GMAT Essays (AWA)

Experts!

Took the MGMAT test today. Would be grateful if you review the below essay for me!

Thank you!


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."

YOUR RESPONSE:

In the passage, it is argued by the firm that in order to improve its profitability and perception in the eyes of its consumers, it must effect price reductions on all the drinks it produces. Support for this claim takes the form, primarily, of an assumption that profitability and perception are linked to price reductions as illustrated by the specified case of energy drinks. On deeper analysis of the subject at hand, however, it becomes apparent that certain relevant aspects have not been taken into account, leading to several flaws.

One such flaw, is the assumption that the strategy that worked for the firm's energy drinks would work for its other drinks as well. Such an analogy cannot be drawn between two product ranges given that they may target different consumer segments with varying purchasing powers and subsequently, different levels of price elasticity. For example, energy drinks are popular with the student community who have a lower purchasing power while coke is more popular with the working population who have a higher purchasing power. In order to strengthen the argument, the firm may provide factual information, such as statistics showing its various products share similar consumer segments with equal purchasing power.

Another statement, significantly weakening the argument, is that perception in the eyes of customers is affected positively by a price decrease. While the price reduction campaign was favourably received, there is no data to support the claim that it also enhanced the firm's perception in the customers' eyes. This statement is based on unsubstantiated assumptions. To overcome this flaw, the firm may cite findings either from its own research or that of others that point to an inverse correlation between price and perception.

The line of reasoning I have employed above points out several flaws. On closer examination of the matter, I conclude that the above argument is logically flawed.