensation programs that are based upon
achievement of specific objectives for the client. These programs are known as ____ compensation.
a.
fee-based
c.
commission
b.
pay-for-results
d.
markup
20. Van Poolen and Associates has been a successful mid-sized, full-service advertising agency for more
than two decades. In an attempt to serve its clients more efficiently in a competitive marketplace, the
agency has changed its compensation package to include payment based on results. If the client agrees,
what results must Van Poolen and Associates not agree to?
a.
Increasing brand awareness
b.
Generating sales increases versus previous year
c.
Changing target consumer attitude toward brand
d.
Flex-pay following in-market performance measures
21. Which of the following is an external facilitator?
a.
public relations firm.
b.
direct marketing firm.
c.
marketing research provider
d.
Internet web provider.
e.
sales promotion agency.
22. Which of the following is a promotion agency available to advertisers?
a.
Direct marketing and database agency
c.
Event planning agency
b.
An e-commerce agency
d.
All of these
23. Media organizations are essential to IMC because
a.
link promoters and advertisers to consumers
b.
they assist in creating and executing promotions
c.
they are often consolidated in conglomerates
d.
they offer both traditional and new media
24. Traditional media include all of the following except:
a.
television
c.
magazines
b.
websites
d.
radio
25. Which of the following is true of organizations whose audiences are primarily non-consumer business
and government audiences?
a.
They only use personal selling to further their business goals
b.
Few rely on public relations to maintain their brand images
c.
Many engage in IMC and use the full variety of IMC tools
d.
They rely primarily on business journals written for their industries
Scenario 2-1
Golf America is a small, national golf company that owns and operates two dozen golf courses in
sunbelt cities in the Southwest, Texas, Florida and North Carolina. The company prides itself on
buying older courses and investing in them to increase membership, outside play, and update the
facility. Members of existing clubs see tremendous changes in grounds, landscaping, food service and
golf amenities when Golf America assumes ownership and management responsibilities. In each
market in which it owned and operates, Golf America engages a marketing group or agency to assist
with communications and promotions.
26. (Scenario 2-1) Golf America enters a new market in which the new course they have purchased has a
fifty-year history in the community. It is important to the new owners to enhance the reputation of the
course, continue the relationship with existing members, yet at the same time invite new members to
join and sponsor promotions to entice outside play to fill in the unused tee times and maximize course
revenues. Most likely, Golf America would engage the following type of agency to manage its
relationships:
a.
Full-service advertising agency.
c.
Interactive agency.
b.
Promotional agency.
d.
Creative boutique.
27. (Scenario 2-1) Golf America has decided against forming an in-house advertising agency because it
feels it needs representation in local markets from people who have established reputations. What
other reason would there be NOT to form an in-house agency?
a.
Golf America is excellent at golf management.
b.
Golf America knows golf, but does not have employees who are experts in advertising.
c.
Golf America courses are noted for challenging design.
d.
All the pros that work for the company are sanctioned golf professionals
28. (Scenario 2-1) Golf America just purchased a new golf course in Palm Springs. The course has long
been the home of a “celebrity” golf tournament that in recent years has not been well attended. In order
to spur interest in the tournament, Golf America decides to hire Golf Events & Tournaments, Inc.
Which type of agency has Golf America hired for this project?
a.
Trade Reseller.
c.
Media Buying Firm.
b.
Marketing Research Firm.
d.
Promotion Agency.
29. (Scenario 2-1) Golf America is also considering hiring an external facilitator to develop an on-line
presence and sell golf membership, tee times at its courses and golf merchandise from its proshops on–
line. What type of firm might it hire?
a.
an e-commerce agency.
c.
a direct-marketing expert.
b.
an information intermediator.
d.
a media conglomerate.
Scenario 2-2
Brush Strokes is an art supply store located in a town with a population of about 100,000 people. The
town is also home to a major state university. Brush Strokes gets a majority of its business from the
student population. It has used the services of a local full-service advertising agency in the past. A
great majority of its marketing budget has gone toward running small advertisements in the local and
school newspapers at the beginning of each term. The advertising agency is now recommending that
Brush Strokes devote a majority of its budget to running television spots during broadcasts of the
university’s football and basketball games. While the owners of Brush Strokes agree that they could be
doing a better job of reaching the student population, they have not come to any conclusions about the
best way to accomplish this.
30. (Scenario 2-2) In all likelihood, with which one of the following would Brush Strokes’s full service
agency be least qualified to handle?
a.
Forecasting dividend earnings of stockholders.
b.
Creating a 30-second television commercial
c.
Interpreting research on the student market
d.
Creating a competitive position against other art supply stores
31. (Scenario 2-2) The owners of Brush Strokes have called a meeting with their agency to determine how
Brush Strokes can benefit best from its advertising. The one agency department that must be
represented at this meeting is
a.
account services.
c.
media-planning services.
b.
administrative services.
d.
creative services.
32. (Scenario 2-2) The agency has informed Brush Strokes that if Brush Strokes agrees to its
recommendation, the agency will have to rely heavily on outside sources. In all likelihood, the area the
agency will seek the most help in will be
a.
developing the strategy behind the spots.
c.
producing the spots.
b.
creating the ideas for the spots.
d.
assessing the effectiveness of the spots.
33. (Scenario 2-2) As a small business, Brush Strokes is always looking for ways to trim its expenses.
Which one of the following would be an effective strategy?
a.
Move consumer advertising in house.
b.
Assign the project to a media conglomerate.
c.
Shift half the advertising budget to an interactive agency specializing in college age target
audiences
d.
Use a media-buying service.
Scenario 2-3
ABC television network notified the Miss America Organization that it would not pick up the show for
broadcast in 2005, leaving the pageant without a major broadcast outlet for the first time in 50 years.
The news cannot have come as a shock to the Miss America Organization. A little more than a decade
ago, the competition that started as an Atlantic City publicity stunt had grown to about 27 million
viewers; in 2004, it drew a record-low 9.8 million, with the median age of the Miss America audience
at 51. ABC paid $5.6 million for broadcast rights to the pageant in 2003. ABC, which took over the
pageant after 30-year sponsor NBC bowed out, was not doing Miss America any favors airing it on
Saturdays — a low-viewership night. (“No More Miss America Pageantry for ABC,” Washington
Post.com, Lisa de Moraes,
October 21, 2004)
34. (Scenario 2-3) The Miss America Pageant has had a struggle over the last few years in gaining the
viewers and resulting ratings and advertising revenues from airing the program on network television.
The board of directors of the pageant has considered simulcasting the event live on the Internet. What
kind of organization might be helpful in planning the webcast?
a.
an advertiser.
c.
a consultant with the right expertise
b.
an advertising agency.
d.
a creative boutique.
35. (Scenario 2-3) One of the problems the Miss America Pageant has encountered has been an
indifference or sometimes negative response to beauty pageants in general. Many viewers are critical
of the swimsuit contest, which awards points for physical characteristics. The pageant feels the
competition is integral to the overall program and wants to educate the public about why the swimsuit
competition is included and how it contributes to a well-rounded program. To achieve its goals in this
area, the pageant might employ the services of:
a.
a public relations specialist.
b.
in-house agency.
c.
media-buying service.
d.
media departments at their full-service agency.
36. (Scenario 2-3) One of the events new to the pageant this year is a sweepstakes in which the lucky
viewer who predicts the winner will be awarded one million dollars at the end of the live broadcast. To
oversee this new component of the event, the pageant should hire the following:
a.
a new full service ad agency
c.
a sales promotion agency.
b.
new pageant emcee
d.
an event planning agency
37. (Scenario 2-3) The pageant’s board of directors has come to the realization that the one night event is
the only aspect that the general public equates to the Miss America contest. In reality, the event lasts
year round with pageants in all fifty states during the year leading up to the nationally televised event.
The board has selected a new full-service agency to tie all the events together in a cohesive marketing
program including an interactive component. To do this, the agency will focus on:
a.
IMC using the full spectrum of promotional tools
b.
development of a new brand logo
c.
creating a compelling new ad campaign
d.
a website directed to a new younger audience
OBJ: 2-3
Scenario 2-4
Advertising is a $300-billion-per-year business in the United States. Understandably, competition for
clients is fierce among advertising agencies. There are many different reasons why a client may choose
to move its business to a new agency, but there is one constant. The agency that wins the business is
celebrated by the press; the agency that loses the business, however, is typically forgotten fairly soon.
38. (Scenario 2-4) What type of agency might Subway select to promote its new line of sandwiches and
bread to a national television audience?
a.
Full-service advertising agency.
c.
Creative boutique.
b.
In-house advertising agency.
d.
Internet publisher.
39. (Scenario 2-4) Kentucky Fried Chicken, a subsidiary of Yum! Brands, Inc. which owns A&W, KFC,
Long John Silvers, Pizza Hut and Taco Bell restaurants, is the world’s largest restaurant company with
nearly 32,500 system units in more than 100 countries and territories. KFC is looking for a new
advertising agency to assist with advertising in Mexico and Canada. The client feels that it would be
best served by a very large agency offering a wide range of services. To have the most agencies to
choose from, it should focus its search on agencies with headquarters in
a.
Toronto.
c.
New York.
b.
Paris.
d.
Mexico City.
40. (Scenario 2-4) A client is unhappy because the work that its agency is turning out is constantly behind
schedule and over budget. This client is likely to look for a new agency with
a.
a stronger creative department.
b.
stronger account management function
c.
a stronger billing department.
d.
a stronger marketing services department.
41. (Scenario 2-4) During a new business presentation, an agency says that one reason it should get the
business is that all of its different department teams are so well coordinated. The department that
brings all the different efforts together on a day–to-day basis is
a.
creative services.
c.
administrative services.
b.
account services.
d.
marketing services.
42. (Scenario 2-4) A client has grown dissatisfied with its ad campaign. What is the best way the agency
can respond?
a.
Account management should first talk with the client about the nature of their
dissatisfaction; then proceed with item “c” below.
b.
Assemble the entire agency team assigned to this client and have a brainstorming session
c.
Call on the planner to assemble data on how the ads are received by the target consumer,
then call a meeting of Account Management, Creative, and Account planning with client
executives to identify the best path forward
d.
Blame on problems with the client’s product line that no advertising should be expected to
fix
Scenario 2-5
Thomas Motors is an independent auto dealer in a metropolitan market dominated by a number of
national franchise dealerships including General Motors, Ford, Daimler/Chrysler, and foreign imports
Honda, Toyota and more. In order to maintain their share of market, Thomas must do significant
advertising in a number of different media. They carry several different popular makes of automobiles,
both foreign and domestic, and maintain a high level of inventory on their lot at all times.
43. (Scenario 2-5) Thomas Motors wants to better understand the media consumption behaviors of
consumers in their target markets. As a result, they wish to conduct a marketing research project to
learn more about this issue. Which of the following types of firms are they most likely to commission
to do such work?
a.
an advertiser
c.
an external facilitator
b.
an advertising agency
d.
a media organization
44. (Scenario 2-5) The marketing director at Thomas has decided that the firm needs a creative slogan or
theme to be used consistently in advertising to help position the firm in the minds of local consumers.
Which of the following types of advertising agencies would likely be the best choice to accomplish
this specific goal?
a.
an interactive agency
c.
a full-service agency
b.
a creative boutique
d.
an in-house agency
45. (Scenario 2-5) Thomas’ management has budgeted $1,000,000 for television advertising for the
coming year. How much can their advertising agency expect to earn from this commitment using a
traditional commission system compensation plan?
a.
$10,000
c.
$100,000
b.
$15,000
d.
$150,000
46. (Scenario 2-5) Thomas is very interested in collecting information on customer purchase transaction
histories of all consumers that have purchased new vehicles in the metropolitan area during the past
two years. Which of the following types of external facilitators will they most likely contract to do
such work for them?
a.
a marketing research firm
c.
a production facilitator
b.
a consultant
d.
an information intermediator
47. (Scenario 2-5) To stimulate more consumer traffic at the dealership, Thomas Motors has decided to
offer a chance to win a free automobile for anyone who comes in and test drives any vehicle on their
lot. Which of the following types of organizations are they most likely to employ to design and operate
this contest?
a.
a public relations firm
c.
a direct marketing firm
b.
a full-service advertising agency
d.
a sales promotion specialist
OBJ: 2-3
Scenario 2-6
SC Johnson & Son produces a wide variety of very popular consumer products such as Shout®,
Windex®, Mr. Muscle®, Ziploc®, Edge®, Glade®, Vanish®, Raid®, OFF!®, Pledge®, Scrubbing
Bubbles® Bathroom Cleaner. These products are in highly competitive markets and require substantial
investments in consumer promotion to maintain market share.
48. (Scenario 2-6) SC Johnson is not interested in doing any of the duties associated with advertising
research, creative development, or media placement. Which of the following types of organizations
would likely be the best match for their needs?
a.
a full-service agency
c.
a media buying service
b.
a creative boutique
d.
an in-house agency
49. (Scenario 2-6) SC Johnson has recently hired an advertising agency to help promote their products.
Several of the senior managers have indicated that they are uncertain as to the specific benefits of
advertising their consumer products. Which of the following departments of their agency should be
involved in giving this information to this client?
a.
administrative services
c.
creative services
b.
marketing research services
d.
account services
50. (Scenario 2-6) SC Johnson managers have agreed that their advertising agency will be compensated
based on measures of audience awareness of their consumer products. This indicates that they have
chosen a ____ compensation program for their agency.
a.
commission
c.
markup
b.
fee
d.
pay-for-results
ESSAY
1. There are several key aspects of change that are affecting the structure of the advertising industry.
Please discuss the four trends discussed in the book.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
(4) Historically, advertisers controlled information and the flow of information as a one-way
communication through mass media. But, as the introductory scenario highlights, consumers are now
in greater control of the information they receive about product categories and the brands within those
categories. The simplest and most obvious example is when consumers log on to the Internet and visit
sites they choose to visit for either information or shopping. But it gets a lot more complicated from
there. The emergence of blogs, websites frequented by individuals with common interest where they
can post facts, opinions, and personal experiences, are emerging as a new and sophisticated sources of
product and brand information. Another new and dramatic example of consumer control is the growth
of digital video recorders (DVRs), like TiVo, which allow TV viewers to essentially skip broadcast
advertising.
PTS: 1 DIF: Difficult REF: p. 25–28 OBJ: 2-1
2. The definition of an advertising agency is “an independent organization of professionals who provide
creative and business services to clients related to planning, preparing, and placing advertisements.”
List the major agency departments involved in each one of these phases (planning, preparing, and
placing). In general terms, describe the role each department plays.
3. One of the trends in the advertising industry today is the fragmentation of marketing budgets.
Advertising agencies can continue to get a healthy share of their clients’ business by redesigning their
role and structure. List three departments that a full-service agency can add to accomplish this. Explain
what each of these departments is responsible for.
4. A company that you work for has asked you to write a brief report that evaluates the advantages and
disadvantages of creating an in-house agency. What points would you consider in your report?
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
An in-house agency provides greater coordination and control throughout the advertising process. An
in-house agency has greater knowledge and control over marketing activities. Plus, a firm can keep
any media commissions that would have gone to an outside agency. However, in-house agencies suffer
from a lack of objectivity. In addition, it’s hard to match the breadth and depth of experience offered
by an external agency.
PTS: 1 DIF: Moderate REF: p. 33–34 OBJ: 2-3
5. Briefly explain the three major methods of agency compensation. Outline any advantages or
disadvantages associated with each system.