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# Automobile manufacturers often offer incentive programs

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06 Sep 2010, 20:18
The OA is E.

(d) actually weakens the argument for the incentive programs, while (e) strengthens that argument. so there's no question that you'd want (e).

(d)
if this happens, then the programs are actually costing the manufacturers in terms of potential profit: rather than buying the cars at regular price, the dealers are stocking as many as possible at the discount price, so that they can avoid paying the regular price (even in subsequent seasons, when they're still selling off the excess inventory).
hence, WEAKEN

(e)
if this is true, then the manufacturers need to offer the programs in order to maintain their customer base.
therefore, STRENGTHEN
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08 Sep 2010, 11:31
hemanthp wrote:
The OA is E.

(d) actually weakens the argument for the incentive programs, while (e) strengthens that argument. so there's no question that you'd want (e).

(d)
if this happens, then the programs are actually costing the manufacturers in terms of potential profit: rather than buying the cars at regular price, the dealers are stocking as many as possible at the discount price, so that they can avoid paying the regular price (even in subsequent seasons, when they're still selling off the excess inventory).
hence, WEAKEN

(e)
if this is true, then the manufacturers need to offer the programs in order to maintain their customer base.
therefore, STRENGTHEN

And if the company lose its customer base, what?
It is better to offer discounts, maintain its customers and lose money??

E is not good.
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07 Jan 2011, 04:15
More thoughts between A and E, please?
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Re: Automobile manufacturers often offer incentive programs [#permalink]

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23 Jul 2012, 12:56
Option E states that failing to offer promotions may result with a decrease in customer base. However, loosing customers is entirely different than reduction in profitability. Decreasing number of customers may result with a decline in total profit but decline in profitability is not necessary.

I think this question ignores a simple business fact.
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Re: Automobile manufacturers often offer incentive programs [#permalink]

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23 Jul 2012, 13:44

We know that the discounts may hurt the company's profitability. Therefore, an assumption exists that the company is offering the discounts for a reason other than maximizing profit.

A) Only states that the discounts were set at a price just high enough to draw attention.
-Ok, so what? You drew their attention. You have to make another assumption that drawing attention leads to sales.
-Why are you drawing attention? Is this about awareness? Raising market share? We have absolutely no idea.
-If you want to draw attention, why are you offering discounts? Does advertising alone not work? What alternatives are there? Is discounts the best alternative? We have no answers to any of these. Again, more assumptions to be made.

E) We know that if the company doesn't offer the discounts, they will lose customers to a competitor.
-Ah ha, the reason the company offers the discount despite a potential to hurt (lower) profitability. No further assumptions needed.
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Re: Automobile manufacturers often offer incentive programs [#permalink]

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23 Jul 2012, 13:55
IMO (D)
It hurts the manufacturer's decision of giving discount.
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Re: Automobile manufacturers often offer incentive programs [#permalink]

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28 Jul 2012, 16:39
I think it should be E. I am not sure about "A" . What is the source of the question ?
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Re: Automobile manufacturers often offer incentive programs [#permalink]

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07 Jul 2014, 00:52
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Re: Automobile manufacturers often offer incentive programs [#permalink]

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08 May 2016, 09:02
Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.
Re: Automobile manufacturers often offer incentive programs   [#permalink] 08 May 2016, 09:02

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