As a result of economies of scale, large advertisers:

A. are likely to enjoy more favorable advertising time and space than smaller advertisers.

B. get higher advertising rates than smaller advertisers.

C. accrue the disadvantages of advertising several products jointly.

D. have higher average costs of production.

E. can spend more money on advertising and realize a better return.

Answer: E

As a result of ____, large advertisers can maintain advertising expenditure shares that are smaller than their market shares because they get lower advertising rates and accrue the advantages of advertising several products jointly.

A. economies of scale

B. differential advertising advantages

C. competitive parity

D. a concave-downward response

E. multiple advertising channels

Answer: A

As a tool for budget allocation, multiple regression analysis is most often employed in budget models using:

A. computer simulation

B. competitive parity

C. arbitrary allocation

D. percentage of sales

E. a top-down approach

Answer: A

During the first months of a new product introduction, a useful budgeting technique to determine a ballpark figure for setting feasible objectives is the _____ method.

A. payout planning

B. percent of sales

C. competitive parity

D. 401k

E. marginal analysis

Answer: A

____ is a method for allocating budgets designed to determine the investment value of the advertising appropriation.

A. Payout planning

B. Percent of sales method

C. Competitive parity

D. Arbitrary allocation

E. Objective and task

Answer: A

The objective and task method is most difficult to use when:

A. the product to be promoted is intangible and in the maturity stage of its product life cycle.

B. the product to be promoted is in the decline stage of its product life cycle.

C. the product to be promoted is a cash cow.

D. the product to be promoted is new to the market.

E. a service is being promoted.

Answer: D

Which of the following statements provides a good rule of thumb for setting the advertising budget for a new product?

A. Its advertising budget should be twice the desired market share.

B. Its advertising budget should be equal to that of the largest market shareholder in the product category.

C. Its advertising budget should be as much as the firm can afford.

D. Its advertising budget should be ten percent greater than the average budget planned for the entire payout period.

E. Its advertising budget should be less than that needed to maintain the desired market share.

Answer: A

The first task in the objective and task method of budgeting is to:

A. conduct a system analysis.

B. create an organizational budget.

C. isolate advertising objectives.

D. determine what tasks need to be accomplished.

E. reevaluate objectives from previous years.

Answer: C

Which of the following is an example of a budgeting allocation method that uses a build-up approach?

A. ROI

B. competitive parity

C. objective and task

D. arbitrary allocation

E. percentage of sales

Answer: C

Defining the communications objectives to be accomplished and estimating the costs associated with the performance of the necessary strategies and activities are steps in the _____ method of budgeting.

A. competitive parity

B. payout planning

C. ROI

D. return on investment

E. objective and task

Answer: E

The task and objective method of budgeting as well as the payout plan are both examples of the _____ approach.

A. trading up

B. top-down

C. bottom-up

D. build-up

E. trickle up

Answer: D

Top-down budgeting methods are commonly used because of:

A. their effectiveness.

B. upper management's desire for control.

C. the growing availability of computer simulations.

D. the ease with which a manager can assess the impact of sales on ROI.

E. their quantitative nature.

Answer: B

In the _____ method of budget determination advertising is considered an investment, similar to plant and equipment.

A. payout planning

B. objective and task

C. ROI budgeting

D. competitive parity

E. percentage of sales

Answer: C

A disadvantage associated with the _____ method is its assumption that because firms have similar promotional expenditures their programs will be equally effective.

A. return on investment

B. affordable

C. competitive parity

D. objective and task

E. payout planning

Answer: C

Which of the following is an advantage of the competitive parity method?

A. It makes use of the buildup approach to establishment of promotional budgets.

B. It leads to stability in the marketplace by minimizing marketing warfare.

C. It is based on the fact that advertising and promotions are designed to accomplish specific objectives by addressing certain problems and opportunities.

D. It gives due recognition to the contributions of creative executions and/or media allocations.

E. Under this method, the budget is driven by the objectives to be attained.

Answer: B

Which of the following methods of determining a budget requires a marketing department manager to use input from a clipping service?

A. ROI method

B. Arbitrary allocation method

C. Percentage of sales method

D. Competitive parity method

E. Objective and task method

Answer: D

When using the competitive parity budgeting method, the firm:

A. matches its share of total industry advertising expenditures to its market share.

B. spends as much as it can.

C. allocates some portion of planned sales for the period to advertising.

D. spends the same total amount as its major competitors spend.

E. bases its advertising and promotion expenditures on sales.

Answer: A

The _____ budgetary allocation method is designed to promote stability and minimize marketing warfare as well as take advantage of the collective wisdom of the industry.

A. ROI

B. arbitrary allocation

C. percentage of sales

D. competitive parity

E. objective and task

Answer: D

The major problem associated with the _____ budgeting method is that it reverses the cause and effect relationship between advertising and sales.

A. percent of sales

B. objective and task method

C. competitive parity

D. S-shaped response

E. rapidly diminishing returns

Answer: A

The _____ method of budgeting uses advertising/sales ratio data.

A. objective and task

B. affordable

C. percent of sales

D. ROI

E. arbitrary allocation

Answer: C