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The Value of a Product

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The Value of a Product

by varundaga05 » Fri Jun 25, 2010 3:46 am
The value of a product is determined by the ratio of its quality to its price. The higher the value of a product, the better will be its competitive position. Therefore, either increasing the quality or lowering the price of a given product will increase the likelihood that consumer will select that product rather than a competing one.
Which of the following, if true, would most strengthen the conclusion drawn above?

(A) It is possible to increase both the quality and the price of a product without changing its competitive position.
(B) For certain segments of the population of consumers, higher-priced brands of some product lines are preferred to the lower-priced brands.
(C) Competing products often try to appeal to different segments of the population of consumers.
(D) The competitive position of a product can be affected by such factors as advertising and brand loyalty.
(E) Consumers' perceptions of the quality of a product are based on the actual quality of the product.

Answer : E
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by albatross86 » Fri Jun 25, 2010 4:35 am
Value = Quality / Price
Higher value => Better competitive position
Conclusion is that increasing quality or lowering price (which by definition would tend to increase value) will increase likelihood that a consumer will choose this product.

We thus have an obvious logical bridge being made here: Consumer is more likely to choose the product that has a better competitive position.

STRENGTHENER:


A. True. You could increase the quality and price proportionally to maintain value, and thus it would not affect the competitive position. So what? Does this strengthen the conclusion? No - it is just a logical statement that is irrelevant.

B. For CERTAIN segments, higher-priced bands of the SAME product line are PREFERRED to lower-priced bands. This is so very narrow in its scope, that it should instantly go off your list. In fact, it tends to weaken our conclusion by saying that lowering the price will actually adversely affect the choice of these particular customers.

C. Product A and Product B which compete tend to target different markets. This would suggest that they don't actually compete in the same markets, and thus weakens the conclusion that consumers from either market will tend towards the other product.

D. Other factors of ADVERTISING and BRAND LOYALTY are introduced. This actually WEAKENS the conclusion by introducing new causes in our cause-effect logical bridge. Therefore these factors must be considered before coming to the conclusion that changes in value will affect competitive position.

E. Consumer's perception of quality = Actual quality. This is the only one that actually clears up some doubt in the argument, provides stronger evidence/facts and thus strengthens the conclusion. For example, if a company increases quality but the customer doesn't perceive this, he won't perceive the increase in value and thus it will not effect the product's competitive position.

Pick E.
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by selango » Fri Jun 25, 2010 4:42 am
IMO E

Option E states that consumer perceptions on product is based on actual quality.This provides additional support that if the quality of the product is increased ,then its better competitive.
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by paddle_sweep » Sat Jun 26, 2010 11:33 pm
I am not clear about the explanation for 'E'. Pls explain in simpler terms.
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by albatross86 » Sat Jun 26, 2010 11:39 pm
paddle_sweep wrote:I am not clear about the explanation for 'E'. Pls explain in simpler terms.
Sure, I'll try.

The conclusion relies on the definition of value = quality/price.

Let's look at this example. I build cars. I want to increase the value of my car, but I cannot reduce the price. So what I can do is to try and increase the quality. I follow some procedures to increase the quality of the car, and I am convinced it is much better.

But, if the consumer who is going to buy my car does not agree with this, then what? What if he perceives the car as not being any better because of the changes that I made? Maybe, he thinks another car is of higher quality though it is of lower quality in reality.

This means that there won't be a change in the perceived value of the car because the consumer has not been able to detect the increase in quality, or does not agree with it.

Thus, choice E clarifies the definition of value by saying that this quality, which is a subjective term, is perceived by the consumer in terms of actual quality. Thus if I spend resources to increase my actual quality, I can be assured that the consumer will also perceive this increased quality and the subsequent increase in value.

Hope that makes sense! :)
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by paddle_sweep » Sun Jun 27, 2010 12:06 am
albatross86 wrote:
paddle_sweep wrote:I am not clear about the explanation for 'E'. Pls explain in simpler terms.
Sure, I'll try.

The conclusion relies on the definition of value = quality/price.

Let's look at this example. I build cars. I want to increase the value of my car, but I cannot reduce the price. So what I can do is to try and increase the quality. I follow some procedures to increase the quality of the car, and I am convinced it is much better.

But, if the consumer who is going to buy my car does not agree with this, then what? What if he perceives the car as not being any better because of the changes that I made? Maybe, he thinks another car is of higher quality though it is of lower quality in reality.

This means that there won't be a change in the perceived value of the car because the consumer has not been able to detect the increase in quality, or does not agree with it.

Thus, choice E clarifies the definition of value by saying that this quality, which is a subjective term, is perceived by the consumer in terms of actual quality. Thus if I spend resources to increase my actual quality, I can be assured that the consumer will also perceive this increased quality and the subsequent increase in value.

Hope that makes sense! :)
Thanks.It's clear now.
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