ADV 1300 Chapter 1

List and briefly describe the four fundamental assumptions of free-market economics.

(1) Self-interest. People and organizations tend to act in their own self-interest. They always want more—for less. (2) Complete information. Complete information about products leads to greater competition and lower prices. (3) Many buyers and sellers. Having a wide range of sellers ensures that if one company does not meet customer needs, another will capitalize on the situation by producing a more market-responsive product. Having a wide range of buyers ensures that sellers can find customers who are interested in the unique products they are able to produce at a fair price. (4) Absence of externalities (social costs). Sometimes the sale or consumption of products may benefit or harm other people who were not involved in the transaction. The government uses taxes and regulations to eliminate the externalities when this occurs.

The 4Ps of the marketing mix are A. product, price, place, and promotion. B. product, people, process, and promotion. C. people, price, place, and product. D. product, process, people, and physical evidence. E. place, people, product, and process.

A

Which of the following organizations is most likely to use a public service announcement (PSA)? A. The Humane Society B. Dell Computer C. American Stock Exchange D. Delta Airlines E. Walmart

A

Which of the following is a social benefit of advertising? A. It helps pay for newspapers and other media. B. It discourages economic competition. C. It emphasizes consumerism over other values. D. It perpetuates longstanding stereotypes. E. It exposes people to thousands of commercial messages daily.

A. It helps pay for newspapers and other media.

Which statement best describes how the growth of new media has affected traditional media? A. New media have massively disrupted traditional media, such as newspapers, by costing them revenue. B. As new media have grown more popular, they have earned far more advertising revenues than traditional media. C. New media grew sharply at first but proved to be a short-lived fad that did not affect traditional media. D. The new media have merged with traditional media like newspapers and prevented them from closing. E. New media have had no effect at all on traditional media.

A. New media have massively disrupted traditional media, such as newspapers, by costing them revenue.

Beginning in the 1840s, _____ permitted advertising on a national scale with high-quality reproduction. A. magazines B. newspapers C. handbills D. direct mailings E. store signs

A. magazines

During the preindustrial age, most advertisements took the form of signs with symbols such as a beer tankard indicating a tavern because A. most people were illiterate and could not read. B. most firms could not afford more sophisticated advertisements. C. local laws prohibited advertising in newspapers. D. most churches would not approve other forms of advertising. E. signs and symbols were considered lucky.

A. most people were illiterate and could not read.

For years Levi-Strauss advertised its jeans to baby boomers because that is what most baby boomers wore during the 1960s, and many baby boomers are trying to buy back their youth. Unfortunately, this strategy of making Levi's a baby boomer icon has decreased the brand's appeal to today's teens, who perceive the Levi's brand as old-fashioned. In this example, the _____ did not produce a positive effect. A. positioning strategy B. unique selling proposition C. logistical strategy D. promotional mix E. universal sales promotion

A. positioning strategy

Which of the following ages in the evolution of advertising was characterized by the Chinese inventing paper, Johannes Guttenberg inventing the printing press, and the Boston Newsletter beginning to carry advertisements that appealed to American colonists? A. preindustrial age B. industrial age C. golden age D. postindustrial age E. global interactive age

A. preindustrial age

Benjamin Franklin was the first American known to A. use illustrations in ads .B. print color in a newspaper. C. use copy in ads. D. eliminate headlines from ads. E. minimize white space in ads.

A. use illustrations in ads

Describe how advertising fits into the marketing process.

Advertising helps an organization achieve its marketing goals. Marketing functions such as marketing research have an impact on the type of advertising a company employs. Companies and organizations use many different types of advertising, depending on their particular marketing strategy. The marketing strategy will determine who the targets of advertising are, where the advertising should appear, what media should be used, and what purposes the advertising should accomplish.

Define advertising.

Advertising is the structured and composed nonpersonal communication of information, usually paid for and usually persuasive in nature, about products or ideas by identified sponsors through various media.

Advertising reaches us through various channels of communication referred to as A. feedback. B. media. C. encoding tools. D. distribution methods. E. information processes.

B

When Kobe buys a box of donuts and Julia purchases a copy of the New York Times, both are acting as A. sponsors. B. consumers. C. producers. D. testers. E. adopters.

B

Who wrote the book Scientific Advertising? A. Francis Ayer B. Claude Hopkins C. Volney B. Palmer D. Albert Lasker E. N. W. Ayer

B. Claude Hopkins

_____ is a type of marketing used to slow down the demand for certain products, such as energy-consuming goods. A. Market segmentation B. Demarketing C. Environmental advertising D. Eco-marketing E. Cause marketing

B. Demarketing

Which of the following statements best describes how Volney B. Palmer influenced advertising? A. In 1729, he became the first to use "white space" and illustration in ads. B. In 1841, he set up the first professional advertising agency in the United States. C. In 1869, his advertising agency became the first to prepare ads for manufacturers. D. In 1888, he founded the Printer's Ink magazine. E. In 1912, he became the first advertising agent to reach $2 million in sales.

B. In 1841, he set up the first professional advertising agency in the United States.

During the _____ age, manufacturers were principally concerned with production, and the primary burden of marketing fell on the wholesalers. A. preindustrial B. Industrial C. golden D. postindustrial E. global interactive

B. Industrial

Governments often use taxation and/or regulation to compensate for or eliminate the social cost when the sale or consumption of products may benefit or harm other people who are not involved in the transaction and did pay for the product. Which fundamental assumption of a market-driven society does this practice relate to? A. many buyers and sellers B. absence of externalities C. presence of opportunity costs D. self-interest E. complete information

B. absence of externalities

Which term best refers to items such as shampoo, lipstick, juice, and breakfast cereal? A. customized packaged goods B. consumer packaged goods C. in-house products D. branded products E. serviceable goods

B. consumer packaged goods

In the history of advertising, the _____ made possible the first advertising formats: posters, handbills, signs, and newspapers. A. quill pen B. printing press C. silk screen D. ability to mold lead E. ability to copy and draw

B. printing press

Which term refers to the distinctive benefits that make a product different than any other? A. perceptual value B. unique selling proposition C. economic differential D. economic advantage E. comparative advantage

B. unique selling proposition

To differentiate its candy from that produced by other candy manufacturers, the manufacturer of Green & Black brand confections advertises that it is the only company to make its chocolate organically. This commitment to market only organic chocolate is an example of a(n) A. perceptual value. B. unique selling proposition. C. economic differential. D. economic advantage. E. differential value.

B. unique selling proposition.

Explain the following statement: "As a social force, advertising has been a major factor in improving the standard of living in the United States."

By publicizing the material, social, and cultural opportunities of a free enterprise society, advertising has increased productivity in both management and labor. Besides facilitating sales, advertising has also fostered freedom of the press. Print and broadcast media all receive the majority of their income from advertising. Through PSAs, advertising has provided Americans with important information about social issues.

26. _____ is the structured and composed nonpersonal communication of information, usually paid for and usually persuasive in nature, about products by identified sponsors through various media. A. Marketing B. Sales promotion C. Advertising D. Feedback E. Message channeling

C

During a drought in the southeastern United States, marketing campaigns were implemented to encourage consumers to use less water by increasing rates and issuing fines to those who used more than their fair share. A marketing effort such as this would best be classified as A. market segmentation. B. eco-marketing. C. demarketing. D. ethical marketing. E. cause marketing.

C

Which of the following is an example of a good? A. a medical examination B. an Internet provider C. a copier D. a haircut E. a car warranty

C

Which of the following is the best example of a service? A. a new suit of clothes B. a splint to treat a sports injury C. a seminar on how to plan for retirement D. popcorn sold at a school fund-raiser E. canned goods donated to a food pantry

C

Which of the following words best describes advertising? A. free B. spontaneous C. persuasive D. unsponsored E. unemotional

C

What role did the firm N. W. Ayers & Sons play in the history of U.S. advertising? A. It was the first printer to use illustrations in its ads. B. It was the first manufacturer to use national advertising. C. It was the first ad agency to charge a commission based on the "net cost of space." D. Its advertising claims were the first criticized by the Food & Drug Administration. E. It published the first colonial newspaper with advertisements for local businesses.

C. It was the first ad agency to charge a commission based on the "net cost of space."

What did the first newsaper ad advertise? A. a new edition of the Bible B. a piece of land C. a reward for stolen horses D. a religious service E. a traveler's inn

C. a reward for stolen horses

What type of strategy is being used by a website like www.CNNMoney.com when it describes itself as "a one-stop destination covering everything a small-business owner needs to know" in order to associate itself with benefits that are important to small business owners? A. market penetration B. target differentiation C. positioning D. market segmentation E. sales promotion

C. positioning

A _____ is an effective way to separate a particular brand from its competitors by associating that brand with a particular set of customer needs that rank high on the consumer's priority list. A. logistical strategy B. universal sales promotion C. positioning strategy D. market aggregation strategy E. promotional mix

C. positioning strategy

The term _____ best explains why most automobile manufacturers produce similar products yet consumers have preferences for specific brands. A. market segmentation B. market formatting C. product differentiation D. strategic marketing E. product segmentation

C. product differentiation

A decade after World War I ended, a significant event occurred that caused consumer sales resistance, corporate budget cutting, and reduced advertising expenditures. This event was A. the imposition of a personal income tax by the federal government. B. the defeat of Germany and its default on loans granted by the Allies. C. the stock market crash and the beginning of the Great Depression. D. the creation of the World Bank, which made loans available to state and federal banks. E. strong challenges to the consumer credit system as established by the federal government.

C. the stock market crash and the beginning of the Great Depression.

During the 1980s, many companies begin using more sales promotions because sale promotions A. took advantage of social media. B. reached a broader audience. C. were more cost effective. D. added value to brands. E. used celebrity endorsements to advantage.

C. were more cost effective.

Of all the business functions, _____ is the only function whose primary role is to bring in revenue. A. finance B. operations management C. human resource management D. marketing E. accounting

D

Which of the following statements about word-of-mouth advertising is true? A. It is not a communication medium. B. It is not an advertising medium. C. It is a highly effective paid form of advertising. D. It is becoming an advertising medium because of social media. E. It has a structured form and generally predictable results

D

Which of the following would most likely be considered a Public Service Announcement (PSA)? A. Dell recalling laptops to correct manufacturing defects B. Verizon promoting a new data plan with unlimited texting C. Walmart advertising year-end discounts and clearance items D. the American Red Cross promoting blood donation opportunities E. a local Chevrolet dealer providing the address of its new showroom

D

_____ is a process by which marketers search for unique groups of people whose needs can be addressed through more specialized products. A. Product segmentation B. Targeted diversification C. Demarketing D. Market segmentation E. Market aggregation

D. Market segmentation

Which of the following statements demonstrates that people tend to act in their self-interest? A. The more information buyers and sellers have, the more efficient the competition. B. A wide variety of sellers encourages market-responsive products. C. A wide variety of buyers helps sellers find customers. D. People always want more—for less. E. Externalities are social costs.

D. People always want more—for less.

Which of the following is the largest advertising medium in terms of advertising revenues? A. Internet B. newspapers C. magazines D. television E. radio

D. TV

Which of the following occurred near the end of the nineteenth century and accelerated the usage of print ads by manufacturers? A. World War I finally ended. B. Global advertising agencies formed. C. Newspaper advertisements decreased in cost. D. The United States reached a 90 percent literacy rate. E. English was established as the official language of the United States.

D. The United States reached a 90 percent literacy rate.

National Park officials are concerned that the growing numbers of visitors to the national park system of the United States pose a threat to the very national wonders they want to see. If the park officials decided to try to decrease the number of visitors to the park, they could most likely use _____ to accomplish this objective. A. positioning B. eco-marketing C. market segmentation D. demarketing E. relationship marketing

D. demarketing

With respect to the evolution of advertising in the United States, the _____ age started at the end of World War II and lasted until about 1979. A. preindustrial B. postindustrial C. industrial D. golden E. global interactive

D. golden

As a marketing tool, advertising is primarily used to A. create unfair advantages among competitors. B. encourage buyers to compare prices. C. control viral commercialization. D. increase product use. E. create feedback.

D. increase product use.

A Quinceañera is a celebratory rite of passage for Latino girls when they turn fifteen. In the United States, some teen-oriented magazines such as Seventeen have begun including articles and publishing special guides focused on the Quinceañera. This is an example of a _____ strategy. A. product B. targeted diversification C. demarketing D. market segmentation E. market aggregation

D. market segmentation

The Cold War ended with the collapse of the Soviet Union, and Western companies and financiers began to invest heavily in what were once called the Warsaw Pact countries. Big multinational companies and their advertising agencies went on a binge, buying other big companies and adding a new term for this process to the financial lexicon. This term was A. partnering. B. capitalism. C. oligopoly. D. megamerger. E. gigantism.

D. megamerger.

Which of the following terms is used for the availability of cable networks devoted to food, home repair, golf, history, or animals? A. mass marketing B. two-way media C. relationship marketing D. narrowcasting E. broadcasting

D. narrowcasting

When Subway uses the slogan "Eat fresh" to appeal to consumers who want healthier fast food, it is using the strategy of A. market segmentation. B. me-too product features. C. me-too images. D. positioning. E. puffery.

D. positioning.

The _____ age, which began around 1980, started a period of cataclysmic change. A. industrial B. preindustrial C. golden D. postindustrial E. global interactive

D. postindustrial

Two related economic factors characterized the marketing world of the late 1980s and early 1990s in the United States. One of those factors was A. an aging upper management that led to a lack of innovation. B. a growing burden of debt, which forced governments to increase business taxes. C. the implementation of affirmative action policies. D. the aging of traditional products and a corresponding growth of competition. E. the development of strong consumer trust.

D. the aging of traditional products and a corresponding growth of competition.

Since advertising is typically directed to groups of people rather than to individuals, advertising is defined as a A. public service announcement. B. subtle medium. C. sponsor-driven strategy. D. market segmentation strategy. E. type of nonpersonal communication.

E

_____ is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. A. Management B. Advertising C. Production D. Logistics E. Marketing

E

Why is 1896 considered an extremely important year for direct mail advertising and mail-order selling? A. Advertising agencies were allowed to charge commissions for their services. B. The U.S. Post Office was created. C. The Office of Consumer Affairs guaranteed that consumers could return products that did not meet their needs. D. The Federal Communications Commission took control of all mail order and direct mail advertising. E. The federal government inaugurated rural free mail delivery.

E. The federal government inaugurated rural free mail delivery.

The term integrated marketing communications means A. developing a long-term marketing strategy. B. communicating marketing information to a target audience. C. linking the sales and communication departments in a firm. D. training a sales force to use proper marketing skills. E. coordinating a firm's brand messages from a variety of sources.

E. coordinating a firm's brand messages from a variety of sources.

_____ has driven the growth of advertising since its earliest beginnings and has made it one of the hallmarks of the free enterprise system. A. Culture B. Ethics C. Economics D. Literacy E. Socialism

E. economics

In 2005, Comcast created AZN, a television network for Asian Americans. What type of strategy did Comcast use when it found this unique group of consumers whose specific needs were not being addressed by a cable station? A. positioning B. demarketing C. product differentiation D. market aggregation E. market segmentation

E. market segmentation

The period in the evolution of advertising that extended from the beginning of recorded history to roughly the start of the nineteenth century was called the A. sales era. B. positioning age. C. industrial age D. industrializing age. E. preindustrial age.

E. preindustrial age.

A firm's advertising strategy will help determine who the targets of advertising should be, in what markets the advertising should appear, and what goals the advertising should accomplish.

False

Athletic shoes, crystal goblets, and manicures are all examples of goods.

False

Benjamin Franklin opposed the use of advertising.

False

Demarketing, which was popular in the industrial age, is no longer used today.

False

For Americans, the profession of advertising began when Francis Ayer formed an ad agency in Philadelphia in 1869.

False

In 1914, Congress passed the Federal Trade Commission Act to protect the public's health and control drug advertising.

False

Only the Internet provides advertisers with the ability to engage in narrowcasting.

False

Our economy is based on the concept of perfect competition.

False

The golden age of advertising ended shortly after World War II.

False

The preindustrial age extended from the beginning of recorded history to the first decades of the twentieth century.

False

The term "mass media" includes print media only. The other media are part of general media

False

The ultimate goal of the marketing process is to build a strong brand image.

False

What was the role of Francis Ayer in the evolution of advertising?

In 1869, Francis Ayer formed an ad agency in Philadelphia. N. W. Ayer & Sons was the first agency to charge a commission based on the "net cost of space" and the first to conduct a formal market survey.

What is integrated marketing communications?

Integrated marketing communications (IMC) is the coordination and integration of messages from a variety of sources. Marketers today realize that it is no longer possible to reach and effectively persuade their audiences with traditional media alone—television, radio, magazines, newspapers, direct mail, and outdoor. Instead, they must combine and coordinate their use of traditional media, public relations, personal selling, sales promotion, and digital media to mount an effective marketing campaign.

What was the most important development in the history of advertising?

Johannes Gutenberg invented the printing press in Germany. The press was not only the most important development in the history of advertising, and indeed communication, but it also revolutionized the way people lived and worked.

Describe who bore the burden of marketing in the industrial age.

Manufacturers were mainly concerned with production. The primary marketing burden fell on wholesalers and large mail-order catalog companies like Montgomery Ward and Sears Roebuck. Only a few innovative manufacturers foresaw the usefulness of mass media advertising to stimulate consumer demand for their products.

What is marketing?

Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

Differentiate between marketing strategy and advertising strategy.

Marketing strategy is the statement of how the company is going to accomplish its marketing objectives. It will help determine who the targets of advertising should be, in what markets the advertising should appear, and what goals the advertising should accomplish. The advertising objective declares what the advertiser wants to achieve with respect to consumer awareness, attitude, and preference; the advertising strategy describes how to get there. Advertising strategy consists of two substrategies: the creative strategy and the media strategy.

What is the most basic function of branding?

One of the most basic functions of branding, as well as of advertising, is to identify products and their source and to differentiate them from others.

How did the spread of public schooling in the United States affect the advertising industry?

Public schooling helped the nation reach an unparalleled 90 percent literacy rate. Manufacturers gained a large reading public that could understand print ads. The United States thus entered the twentieth century as a great industrial state with a national marketing system propelled by advertising.

Briefly describe the 4Ps of the marketing mix.

The 4Ps of the marketing mix are developing products, pricing them strategically, distributing them so they are available to customers at appropriate places, and promoting them through sales and advertising activities.

Why did advertisers during the mid-twentienth century believe that every advertisement must point out their product's unique selling proposition?

The USP (unique selling proposition) refers to product features that differentiate it from competitive products. It was an extension of the product differentiation strategy. It was believed at this time that consumers would not be influenced by ads to buy a product unless the ad explained why they should buy that specific product and not some other.

Describe how advertising evolved during the industrial age.

The industrial age ran from the late-1700s (when the Industrial Revolution began in England) to around the middle of the 1900s. The Industrial Revolution reached the United States in the early 1800s. Significant events of this age that could be discussed include the early use of machinery, how population increased, how literacy rates increased, the power of the wholesaler in the distribution channel, how the profession of advertising grew, how early advertising agencies functioned, and how communication devices changed the way advertising was received. In addition, technologies such as the telegraph, telephone, typewriter, phonograph, and films all helped people communicate as never before.

One of the principles of free-market economics is that our market-driven society believes in "complete information." What does this mean?

The more information buyers and sellers have about what products are available, at what quality, and at what prices, the more efficient the competition. The outcome is better quality products and lower prices for all.

How has the Coca-Cola Company gone about achieving the most basic function of branding?

The most basic function of branding is to identify products and their sources and to differentiate them from others. Coca-Cola created a clear identity with its distinctive logo and bottle shape. Over the company's history, its advertising has always promoted a common voice and a common theme: "Coca-Cola makes life's relaxing moments even better."

Describe how advertising evolved during the preindustrial age.

The preindustrial age began with the beginning of recorded history and ran until the early 1800s. During this time, most human activity was devoted to meeting basic survival needs. Distribution was limited to how far vendors could walk and advertising was how loud they could shout. Over time, the development of literacy, inventions such as the printing press, and the spread of trade away from local producers encouraged the development of advertising. Developments such as print ads spread advertising to wider audiences. Benjamin Franklin introduced the use of illustrations. Advertising techniques such as puffery began as early as the mid-1700s.

Which technical innovations of the Industrial Revolution assisted the advertising industry?

The technological advances of the Industrial Revolution enabled great changes in advertising. Photography, introduced in 1839, added credibility and a new world of creativity. It allowed ads to show products, people, and places as they really were, rather than how an illustrator visualized them. The telegraph, telephone, typewriter, phonograph, and later, films, all let people communicate as never before.

What are the fundamental assumptions of free-market economics that a market-driven society strives to achieve?

There are four fundamental assumptions of free-market economics that a market-driven society strives to achieve. These are self-interest, complete information, many buyers and sellers, and the absence of externalities (social costs).

A product's USP is the feature that differentiates it from competitive products.

True

Advertising is just one type of marketing communications tool.

True

As a social force, advertising has been a major factor in improving the standard of living in the United States.

True

During the industrial age, manufacturers were primarily concerned with production rather than marketing.

True

Integrated marketing communications involves the coordination of brand messages from multiple sources including PR activities, sponsorship commitments, personal selling, advertising, and digital media.

True

One of the basic functions of advertising is to communicate information about the product, its features, and its location of sale.

True

One of the functions of advertising as a marketing tool is to build value, brand preference, and loyalty.

True

Popeyes Louisiana Kitchen, a fast-food restaurant chain, used a positioning strategy when it adopted the slogan "Louisana Fast."

True

Product differentiation is a strategy used to identify groups of people or organizations with certain shared needs and characteristics.

True

Sales promotion is a more cost-effective marketing communication tool than advertising.

True

The billboard that displays an advertisement for a new Internet service provider is an example of a medium.

True

Wheaties breakfast cereal is using product differentiation when it calls itself the "breakfast of champions."

True

With the establishment of public schooling, the United States reached an unparalleled 90 percent literacy rate.

True