GMAT Essays (AWA)

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

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Many companies use promotional price reductions as marketing tools. These campaigns definitely have their pros and cons, which we will examine in this essay. The author states that the company's promotional price reductions on the energy drinks segment has been successful in increasing sales along with boosting consumer sentiment and thus should be applied to all drinks. There are many flaws in this reasoning primarily stemming from faulty assumptions and correlation logic.
The company is incorrectly capturing the increase of sales and consumer sentiment. Assumes that this increase will continue and is not primarily caused by the drop in price. The company needs to realize that it is most likely that this drop in price is either causing current customers to stock up and buy more energy drinks or the fact that non-customers are willing to try the product because of the low prices. While this strategy may work to a certain degree, the temporary boost of sales will most likely drop once prices return to normal levels.
The company is also proposing this marketing strategy to be applied to all drinks the company manufactures. We discussed earlier that this promotion may work to a certain extent but is most likely caused by the price drop. It should be further noted that applying this strategy to other drinks may have even less of an effect than intended. This is because energy drinks are typically more expensive than normal drinks and thus price drops lure in consumers; however, price drops in normal drinks will have less of an effect on consumers just because normal drinks are not novel like energy drinks are.
The author can improve his argument many ways: by including some statistical evidence on price of campaign versus increase in sales, as well as suggesting why exactly this model would work effectively on the other drinks the company makes. Statistical evidence and figures analyzing cost benefit analysis always helps strengthen an argument, and removes doubt from the readers' minds. Furthermore, expanding on the last point in the author's argument about firm-wide application of this marketing strategy would clarify any ambiguities the reader may have.
In conclusion, the author's argument that the increase in sales and consumer sentiment regarding recent price reductions in the company's energy beverage line is seriously flawed. The author makes faulty assumptions about the true source of the increase in sales. Additionally, the author attempts to create a false logical bridge by assuming that because sales increased in the energy drink line, the strategy would be effective company-wide on its other drinks. If the author could correct these flaws as well as include statistical evidence, the argument would be significantly stronger.