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The following appeared in an announcement issued by the publisher of The Mercury, a weekly newspaper:
“Since a competing lower-priced newspaper, The Bugle, was started five years ago, The Mercury’s circulation has declined by 10,000 readers. The best way to get more people to read The Mercury is to reduce its price below that of The Bugle, at least until circulation increases to former levels. The increased circulation of The Mercury will attract more businesses to buy advertising space in the paper.”
Discuss how well reasoned . . . etc.
The publisher believes that advertising revenue has been affected by the dwindling circulation of the Mercury, which they attribute to a new entrant into the newspaper market. The publisher concludes that in order to restore circulation, they should price the newspaper lower than their rival. Unfortunately, this plan is unlikely to work as the argument suffers from too many assumptions.
First, the publisher assumes that the decline in circulation was due to the Bugle entering the market because circulation began to suffer as the competition began printing. This assumption suffers from an after this, therefore because of this fallacy as correlation between competitors and circulation does not imply causation. It is possible that the newspaper market has been shrinking and the Bugle’s circulation may have suffered as well. On top of this, the publisher doesn’t quantify 10,000 readers. If the Mercury is printed nationally, this drop could be a miniscule percentage of total circulation which would not warrant a cut in revenue.
Second, the publisher assumes that the consumers are sensitive to price alone. This is a logical non sequitor as an increase in sales may not follow from a reduction in price. It may be that the lost readership preferred the style of writing and the content of the Bugle and are prepared to pay a premium. If this is true, a reduction in price will lower revenues rather than increase circulation. Third, it assumes that increased circulation will attract more advertisers when this may or may not be true.
In conclusion, the publisher is most likely right in his assumption that higher circulation will lead to increased demand for advertising space but they have made a fundamental flaw in assessing how to increase circulation. It would be wise to do more research into the newspaper market and survey consumers with regards to the type of content they prefer reading. This will allow the publisher to get a better idea of whether declining circulation is a Mercury specific problem or an industry wide problem
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