Integrated Marketing Communications 4th Edition by Bill Chitty - Test Bank

Integrated Marketing Communications 4th Edition by Bill Chitty – Test Bank

 

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Chapter 5 – Advertising and digital marketing communications

TRUE/FALSE

1. According to the hierarchy-of-effects model, successful advertising must move consumers to the shopping mall.

ANS: F         PTS:  1       DIF: Moderate     TOP: The hierarchy-of-effects framework

2. Advertising objectives should specify the target audience, detail the specific goal to be accomplished and indicate the relevant time frame.

ANS: T         PTS: 1        DIF: Moderate     TOP: Objectives must include a precise statement of who, what and when

3. The percentage-of-sales method is the advertising budget procedure used most frequently by both consumer and industrial companies.

ANS: F         PTS: 1        DIF: Moderate     TOP: Percentage-of-sales budgeting

4. Advertising objectives must specify the amount of sales.

ANS: F         PTS: 1        DIF: Easy            TOP: The traditional view (thesis)

5. When a company with a relatively low market share has a major competitor with a relatively high share of voice, the company should increase advertising expenditures and find a niche that can be defended.

ANS: F         PTS: 1        DIF: Difficult      TOP: Competitors’ ad spend

6. Most successful companies are aware that consistent investment spending is the key factor underlying successful advertising.

ANS: T         PTS: 1        DIF: Moderate     TOP: The magnitude of advertising and ad-investment considerations

7. The antithesis of the traditional view towards advertising objectives (i.e. the alternative approach) is that advertising objectives should be stated in terms of sales and market share.

ANS: T         PTS: 1        DIF: Moderate     TOP: An alternative approach (antithesis)

8. The advertising–sales-response function is the amount of sales revenue generated at each level of advertising expenditure.

ANS: T         PTS: 1        DIF: Difficult      TOP: Budgeting for advertising

9. The first step of the objective-and-task method is to establish specific marketing objectives that need to be defined.

ANS: T         PTS: 1        DIF: Moderate     TOP: The objective-and-task method

10. Whether a marketing manager chooses to invest or not in advertising a brand depends largely on expectations about how advertising will influence a brand’s production volume and revenue.

ANS: F         PTS: 1        DIF: Difficult      TOP: Putting advertising in perspective

11. The competitive parity method sets the advertising budget by following what suppliers are doing.

ANS: F         PTS: 1        DIF: Easy            TOP: The competitive parity method

12. Even with the knowledge that price elasticity exists in a particular situation, it is impossible to mathematically determine whether it is more profitable to increase advertising or offer a discounted price.

ANS: F         PTS: 1        DIF: Difficult      TOP: Which approach is more beneficial?

13. The traditional view states that advertising objectives should be stated in terms of sales and market share.

ANS: F         PTS: 1        DIF: Easy            TOP: The traditional view (thesis)

14. In terms of profitability, investing in advertising can be justified only if the incremental revenue generated from the advertising effort exceeds the advertising expense.

ANS: T         PTS: 1        DIF: Moderate     TOP: Arguments for investing in advertising

15. Advertising adds value to brands by influencing perceptions.

ANS: T         PTS: 1        DIF: Moderate     TOP: Adding value

16. At times, advertising’s primary role is to facilitate a company’s other efforts in the marketing communication process.

ANS: T         PTS: 1        DIF: Moderate     TOP: Assisting other company efforts

17. Advertising objectives should be established before making decisions regarding message selection and media determination.

ANS: T         PTS: 1        DIF: Moderate     TOP: Setting advertising objectives

18. Elasticity is a measure of how responsive the quantity demanded is to changes in marketing variables such as price and advertising.

ANS: T         PTS: 1        DIF: Difficult      TOP: Which approach is more beneficial?

19. Advertising objectives should be qualitative and measurable.

ANS: F         PTS: 1        DIF: Moderate     TOP: Objectives must be quantitative and measurable

20. Advertising is an efficient form of communication capable of reaching mass audiences at a relatively low cost per contact.

ANS: T         PTS: 1        DIF: Moderate     TOP: Informing

21. Advertising has not been proven to influence brand switching.

ANS: F         PTS: 1        DIF: easy             TOP: Persuading

22. Most sophisticated companies are willing to place their bets on advertising’s ability to boost revenues and thus enhance profits from the expense-reduction side rather than from the revenue-increase side.

ANS: F         PTS: 1        DIF: Difficult      TOP: Which approach is more beneficial?

23. Advertising objectives must be set before the product is positioned and the target market selected.

ANS: F         PTS: 1        DIF: Difficult      TOP: Setting advertising objectives

24. Creating high levels of awareness is an important prerequisite to influencing consumer decisions in relation to new brands.

ANS: T         PTS: 1        DIF: Easy            TOP: Setting objectives

25. Advertising has the power to enhance a brand’s perceived quality, which in turn allows a company to reduce the price of the product.

ANS: F         PTS: 1        DIF: Moderate     TOP: Arguments for investing in advertising

26. A company can increase its volume of sales by using price discounting.

ANS: T         PTS: 1        DIF: Easy            TOP: Which approach is more beneficial?

27. When the market is both price elastic and advertising elastic, advertising and price discounting should be avoided.

ANS: F         PTS: 1        DIF: Difficult      TOP: Which approach is more beneficial?

28. Advertising effectiveness should only be measured if the company has spare financial resources to do so.

ANS: F         PTS: 1        DIF: Easy            TOP: Assessing advertising effectiveness

29. There are three ways that a company can add value to its product offerings: innovating, improving quality and changing consumer perceptions.

ANS: T         PTS: 1        DIF: Moderate     TOP: Adding value

30. Sales promotions tend to reduce brand loyalty by rewarding customers for being more price sensitive and less loyal.

ANS: T         PTS: 1        DIF: Moderate     TOP: Brand loyalty

31. Strategy implementation involves the tactical, day-to-day activities that must be performed for an advertising campaign.

ANS: T         PTS: 1        DIF: Difficult      TOP: Implementing advertising strategy

32. Brand loyalty is a product of belief and attitude reinforcement.

ANS: T         PTS: 1        DIF: Moderate     TOP: The hierarchy-of-effects framework

33. The purpose of advertising for mature brands is to reinforce beliefs about brand benefits.

ANS: T         PTS: 1        DIF: Moderate     TOP: Setting objectives

34. If a brand continues to satisfy consumer expectations, it doesn’t matter if new brands are introduced as they will not be able to compete.

ANS: F         PTS: 1        DIF: Moderate     TOP: The hierarchy-of-effects framework

35. Advertising objectives provide standards against which results can be measured.

ANS: T         PTS: 1        DIF: Easy            TOP: Setting advertising objectives

36. Brand loyalty is a guaranteed outcome of effective advertising.

ANS: F         PTS: 1        DIF: easy             TOP: Brand loyalty

37. Advertising objectives are an expression of marketing management consensus.

ANS: T         PTS: 1        DIF: Moderate     TOP: Setting advertising objectives

38. The first goal of advertising for new products is to make consumers aware of the brand.

ANS: T         PTS: 1        DIF: Easy            TOP: Setting objectives

39. Advertising objectives determine how much money should be spent on the campaign.

ANS: T         PTS: 1        DIF: Moderate     TOP: Setting advertising objectives

40. The advertising process consists of formulating an advertising strategy, implementing the strategy and repeating the strategy.

ANS: F         PTS: 1        DIF: Moderate     TOP: Managing the advertising process

41. Generating customer loyalty requires continuous advertising of the brand’s price.

ANS: F         PTS: 1        DIF: Moderate     TOP: Brand loyalty

42. Both the Australian Competition and Consumer Commission (ACCC) and each State’s Fair Trading Act focus on issues of national impact or large cross-border reach.

ANS: F         PTS: 1        DIF: Moderate     TOP: The Competition and Consumer Act 2010 (CCA) and the ACCC

43. The Competition and Consumer Act 2010 prohibits exclusive dealings.

ANS: T         PTS: 1        DIF: Easy            TOP: The Competition and Consumer Act 2010 and the ACCC

44. The legal and industry self-regulation issues associated with marketing communications apply to all the issues related to advertising management but not to media strategies.

ANS: F         PTS: 1        DIF: Easy            TOP: Legal and regulatory issues for advertising management

45. Trademarks are distinctive symbols, numbers, smells or colours.

ANS: T         PTS: 1        DIF: Easy            TOP: Trademarks and domain names

46. Unregistered trademarks may receive common law protection through action of the tort of ‘passing off’.

ANS: T         PTS: 1        DIF: Difficult      TOP: Trademarks and domain names

47. The Copyright Act divides original creation into three types: (1) literary and musical works, (2) ‘subject matter other than works’, and (3) marketing and IMC campaigns.

ANS: F         PTS: 1        DIF: Difficult      TOP: Copyright and websites

48. Packaging must comply with various industry-specific laws.

ANS: T         PTS: 1        DIF: Moderate     TOP: Packaging and labelling

49. In Australia, to date there are no controlling bodies for managing self-regulation.

ANS: F         PTS: 1        DIF: Easy            TOP: Self-regulation

50. It is important for Internet advertisers to register Internet domain names as trademarks.

ANS: T         PTS: 1        DIF: Moderate     TOP: Trademarks and domain names

51. Advertising agencies that prepare advertisements for their clients are not liable in marketing law under section 18, division 2 of the Australian Consumer Law

ANS: F         PTS: 1        DIF: Difficult      TOP: Liability of advertisers and marketers: Section 52

52. In some situations marketers consider it unnecessary to advertise when their brands are enjoying market success.

ANS: T         PTS: 1        DIF: Easy            TOP: The magnitude of advertising and ad-investment considerations

53. Advertising and personal selling are two of the most frequently used marketing communication tools.

ANS: F         PTS: 1        DIF: Easy            TOP: The magnitude of advertising and ad-investment considerations

54. In 2012, some Australian companies invested more than $1.0 billion on domestic advertising.

ANS: F         PTS: 1        DIF: Moderate     TOP: The magnitude of advertising and ad-investment considerations

55. Advertising momentum is like exercise – stop exercising and you will probably gain weight; stop advertising and you will gain extra profits.

ANS: F         PTS: 1        DIF: Easy            TOP: The magnitude of advertising and ad-investment considerations

56. Firms often choose to reduce advertising expenditures, either when a brand is performing above expectations or during periods of economic slowdown.

ANS: T         PTS: 1        DIF: Easy            TOP: Arguments for reducing advertising expenditure

57. When advertising and other forms of communications create unique and positive messages, a brand is relatively insulated from future price competition.

ANS: T         PTS: 1        DIF: Easy            TOP: An investment in the brand equity

58. Effective advertising can increase consumers’ interest in a mature brand and thus increases the likelihood of purchasing a brand that might otherwise not be considered.

ANS: T         PTS: 1        DIF: Easy            TOP: Reminding

59. Advertising strategy involves four main activities: segment, target, position and exchange.

ANS: F         PTS: 1        DIF: Moderate     TOP: Advertising strategy

60. The ultimate advertising objective is to create brand loyal customers.

ANS: T         PTS: 1        DIF: Easy            TOP: The hierarchy-of-effects framework

61. Advertising decision makers must consider three factors when establishing advertising budgets: the ad objective, competitors’ ad spend, and the size of the market place.

ANS: F         PTS: 1        DIF: Moderate     TOP: Practical budgeting considerations

MULTIPLE CHOICE

1. An advertisement designed to keep a company’s brand fresh in the consumer’s memory performs the advertising function of ____________.

A	reminding
B	persuading
C	adding value
D	informing
E	assisting other company efforts

ANS: A        PTS: 1        DIF: Moderate     TOP: Reminding

2. The hierarchy-of-effects framework implies that successful advertising ____________.

A	encourages consumers to discuss the advertisement
B	creates brand loyalty for the product
C	moves consumers from one goal to the next
D	has the objective of creating brand awareness
E	encourages consumers to purchase the product

ANS: C         PTS: 1        DIF: Moderate     TOP: The hierarchy-of-effects framework

3. Advertisers obtain consumer loyalty by providing a brand that meets the needs of the consumers and ____________.

A	by continually advertising the brand’s merits
B	by stressing the price
C	by stating the unfavourable attributes of the major competitor
D	by using sales promotion
E	All of the answers supplied for this question are correct.

ANS: A        PTS: 1        DIF: Moderate     TOP: Brand loyalty

4. The criticism that the percentage-of-sales budgeting technique is not logical is based on the idea that ____________.

A	sales volume cannot be estimated accurately
B	it results in excessive amounts of funding being invested in advertising
C	it confuses objectives with goals
D	it reverses the true functional relationship between advertising and sales
E	advertising effectiveness cannot be measured

ANS: D        PTS: 1        DIF: Difficult      TOP: Percentage-of-sales budgeting

5. An advertisement designed to pre-sell a company’s products and provide salespeople with valuable introductions performs the advertising function of ____________.

A	informing
B	persuading
C	adding value
D	reminding
E	assisting other company efforts

ANS: E         PTS: 1        DIF: Moderate     TOP: Assisting other company efforts

6. When a product has a relatively high share of market and a competitor has a high share of voice, it is best to ____________.

A	increase advertising expenditures
B	decrease advertising expenditures
C	increase prices
D	aggressively attack the competitor
E	cut prices

ANS: A        PTS: 1        DIF: Moderate     TOP: Competitor’s ad spend

7. The traditional view states that advertising objectives should not be stated in terms of ____________.

A	sales or market share gains
B	brand awareness
C	attitude change
D	purchase intentions
E	creating brand loyalty

ANS: A        PTS: 1        DIF: Easy            TOP: The traditional view (thesis)

8. The case for investing in advertising is based on the belief that it can increase profitability and thus increase revenue beyond the incremental advertising expense by ____________.

A	increasing sales volume
B	enabling higher selling prices
C	reducing production cost
D	both A and B
E	None of the answers supplied for this question are correct.

ANS: D        PTS: 1        DIF: Difficult      TOP: Arguments for investing in advertising

9. The first step of the objective-and-task method is ____________.

A	assessing the communications functions
B	establishing specific marketing objectives that need to be accomplished
C	determining advertising’s role in the total communication mix
D	establishing specific advertising goals in terms of the levels of measurable communication response required to achieve marketing objectives
E	establishing the budget, based on estimates of expenditures required to accomplish the advertising goals

ANS: B         PTS: 1        DIF: Moderate     TOP: The objective-and-task method

10. Assume that the total advertising expenditure for shoe manufacturers is $828 million and that Nike spends $207 million. Nike’s ____________ would be 25 per cent.

A	share of market
B	share of objectives
C	share of stage
D	share of goals
E	share of voice

ANS: E         PTS: 1        DIF: Easy            TOP: Competitors’ ad spend

11. A clothing store that sets its advertising budget by following the major competitor and adding an additional 15 per cent is using the ____________ method.

A	percentage-of-sales
B	arbitrary allocation
C	objective-and-task
D	competitive parity
E	affordability

ANS: D        PTS: 1        DIF: Moderate     TOP: The competitive parity method

12. In terms of profitability, investing in advertising can be justified only if the incremental revenue generated from the advertising effort exceeds the ____________.

A	production expense
B	operational expense
C	discretionary expense
D	advertising expense
E	None of the answers supplied for this question are correct.

ANS: D        PTS: 1        DIF: Moderate     TOP: Arguments for investing in advertising

13. In the ____________ method, only the funds that remain after budgeting for everything else are spent on advertising.

A	competitive parity
B	affordability
C	objective-and-task
D	arbitrary allocation
E	percentage-of-sales

ANS: B         PTS: 1        DIF: Easy            TOP: The affordability method

14. Which of the following is not a requirement for setting advertising objectives?

A	Objectives must specify the amount of change.
B	Objectives must be stated in terms of profits.
C	Objectives must be realistic.
D	Objectives must be internally consistent.
E	Objectives must be clear and in writing.

ANS: B         PTS: 1        DIF: Moderate     TOP: Setting advertising objectives

15. When firms choose to reduce advertising expenditure when a brand is performing well or during periods of economic recession, they make an assumption that all ____________ are held constant.

A	operating costs
B	fixed costs
C	variable costs
D	All of the answers supplied for this question are correct.
E	None of the answers supplied for this question are correct.

ANS: A        PTS: 1        DIF: Difficult      TOP: Arguments for reducing advertising expenditure

16. Advertising is costly and its effects are often ____________.

A	uncertain
B	certain
C	predetermined
D	constant
E	None of the answers supplied for this question are correct.

ANS: A        PTS: 1        DIF: Moderate     TOP: Practical budgeting methods

17. According to the hierarchy-of-effects model, the advertiser’s initial imperative is to ____________.

A	make people aware of the brand
B	make people like the advertisement
C	make people discuss the advertisement with others
D	encourage trial of the product
E	change beliefs of the brand

ANS: A        PTS: 1        DIF: Easy            TOP: The hierarchy-of-effects framework

18. An ex-CEO at Procter and Gamble – one of the world’s largest advertisers – aptly draws an analogy between advertising and exercise in that both provide ____________.

A	short-term benefits
B	irreversible benefits
C	long-term benefits
D	a learning environment
E	None of the answers supplied for this question are correct.

ANS: C         PTS: 1        DIF: Moderate     TOP: The magnitude of advertising and ad-investment considerations

19. Whether one chooses to invest or not in advertising a brand depends largely on expectations about how advertising will influence a brand’s sales volume and ____________.

A	marginal cost
B	variable cost
C	discretionary cost
D	revenue
E	None of the answers supplied for this question are correct.

ANS: D        PTS: 1        DIF: Moderate     TOP: Arguments for investing in advertising

20. ____________ is a measure of how responsive the quantity demanded is to changes in marketing variables such as price and advertising.

A	Profitability
B	Elasticity
C	Production
D	Disinvesting
E	None of the answers supplied for this question are correct.

ANS: B         PTS: 1        DIF: Difficult      TOP: Which approach is more beneficial?

21. Most small firms use the ____________ method to determine their advertising budget.

A	competitive parity
B	marginal cost
C	objective-and-task
D	percentage-of-sales
E	None of the answers supplied for this question are correct.

ANS: A        PTS: 1        DIF: Moderate     TOP: The affordability method

22. Which of the following is not a communication function performed by advertising?

A	persuading
B	reminding
C	adding value
D	assisting production
E	informing

ANS: D        PTS: 1        DIF: Easy            TOP: Advertising functions

23. Presales objectives are commonly referred to as ____________.

A	image objectives
B	advertising objectives
C	marketing objectives
D	communication objectives
E	None of the answers supplied for this question are correct.

ANS: D        PTS: 1        DIF: Difficult      TOP: Developing an advertising objective

24. The Dairy Council’s campaign points out that weight-conscious consumers can buy low-fat dairy products. This message is primarily designed to ____________.

A	persuade
B	inform
C	add value
D	deceive
E	None of the answers supplied for this question are correct.

ANS: B         PTS: 1        DIF: Moderate     TOP: Informing

25. The optimal level of any investment is the level that maximises ____________.

A	profit
B	turnover
C	sales
D	cost of goods sold
E	None of the answers supplied for this question are correct.

ANS: A        PTS: 1        DIF: Moderate     TOP: Budgeting in theory

26. There are two broad types of advertising objectives: sales objectives and ____________.

A	presale objectives
B	long-term objectives
C	short-term objectives
D	image objectives
E	None of the answers supplied for this question are correct.

ANS: A        PTS: 1        DIF: Easy            TOP: Developing an advertising objective

27. A Korean brand of television was perceived as ‘low quality’ by more than 70 per cent of surveyed American consumers. However, after an extensive advertising campaign, the percentage of American consumers who held this perception fell to 20 per cent. In this instance, advertising successfully performed which function?

A	adding value
B	informing
C	persuading
D	reminding
E	None of the answers supplied for this question are correct.

ANS: A        PTS: 1        DIF: Difficult      TOP: Adding value

28. The advertising budget procedure used most frequently is the ____________ method.

A	percentage-of-sales
B	arbitrary allocation
C	marginal cost
D	competitive parity
E	None of the answers supplied for this question are correct.

ANS: E         PTS: 1        DIF: Easy            TOP: The objective-and-task method

29. Advertising objectives that are precise should specify ____________.

A	the creative strategy
B	who, what and when
C	where, what and how
D	the implementation strategy
E	None of the answers supplied for this question are correct.

ANS: B         PTS: 1        DIF: Moderate     TOP: Objectives must include a precise statement of who, what and when

30. When Kellogg’s advertises Sultana Bran (which is typically eaten at breakfast time) as being eaten as a ‘between meals’ snack, this is an example of ____________.

A	emotional advertising
B	rational advertising
C	sales advertising
D	image advertising
E	usage expansion advertising

ANS: E         PTS: 1        DIF: Difficult      TOP: Informing

31. In general, there are four combinations of advertising and price elasticities. Which of the following is not one of the combinations?

A	Grow volume via price discounting.
B	Increase advertising expense and discount prices.
C	Maintain the status quo.
D	Build image via increased advertising.
E	Decrease prices and advertising expenses.

ANS: A        PTS: 1        DIF: Difficult      TOP: Which approach is more beneficial?

32. Successful advertising objectives must be or include all of the following except ____________.

A	a precise statement
B	quantitative and measurable
C	specific budget requirements
D	realistic
E	clear and in writing

ANS: C         PTS: 1        DIF: Moderate     TOP: Setting achievable advertising objectives

33. The percentage-of-sales budgeting method has been criticised because the method ____________.

A	reverses the logical relationship between sales and advertising
B	ignores brand image development
C	is based on historical data
D	All of the answers supplied for this question are correct.
E	None of the answers supplied for this question are correct.

ANS: A        PTS: 1        DIF: Difficult      TOP: Percentage-of-sales budgeting

34. Australian advertising expenditures have grown exponentially in recent years, with the biggest growth area being ____________ advertising.

A.	digital
B.	radio
C.	free-to-air TV
D.	pay TV
E.	facebook

ANS: A        PTS: 1        DIF: Easy            TOP: The magnitude of advertising and ad-investment considerations

35. In Australia, advertising on smartphones and tablets grew from $13 million in 2012 to ____________ in 2013.

A.	$20 million
B.	$25 million
C.	$30 million
D.	$35 million
E.	$65 million

ANS: D        PTS: 1        DIF: Moderate     TOP: The magnitude of advertising and ad-investment considerations

36. A key consideration in an advertising budget is the ____________.

A	expected sales
B	preferred sales
C	advertising objective
D	All of the answers supplied for this question are correct.
E	None of the answers supplied for this question are correct.

ANS: C         PTS: 1        DIF: Easy            TOP: Budgeting for advertising

37. Demand that refers to an entire product category is referred to as ____________.

A	in demand
B	primary demand
C	secondary demand
D	initial demand
E	subsequent demand

ANS: B         PTS: 1        DIF: Moderate     TOP: Persuading

38. Advertising strategy includes ____________.

A	setting objectives
B	formulating budgets
C	creating ad messages
D	selecting media and media vehicles
E	All of the answers supplied for this question are correct.

ANS: E         PTS: 1        DIF: Moderate     TOP: Advertising strategy

39. Advertising objectives provide standards against which results can be ____________.

A	measured
B	published
C	gained
D	lost
E	None of the answers supplied for this question are correct.

ANS: A        PTS: 1        DIF: Easy            TOP: Assessing advertising effectiveness

40. Advertising objectives are an expression of ____________.

A	the brand
B	the product
C	the budget
D	marketing management consensus
E	the image

ANS: D        PTS: 1        DIF: Moderate     TOP: Setting advertising objectives

41. A certain brand of hand lotion commands 7 per cent of the market for this product category. To increase the brand’s market share, a new advertising campaign is formulated with the following objective: ‘Within the next six months, our objective is to increase the brand’s market share from
    7 per cent to 40 per cent’. This objective suffers from being ____________.

A	imprecise
B	non-measurable
C	general
D	unrealistic
E	None of the answers supplied for this question are correct.

ANS: D        PTS: 1        DIF: easy             TOP: Objectives must be realistic

42. If advertising were to attempt to increase the consumption of milk in Australia, it would be increasing ____________.

A	in demand
B	primary demand
C	secondary demand
D	initial demand
E	subsequent demand

ANS: B         PTS: 1        DIF: Moderate     TOP: Persuading

43. All marketing communications should be ____________.

A	clearly positioned
B	directed to a specific target market
C	created to achieve objectives
D	accomplish the objectives within an allocated budget
E	All of the answers supplied for this question are correct.

ANS: E         PTS: 1        DIF: Moderate     TOP: Setting advertising objectives

44. Advertising objectives determine how much money should be spent on the ____________.

A	product
B	campaign
C	sales promotion
D	brand
E	evaluation

ANS: B         PTS: 1        DIF: Moderate     TOP: Setting advertising objectives

45. Effective advertising can add value through influencing ____________.

A	memories
B	perceptions
C	revenues
D	profit
E	availability

ANS: B         PTS: 1        DIF: Moderate     TOP: Adding value

46. Demand for a specific company’s brand is referred to as ____________.

A	in demand
B	primary demand
C	secondary demand
D	initial demand
E	subsequent demand

ANS: C         PTS: 1        DIF: Moderate     TOP: Persuading

47. If a brand continues to satisfy consumer expectations, ____________.

A	it doesn’t matter if new brands are introduced as they will not be able to compete
B	advertising can cease
C	advertising should increase
D	All of the answers supplied for this question are correct.
E	None of the answers supplied for this question are correct.

ANS: E         PTS: 1        DIF: Moderate     TOP: The hierarchy-of-effects framework

48. For every dollar not invested in advertising, there is a dollar increase in ____________, assuming that advertising does not adversely affect revenue.

A	revenue
B	expenses
C	short-term profit
D	long-term profit
E	cost of goods sold

ANS: C         PTS: 1        DIF: Moderate     TOP: Which approach is more beneficial?

49. Three basic ways by which companies can add value to their product offerings include all of the following except ____________.

A	innovating
B	exhibiting
C	improving quality
D	changing consumer perceptions
E	All of the answers supplied for this question are correct.

ANS: B         PTS: 1        DIF: Easy            TOP: Adding value

50. The current structure of the legal regulatory environment in Australia is premised on protecting the ____________.

A	consumers
B	brands
C	shareholders
D	suppliers
E	small businesses

ANS: A        PTS: 1        DIF: Easy            TOP: The Competition and Consumer Act 2010 and the ACCC

51. The competition provisions (of the CCA) prohibit practices that marketers should be aware of, such as ____________.

A	price fixing
B	exclusive dealing
C	primary and secondary boycotts
D	anti-competitive behaviour
E	All of the answers supplied for this question are correct.

ANS: E         PTS: 1        DIF: Easy            TOP: The Competition and Consumer Act 2010 and the ACCC

52. The Competition and Consumer Act 2010 also introduces a new national consumer law regime in Australia, known as ____________.

A	shoppers’ protection law
B	national consumer protection law
C	Australian consumer law
D	buyers’ protection law
E	Australian safeguard law

ANS: C         PTS: 1        DIF: Difficult      TOP: The Competition and Consumer Act 2010 and the ACCC

53. The Federal Court in Taco Co. of Australia v. Taco Bell Pty Ltd determined that ____________.

A	clear brand communication objectives must be stated
B	the relevant section of the target audience should first be identified
C	relevant media should be used
D	customers’ relationships must not be neglected
E	All of the answers supplied for this question are correct.

ANS: B         PTS: 1        DIF: Moderate     TOP: Liability of advertisers and marketers: Section 52

54. Section 56 of Part IV of the Competition and Consumer Act 2010 implies into consumer contracts a condition that when goods are supplied by description they will correspond with that description, which only goes to the ____________ of the goods.

A	identity
B	quality
C	pricing
D	delivery
E	None of the answers supplied for this question are correct.

ANS: A        PTS: 1        DIF: Difficult      TOP: Correspondence with description

55. In general, ____________ is a process whereby the responsibility for socially acceptable standards of professional behaviour is assumed by a controlling body that consists of members of that profession.

A	merchant association
B	consumer advocates
C	self-regulation
D	industry monitoring
E	self-assessing

ANS: C         PTS: 1        DIF: Moderate     TOP: Self-regulation

56. The ACCC states that the phrase ‘Australian owned’ on packaging or labelling would need to reflect ____________.

A	a brand with half of its employees being Australian citizens
B	a brand with a minimum of five retail stores in Australia
C	a minimum of 65 per cent Australian ownership
D	a minimum of 51 per cent Australian ownership
E	None of the answers supplied for this question are correct.

ANS: D        PTS: 1        DIF: Moderate     TOP: Packaging and labelling

57. To comply with Australian laws, advertisers need to ____________.

A	be aware of key legislation pertaining to marketing communications
B	ensure intellectual property is protected
C	undertake research prior to launch of a brand
D	monitor competitors to check for unauthorised use of intellectual property
E	All of the answers supplied for this question are correct.

ANS: E         PTS: 1        DIF: Easy            TOP: Self-regulation

58. ____________ are the most valuable asset underpinning a brand and require protection and due diligence in the brand creation process.

A	Websites
B	Employees
C	Messages
D	Trademarks
E	Labelling

ANS: D        PTS: 1        DIF: Easy            TOP: Trademarks and domain names

59. Advertising can cost millions and its results are often ____________.

A.	worth it
B.	uncertain
C.	effective
D.	all of these choice
E.	none of these choices

ANS: B         PTS: 1        DIF: Easy            TOP: The magnitude of advertising and ad-investment considerations

60. Whether a marketing manager chooses to invest in advertising a brand depends largely on expectations about how advertising will influence a brand’s ____________.

A.	current image
B.	level of awareness
C.	cost of production
D.	position in the market place
E.	none of these choices

ANS: E         PTS: 1        DIF: Difficult      TOP: Putting advertising in perspective

61. A profit-increasing strategy typically employed for new products, luxury goods and products characterised by symbolic imagery, such as cosmetics and designer-label apparel, is to build ____________ through advertising.

A.	brand awareness
B.	brand recall
C.	brand trials
D.	brand image
E.	brand knowledge

ANS: D        PTS: 1        DIF: Easy            TOP: Which approach is more beneficial?

62. By calculating the price and advertising elasticities for a particular brand category, it is possible to determine whether it is profitable to increase advertising or reduce ____________.

A.	distribution network
B.	selling price
C.	product range
D.	the sales force
E.	advertising budgets

ANS: B         PTS: 1        DIF: Moderate     TOP: Which approach is more beneficial?

63. When advertising creates unique and positive messages, a brand is relatively insulated from future ____________.

A.	direct competitors
B.	negative word of mouth
C.	price competition
D.	suppliers’ bargaining
E.	advertising rate increases

ANS: C         PTS: 1        DIF: Easy            TOP: An investment in the brand equity

64. Advertising can also influence brand ____________ by reminding consumers who have not recently purchased a particular brand that the brand is still available and it possesses favourable attributes and benefits.

A.	switching
B.	profitability
C.	recognition
D.	liking
E.	recall

ANS: A        PTS: 1        DIF: Easy            TOP: Reminding

65. Researchers have suggested that a psychological theory called ____________ can explain how advertisers can increase advertising effectiveness.

A.	decoding consistency theory
B.	encoding variability hypothesis
C.	minimum variability hypothesis
D.	message construct theory
E.	receiver variability equation

ANS: B         PTS: 1        DIF: Moderate     TOP: Competitors’ ad spend

66. Internet advertisers are required by law to observe the Commonwealth ____________ Act 1968.

A.	copyright
B.	consumer protection
C.	warranty
D.	pricing adjustment
E.	liability

ANS: A        PTS: 1        DIF: Easy            TOP: Copyright and websites

67. It is important for Internet advertisers to register Internet domain names as ____________.

A.	useable entities
B.	brand titles
C.	private properties
D.	copyrights
E.	trademarks

ANS: E         PTS: 1        DIF: Easy            TOP: Electronic marketing and intellectual property

ESSAY

1. Edwin L. Artzt, former chairman and CEO of Procter & Gamble, draws an analogy between exercising and advertising. Explain the meaning of this analogy, particularly in reference to brand equity.

ANS:

Mr Artzt is pointing out that advertising, like exercising, provides long-term benefits. Moreover, like exercise, it is easy to stop advertising or postpone it because there is no immediate penalty for the interruption.

Advertising momentum is like exercise. Stop exercising and you will lose conditioning and probably gain weight. Stop advertising and your brand likely will lose some of its equity and market share as well.

PTS: 1          DIF: Easy                 TOP: The magnitude of advertising and ad-investment considerations

2. In general, we can consider four combinations of advertising and price elasticities. Discuss the implications of each of these situations.

ANS:

Situation 1 (maintain the status quo): Consider a situation where consumers have well-established brand preferences. The market would not be very price elastic or advertising elastic. Profits would be maximised by basically adhering to the status quo and maintaining the present price and advertising levels.

Situation 2 (build brand image via increased advertising): In a situation where the market is more advertising elastic than price elastic, it is advisable to spend relatively more on advertising increases than price discounts. This situation is likely for new products, luxury goods and products characterised by symbolism and imagery.

Situation 3 (increase volume via price discounting): This situation is characterised by mature consumer goods markets where consumers have complete information about most brands in the category and brand switching is frequent. Because brands are little differentiated, the market is more price than advertising elastic. Profit increases are obtained more from price discounts than advertising investments.

Situation 4 (increase advertising and/or discount prices): This is a situation where the market is both price elastic and advertising elastic. This would be expected when brands in the product category are inherently differentiable and for products that are seasonal. In this situation, informative advertising can influence consumers’ beliefs about product attributes, but because brands are similar, consumers also are eager to compare prices.

PTS: 1          DIF: Difficult           TOP: Which approach is more beneficial?

3. Explain the hierarchy-of-effects metaphor and discuss why it is important for marketing communicators to understand.

ANS:

The hierarchy-of-effects metaphor implies that for marketing communications to be successful, the various marcom elements must advance consumers through a series of psychological stages. These types of models are all predicted on the idea that the marcom elements, if successful, move people from an initial state of unawareness about a brand to eventually purchasing that brand.

Intermediate stages represent progressively closer steps to brand purchase, with the model given in the textbook establishing brand loyalty as the top step on the ladder.

The initial imperative is to make consumers aware of the brand. However, that is not sufficient, so the next step is to instil in consumers an expectation of what benefits they will obtain from buying a brand. Consumers’ expectations are based on how the brand has been positioned. To the extent that consumers develop expectations, they may undertake trial purchases. Sales promotions and advertisements sometimes work together to encourage trial purchases, often by influencing consumers to switch from brands they currently are purchasing.

Upon trying a brand for the first time, the consumer will form beliefs about its performance, which then form the basis for developing an overall attitude toward the brand. Beliefs and attitudes are mutually reinforcing. Once brand-specific beliefs and attitudes are formed, subsequent marketing communications serve merely to reinforce these beliefs and attitudes.

As long as the brand continues to satisfy expectations and a superior brand is not introduced, the consumer may become a brand loyal purchaser, which is the ultimate objective.

It is important for marketing communicators to understand the hierarchy of effects because the objective for a brand’s marcom program at any point in time depends on where on the hierarchy most consumers are located.

PTS: 1          DIF: Difficult           TOP: The hierarchy-of-effects framework

4. Explain the criteria that good marketing communications (marcom) objectives must satisfy.

ANS:

The criteria for good marcom objectives are:

1.	Include a precise statement of who, what and when. At a minimum, objectives should specify the target audience (who), indicate the specific goal, such as awareness level, to be accomplished (what) and indicate the relevant time frame (when) over which the objective is to be achieved.
2.	Be quantitative and measurable. Objectives must be stated in quantitative terms so as to be measurable.
3.	Specify the amount of change. In addition to being quantitative and measurable, objectives must specify the amount of change they are intended to accomplish.
4.	Be realistic. Unrealistic objectives cannot be accomplished in the time allotted to the proposed marcom campaign.
5.	Be internally consistent. Objectives set for a particular element of a marcom program must be compatible with objectives set for other marcom components.
6.	Be clear and in writing. For objectives to accomplish their purposes of fostering communication and permitting evaluation, they must be stated clearly and in writing so that they can be disseminated to marcom personnel who will be held responsible for seeing that the objectives are accomplished.

 

PTS: 1          DIF: Moderate          TOP: Setting achievable advertising objectives

5. Compare and contrast the concepts of ‘share of market (SOM)’ and ‘share of voice (SOV)’ and discuss the implications for advertising budgeting.

ANS:

The ratio of the brand’s revenue to total category revenue is that brand’s share of market (SOM). Similarly, the ratio of a brand’s advertising expenditures to total category advertising expenditures is that brand’s share of voice (SOV).

SOV and SOM generally are correlated: brands having larger SOVs also generally realise larger SOMs. This does not mean, however, that the SOV causes SOM; in fact, the relationship between the two is bidirectional. A brand’s SOV is partially responsible for its SOM; at the same time, brands with larger SOMs can afford to achieve higher SOVs and smaller-share brands often are limited to relatively small SOVs.

By considering a brand’s SOM and the competitor’s SOV, a framework can be developed for evaluating whether a brand should increase or decrease its advertising expenditures (some students might reproduce Figure 5.10).

• If a brand has a relatively low SOM and its competitor’s SOV is relatively high, managers for that brand should consider decreasing ad expenditures and finding a niche that can be defended against other small-share brands.
• If a brand’s SOM is relatively high and its competitor has a high SOV, advertising expenditures should probably be increased to defend its position.
• If a brand’s SOM is low and its competitor’s SOV is also low, the general recommendation is to aggressively attack with a large SOV premium vis-á-vis that competitor.
• Finally, if a brand holds a high SOM but its competitor is non-aggressive and has a relatively low SOV, a brand can retain its present position by maintaining only a modest advertising spending premium over its competitor.

PTS: 1          DIF: Difficult           TOP: Competitors’ ad spend

6. Name and describe the four practical budgeting methods.

ANS:

The four budgeting methods are:

1.	Percentage-of-sales budgeting. A company sets a brand’s advertising budget by simply establishing the budget as a fixed percentage of past or anticipated sales volume. What percentage to use is highly variable, however, and varies by industry. This method has been criticised as being illogical because it reverses the logical relationship between sales and advertising. Instead of Sales = f(Advertising), this method says Advertising = f(Sales). Thus if sales are expected to increase, the budget also increases; when sales are expected to decline, the budget is reduced. However, in an economic downswing, increasing advertising expenditures might be more appropriate to prevent further sales erosion.
2.	Objective-and-task budgeting. This is generally regarded as the most sensible and defendable advertising budgeting method. In using this method, decision makers must specify what role they expect a marcom element to play for a brand and then set the budget accordingly. The steps involved are: (1) specify the marketing objectives (i.e. sales volume, market share, profit contribution), (2) assess the communication functions that must be performed to accomplish the marketing objectives, (3) determine advertising’s role in the total communication mix, (4) establish specific advertising goals in terms of measurable communication responses, and (5) establish the budget based on estimates of expenditures required to accomplish the advertising goals.
3.	Competitive parity method. This method sets the budget by examining what competitors are doing. A company may decide not merely to match but to exceed its expenditures. Deciding what to do depends on your market share and your competitor’s share of voice.
4.	Affordability method. A firm spends on advertising only those funds that remain after budgeting for everything else. This method relegates marcom elements to a position of comparative insignificance (vis-á-vis other investment options) and implicitly considers them unimportant to a brand’s present success and future growth.

 

PTS: 1          DIF: Moderate          TOP: Practical budgeting methods

7. Explain the differences between the Traditional view and the Alternative view for having sales represent the advertising objective. Explain which view you support.

ANS:

The Traditional view asserts that using sales as the objective for a branded product’s marcom effort is unsuitable for two major reasons. First, a brand’s sales volume during any given period is the consequence of a host of factors in addition to advertising, sales promotions, and other elements of the program. These include the economic situation, competitive activity, and all the other marketing mix variables (i.e. price, quality, distribution etc.). The second reason is that marcom’s effect on sales is typically delayed, or lagged. Advertising during any given period does not necessarily influence sales in the current period but may influence sales during later periods.

The Alternative view contends that marketing communicators should always state objectives in terms of sales or market share gains and that failure to do so is a cop-out. The logic of this view is that marcom’s purpose is not just to result in communication effects but rather to generate sales. This view contends that it is always possible to measure, if only vaguely and imprecisely, marcom’s effect on sales. Presales, or communication, objectives are claimed to be ‘precisely wrong,’ in contrast to sales measures that are asserted to be ‘vaguely right.’

Students’ opinions will support either view, and don’t be surprised if many espouse the ‘accountability perspective’, which is a synthesis of the two viewpoints.

PTS: 1          DIF: Moderate          TOP: Developing an advertising objective