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United Shipping

by Leonard C » Mon Dec 17, 2007 3:20 am
Because of rising costs, United Shipping Company raised its rates by ten percent last year. Many of its customers balked at the increase, however, and turned to a rival company whose rates were lower. In response, United Shipping Company began offering a package of services for a single rate that, though high, is still lower than the combined rates of the individual services. Officers of the company claim that this move will recoup the company's lost profits.

Which of the following, if true, provides the best basis for the officers' claim?

A) United Shipping will aggressively advertise the new package of services.
B) United Shipping's rival does not offer some of the services included in the package.
C) Marketing studies have shown that many of United Shipping's former customers would prefer a combined rate for their various shipping services.
D) United Shipping does not already offer all the services separately.
E) No other shipping company offers the same package of services as United Shipping.


SPOILER TO FOLLOW



The answer is C. My beef with this answer is that it is not foolproof (or at least I don't think it is). For example, what if existing customers are already using all of the services that United Shipping is including in its package? Then by offering the package, customers will buy the package paying less for each service than they originally were paying when they purchased each service separately, resulting in lower profits.

I chose D.

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by camitava » Mon Dec 17, 2007 4:22 am
Because of rising costs, United Shipping Company raised its rates by ten percent last year. Many of its customers balked at the increase, however, and turned to a rival company whose rates were lower. In response, United Shipping Company began offering a package of services for a single rate that, though high, is still lower than the combined rates of the individual services. Officers of the company claim that this move will recoup the company's lost profits.

Which of the following, if true, provides the best basis for the officers' claim?

A) United Shipping will aggressively advertise the new package of services.
B) United Shipping's rival does not offer some of the services included in the package.
C) Marketing studies have shown that many of United Shipping's former customers would prefer a combined rate for their various shipping services.
D) United Shipping does not already offer all the services separately.
E) No other shipping company offers the same package of services as United Shipping.
Leonard, I will go for C. Here is my approach -
I think u r getting a wrong idea about the option - D. D is saying that United Shipping does not already offer all the services seperately. So these services are coming in a combined package already. If it is true, then the existing customers have already moved from United Shipping to some other organization. That means the then customers were not happy with the package services of the United Shipping. This option actually weakens the officer's claim. So it can not be!
Now come to C - 1. It is a market survey. 2. Former customers like combined rate of some package services. And according to the argument, United Shipping is offering this package service with a less price than the combined cost of individual services offered by different other vendors. So this is the offer which customers will be happy to accept. So IMO C. But u can say that B is also another option which is close to chose. But C is the best option to chose. So C.
Correct me If I am wrong


Regards,

Amitava

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by pink_08 » Tue Dec 29, 2009 3:48 pm
Why cannot the answer be B

Here's how I was thinking. :
  • The rival does not offer some of the services that United Shipping offers in this combined package. So the customers would now return to the united shipping to leverage those services

    Also D seems to be close : If no other company offers the same package of services as United does , then customers would use the services provided by the United shipping

    In C Marketing studies have shown that many of United Shipping's former customers would prefer a combined rate for their various shipping services

    Prefer does not mean they would actually use those services ..You prefer to buy mercedes, but can u really do it ???

    I have seen some CRs knock off using the prefer and actually executing something ..
Please explain

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by Testluv » Thu Dec 31, 2009 4:46 am
received a pm.
Here's how I was thinking. :
The rival does not offer some of the services that United Shipping offers in this combined package. So the customers would now return to the united shipping to leverage those services
But, go back to the argument. The argument isn't that by providing new services, United Shipping will draw customers away from its competitors. Instead, the argument is that by packaging up multiple services that customers of other companies are already paying for individually, United Shipping can offer up an on-the-whole cheaper value proposition. (This is also why, incidentally, choice C is correct).
Also D seems to be close : If no other company offers the same package of services as United does , then customers would use the services provided by the United shipping
...I think you've misread choice D...
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by lunarpower » Fri Jan 08, 2010 1:21 am
pink_08 wrote: Why cannot the answer be B

Here's how I was thinking. :
The rival does not offer some of the services that United Shipping offers in this combined package. So the customers would now return to the united shipping to leverage those services
Testluv nails it.

the choice does NOT say that they are adding services that the rival firms don't offer; these are services that are already extant. therefore, your reasoning doesn't apply.
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by nervesofsteel » Sat Jan 09, 2010 5:42 pm
How is E incorrect ..??

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by kabirmohammed » Sat Jan 09, 2010 7:48 pm
IMO: E

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by mmslf75 » Sat Jan 09, 2010 11:59 pm
kabirmohammed wrote:IMO: E

C is correct

Check out what TestLUV and Ron says !! upthread ;-)

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by lunarpower » Sun Jan 17, 2010 10:02 am
nervesofsteel wrote:How is E incorrect ..??
(e) is incorrect for the same sorts of reasons that explain why (b) is incorrect.

specifically - these aren't new services; only the PACKAGE FORMAT is new.

note the wording of the passage: specifically, the passage indicates that the cost of the new package is "though high". while this language is annoyingly vague,** we must ask ourselves, "high compared to what?"
the only reasonable answer is "still high compared to the cost of the services offered by other firms". this is pretty much the only reasonable interpretation of this "high".

so it's highly likely that the customers are still paying more for these services, even when the services are rendered as a package.

therefore, the crux of the issue is not whether the other companies also offer the package; the crux of the issue is whether customers care about packaging the services in the first place. this is substantiated in the correct answer.
if customers don't care whether the services are packaged to start with, then choice (e) is irrelevant.

in other words, choice (e) doesn't matter unless the correct answer (choice c) is assumed!

**for this reason (overly vague language), i don't think this problem provides particularly useful preparation for the test.
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by mmslf75 » Sun Jan 17, 2010 10:44 am
@Leonard C

Is it from MGMAT test ? or what's the source ?!

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by mmslf75 » Sun Jan 17, 2010 8:45 pm
mmslf75 wrote:@Leonard C

Is it from MGMAT test ? or what's the source ?!
oh, i saw this today in MGMAT test CAT 6, but will not bother... about it..as ron says!

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by tanviet » Sat Feb 27, 2010 1:55 am
Testluv, Ron, it is great to have you here

B is painful to me

B CONTRADICT evidence?, is that right.

for Asummption, Strengthen, weaken question, the answer choice which RESTATE or CONTRADICT is wrong

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by lunarpower » Sat Feb 27, 2010 2:42 am
duongthang wrote:Testluv, Ron, it is great to have you here

B is painful to me

B CONTRADICT evidence?, is that right.

for Asummption, Strengthen, weaken question, the answer choice which RESTATE or CONTRADICT is wrong
nope. (b) is completely irrelevant - it neither weakens nor strengthens the argument.

note that united shipping lost profits because some of its customers "turned to a rival company whose rates were lower".
this means that the passage is ONLY concerned with services that are also offered by the rival firm. even if it's true that united offers some services that the rival firm doesn't offer, this fact wouldn't matter at all - since customers using those services wouldn't have been able to switch to the rival firm in the first place.
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by gotaipei » Wed May 05, 2010 11:28 am
I got the answer wrong. However, this is what I found out.

The question is asking how United Shipping can win the customers back.

Conclusion: "Offering a package of services for a single rate that is lower than the combined rates of the individual servies" will win the cusomers back.
Evidence: Many customers truned away beause of lower price.

In order to support the arugment, we need to show that United Shipping's former customer LIKE the "combined rates" of the rivals. (so the lower rate will win the customers back).

(A),(B),(D),(E) do not show the links between lower rate and winning the customers back. They might imply that customers return because of "services." Then it is not matter if United Shipping lower its rate or not.

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by akhpad » Mon Jul 19, 2010 9:53 pm
lunarpower wrote:
duongthang wrote:Testluv, Ron, it is great to have you here

B is painful to me

B CONTRADICT evidence?, is that right.

for Asummption, Strengthen, weaken question, the answer choice which RESTATE or CONTRADICT is wrong
nope. (b) is completely irrelevant - it neither weakens nor strengthens the argument.

note that united shipping lost profits because some of its customers "turned to a rival company whose rates were lower".
this means that the passage is ONLY concerned with services that are also offered by the rival firm. even if it's true that united offers some services that the rival firm doesn't offer, this fact wouldn't matter at all - since customers using those services wouldn't have been able to switch to the rival firm in the first place.
I also stuck over B and C, and Finally, I selected B, which is wrong.

Ron and Testluv's explanation gave me a clear idea about B. Thanks

Here, I believe that stimulus is concerned about cost and not about number of services.