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parul9
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ESSAY QUESTION:
The following appeared in a corporate memorandum of a beverage manufacturer:
"Our promotional price reductions on energy drinks have been highly successful, as we have seen a dramatic increase in unit sales. Further, surveys of our consumers indicate that this promotion was favorably received by the majority of our customers. Therefore, to improve our company's profitability and enhance its perception in the eyes of consumers, similar price reductions should be offered on all drinks produced by our firm."
Discuss how well reasoned you find this argument. Point out flaws in the argument's logic and analyze the argument's underlying assumptions. In addition, evaluate how supporting evidence is used and what evidence might counter the argument's conclusion. You may also discuss what additional evidence could be used to strengthen the argument or what changes would make the argument more logically sound.
YOUR RESPONSE:
The argument states that since the response of price reduction on new energy drinks introduced in the market by the company was favourible, the same strategy should be applied on all the existing drinks produced by the firm. The expectation of the author is that this measure would incrase profitability and enhance the perception in the eyes of the consumers. The argument is not a very well reasoned one and has a lot of loopholes in its logical structure. The argument is analysed in greater detail in the paragraphs that follow.
The evidence provided in the argument is related to drinks newly introduced in the market. In order to make their presence felt in a market overcrowded with a lot of competetive drinks, it is a prudent move to launch these drinks at a price lower than their actual market price. An indicator of positive response from the consumers for these drinks is cited by the mention of the surveys done with the consumers of these drinks. This strategy of discounted selling price of newly launched drinks has proved to be highly effective and hence is laudable. Such moves help in establishing a product in the market. When a product is new and untried, it has no differentiating edge against its competitors since the consumer has not tried it. The only way that it can grab the consumer's attention is if it has a lower price tag than its competitors. So, this is a perfect move for creating a base for a new product.
The argument goes on to say that since the price reduction technique worked with new energy drinks, the same should be applied to existing drinks as well. This is a highly debatable conclusion. First of all, it is highly inaccurate to see already established products and new products at the same level. Unlike new products, consumers already have an already evolved perception of the existing products. In fact price reduction of an already existing drink without any rhyme or reason, might have a very contrary effect to what is expected. Consumers may look at such a drink with great suspicion, doubting the quality and may decide against buying it. Secondly, the author's argument is based on the assumption that the the favorible response to the newly introduced drinks will continue if the prices remain slashed. This assumption is flawed because it completely sidelines factors like quality, taste, camparison with competitor drinks that a consumer considers while choosing one drink over another. What worked at the promotional phase of a product may not continue once the consumers have made their judgement about the drink based on various other parameters apart from cost.
Lastly, the author has naively concluded that slashed prices would lead to increased unit sales which would increase profitability. There are factors like operating costs, margins etc that should have been considered before reaching such a conclusion.
The argument could have been strengthened had there been a mention of the current market prsence of the firm vis-a-vis its drinks. The conclusion drawn currently seems hollow in the light of the evidence provided. If the firm is a market leader and then slashes prices, the move would make sense, because then it would purely be a sale boosting exercise. The current perception of the consumers of the firm's drinks should also have been mentioned. Also, the current costing of the drinks and operating margins should have been considered.
Summing up, the argument is not well reasoned out and has gaping holes in its logical structure. There are assumptions made that can be easily pointed out and questioned. There are fundamental flaws in the reasoning that can subject it to immediate rebuttal. The author should consider stating the assumptions and making a more rounded conclusion for gaining more credibility for this argument.
The following appeared in a corporate memorandum of a beverage manufacturer:
"Our promotional price reductions on energy drinks have been highly successful, as we have seen a dramatic increase in unit sales. Further, surveys of our consumers indicate that this promotion was favorably received by the majority of our customers. Therefore, to improve our company's profitability and enhance its perception in the eyes of consumers, similar price reductions should be offered on all drinks produced by our firm."
Discuss how well reasoned you find this argument. Point out flaws in the argument's logic and analyze the argument's underlying assumptions. In addition, evaluate how supporting evidence is used and what evidence might counter the argument's conclusion. You may also discuss what additional evidence could be used to strengthen the argument or what changes would make the argument more logically sound.
YOUR RESPONSE:
The argument states that since the response of price reduction on new energy drinks introduced in the market by the company was favourible, the same strategy should be applied on all the existing drinks produced by the firm. The expectation of the author is that this measure would incrase profitability and enhance the perception in the eyes of the consumers. The argument is not a very well reasoned one and has a lot of loopholes in its logical structure. The argument is analysed in greater detail in the paragraphs that follow.
The evidence provided in the argument is related to drinks newly introduced in the market. In order to make their presence felt in a market overcrowded with a lot of competetive drinks, it is a prudent move to launch these drinks at a price lower than their actual market price. An indicator of positive response from the consumers for these drinks is cited by the mention of the surveys done with the consumers of these drinks. This strategy of discounted selling price of newly launched drinks has proved to be highly effective and hence is laudable. Such moves help in establishing a product in the market. When a product is new and untried, it has no differentiating edge against its competitors since the consumer has not tried it. The only way that it can grab the consumer's attention is if it has a lower price tag than its competitors. So, this is a perfect move for creating a base for a new product.
The argument goes on to say that since the price reduction technique worked with new energy drinks, the same should be applied to existing drinks as well. This is a highly debatable conclusion. First of all, it is highly inaccurate to see already established products and new products at the same level. Unlike new products, consumers already have an already evolved perception of the existing products. In fact price reduction of an already existing drink without any rhyme or reason, might have a very contrary effect to what is expected. Consumers may look at such a drink with great suspicion, doubting the quality and may decide against buying it. Secondly, the author's argument is based on the assumption that the the favorible response to the newly introduced drinks will continue if the prices remain slashed. This assumption is flawed because it completely sidelines factors like quality, taste, camparison with competitor drinks that a consumer considers while choosing one drink over another. What worked at the promotional phase of a product may not continue once the consumers have made their judgement about the drink based on various other parameters apart from cost.
Lastly, the author has naively concluded that slashed prices would lead to increased unit sales which would increase profitability. There are factors like operating costs, margins etc that should have been considered before reaching such a conclusion.
The argument could have been strengthened had there been a mention of the current market prsence of the firm vis-a-vis its drinks. The conclusion drawn currently seems hollow in the light of the evidence provided. If the firm is a market leader and then slashes prices, the move would make sense, because then it would purely be a sale boosting exercise. The current perception of the consumers of the firm's drinks should also have been mentioned. Also, the current costing of the drinks and operating margins should have been considered.
Summing up, the argument is not well reasoned out and has gaping holes in its logical structure. There are assumptions made that can be easily pointed out and questioned. There are fundamental flaws in the reasoning that can subject it to immediate rebuttal. The author should consider stating the assumptions and making a more rounded conclusion for gaining more credibility for this argument.
