Densmore Company, known for its luxury goods, has recently expanded its business and has begun marketing to consumers who, when surveyed, have stated that they usually purchase products priced at or below the prevailing market rate. To attract these customers' business, Densmore is advertising that its new, more inexpensive product lines, already priced lower than its top-selling luxury items, are on sale for 30% off. The Densmore marketing staff has determined that advertising its discounted prices is the most effective way of attracting potential customers.
Which of the following would be most helpful in evaluating the likelihood that Densmore's plan will achieve its goal?
A) How the profit margins on the new product lines compare to those for the top selling luxury items.
B) What percentage of existing Densmore customers are included in the consumer survey.
C) How many consumers surveyed are existing Densmore customers.
D) Whether those consumers most concerned with bargain-hunting will be exposed to Densmore's advertising campaign.
E) How the sale price compare to those for comparable, non-discounted products.
The conclusion is : "The Densmore marketing staff has determined that advertising its discounted prices is the most effective way of attracting potential customers."
The marketing staff based its conclusion on "Densmore is advertising that its new, more inexpensive product lines, already priced lower than its top-selling luxury items, are on sale for 30% off".
Now let me explain via an example. Consider two car brands, namely Bugatti and Peugeot. Bugatti costs $200,000 and Peugeot costs around $65,000. As we all know Bugatti is quite expensive, in fact for me it is cause I am not a millionaire, Bugatti cars are not affordable to many customers. To expand its customer base, Bugatti decides to introduce a cheaper model, suppose at $175,000. Moreover, Bugatti is also providing a discount of 30% on the sale price of its newer model. Suppose that price is around $140,000.
Now my question is, can we expect Bugatti to attract potential customers. NO! because still there is a huge price difference between the Peugeot and Bugatti's new model. Even if Bugatti advertises its discounted price, no way it is going to attract potential customers.
The matter of concern is the price of the brand after discount.
For me, its straight E.
When I read this question, the first thing that struck my mind was the basis on which the marketing staff based its conclusion. I knew what I was looking for and E was available.
Let me know, if any more clarification is required.
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