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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RESPONSE:

In order to increase the profitability and image in the eyes of customers, the author here presents an argument which is seriously flawed in its reasoning. Though, the intentions are very noble, I think, they cannot be accomplished based on the author's reasoning.

First, the author cites the increase in unit sales of energy drinks, which he thinks, was due to the promotional reductions. It can be the case that the increase was because the competitor brands reduced or stopped producing energy drinks line as it was unprofitable. Hence, the consumers had no other choice but to buy this brand. There are no statistics in the argument which positively link the increase with the reductions.

Secondly, even if we assume that the increase in unit sales was due to the promotional reductions, no information is presented about where this increase happened. Was it country wide or specific to a particular demographic area? Behavioral likings should be taken into account. Any generalization without having this sort of information, frequently leads to decisions which are harmful for a company/individual.

Third, the author says that the promotional reductions were favorably received by the customers. "Favorably", when in the light of a product, has shades or gray. Does it mean that those customers really DID increase buying these drinks or it brought smiles to their faces? Lack of this information should make anyone cautious in taking business decisions. It's a big, loud, emphatic NO to think that customers of other lines of drinks will react "favorably" if promotional price reductions are introduced.

Last, it's a cliche but fits the bill here : " Do not compare Apples with Oranges". Thinking that ALL the customers will behave similar to energy drink-customers is gross misconception. It may be the case that other customers will take the reductions in negative sense. The may think that along with the price, the quality has reduced as well. And if those consumers rate quality more than the price and are willing to pay that extra buck for the "goodness", they will surely steer away from this brand. The boomerang will hit back and the reductions will be of no use.

So, considering the good intentions and a bad reasoning to achieve them, the author first needs to consider his way of thinking once more. She should research more on the actual reason for the increase in unit sales of the energy drink line, gather statistics, have a questionnaire with the energy drink consumers and the consumers of rest of the lines. Once she has all this information with her, she can then map the dots on the plan. Any conclusion after this exercise will not only be more viable to implement, but may also be profitable business decision for the company.