GMAT Essays (AWA)

“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.”


Response:

The argument states that a successful promotion in one of the firms brands can and should be applied to all the brands to increase profitability and the companies image.The argument is flawed at several levels and unless more concrete evidence is given this argument cannot be assumed to be true.

To begin with, the argument tries to apply the increase in unit sales on energy drinks by reducing prices to all other drinks produced by the firm. There is no basis that such a move would increase the sales of the other drinks. Were the energy drinks a new category launched by the firm ? Could the energy drinks of this firm been priced higher to other competitors drinks and reducing them was received favorably by existing customers?

The argument also tries to scale the results of this survey to a broader scale. The survey is stated to be conducted among existing customers , but it still tries to apply the results to the larger domain of all consumers. Existing customers viewing the price reductions favorably has no bearing on how the consumer market will react to this.

Also, the author of the argument believes that such a promotion, if offered across the company will lead to higher profitability. There is no evidence in the argument that says the initial promotion was a profitable one. In fact, if the prices of the energy drinks were reduced for the promotion, it could well be that this lead to a loss for the firm. Without more data about this statement, this comparison cannot be made.

In conclusion, the argument seems to be very fractured. To arrive at the conclusion the author tries to lead us to requires a lot of assumptions on our part which cannot be made. To make the argument more sound, the author could provide us with more statistical data, and more insight into the survey.