An online media company plans

[gkkk]

An online media company plans to increase its share of market by deeply discounting its subscription prices for the next two months. The discounts will cut into profits, but because they will be heavily advertised, the company expects that they will attract buyers away from rival providers of similar media. The company foresees that, in the longer term, customers initially attracted by the discounts will remain loyal subscribers.

In assessing the plan's chances of achieving its aim, it would be most useful to know which of the following?

A - Whether the company's competitors are likely to respond by offering deep discounts on their own subscriptions
B - Whether the advertisements will be created by the company's current advertising agency
C - Whether some of the company's subscription options will be more deeply discounted than others
D - Whether the company will be able to cut costs sufficiently to maintain profit margins even when the discounts are in effect
E - Whether an alternative strategy will enable the company to enhance its profitability while holding a constant or diminishing share of the market

OA - A

I am confused between A and D. both seems legit as either of them will impact on plan for being successful. Let just say that a deeper discount is given by the competitors and still many factors can be involved to make them have profit. while if D is true then game is over. if discounts are in effect then also we are making profits irrespective of scenario. Help plz !!!

[DavidG@VeritasPrep]

An online media company plans to increase its share of market by deeply discounting its subscription prices for the next two months. The discounts will cut into profits, but because they will be heavily advertised, the company expects that they will attract buyers away from rival providers of similar media. The company foresees that, in the longer term, customers initially attracted by the discounts will remain loyal subscribers.

In assessing the plan's chances of achieving its aim, it would be most useful to know which of the following?

A - Whether the company's competitors are likely to respond by offering deep discounts on their own subscriptions
B - Whether the advertisements will be created by the company's current advertising agency
C - Whether some of the company's subscription options will be more deeply discounted than others
D - Whether the company will be able to cut costs sufficiently to maintain profit margins even when the discounts are in effect
E - Whether an alternative strategy will enable the company to enhance its profitability while holding a constant or diminishing share of the market

OA - A

I am confused between A and D. both seems legit as either of them will impact on plan for being successful. Let just say that a deeper discount is given by the competitors and still many factors can be involved to make them have profit. while if D is true then game is over. if discounts are in effect then also we are making profits irrespective of scenario. Help plz !!!

The problem with D is that maintaining profit margins while the discounts are in effect is beside the point. Presumably, if the company had to take a loss while the discounts were in effect, but those discounts attracted customers who would remain customers even after the discount had expired, then the company's long-term prospects would look pretty good. In other words, the point of the discounts is to attract new customers. Short-term profitability is less of a concern. (This is why A is correct. If other companies offer the same discount, then there's no reason to believe that they'd be able to expand their customer base.)