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Extensive research has shown that the effects of short-term

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Extensive research has shown that the effects of short-term [#permalink] New post 22 Jul 2009, 19:52
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Extensive research has shown
that the effects of short-term price
promotions on sales are themselves
short-term. Companies’ hopes that
(5) promotions might have a positive
aftereffect have not been borne
out for reasons that researchers
have been able to identify. A price
promotion entices only a brand’s
(10) long-term or “loyal” customers;
people seldom buy an unfamiliar
brand merely because the price is
13
reduced. They simply avoid paying
more than they have to when one of
(15) their customary brands is temporarily
available at a reduced price. A
price promotion does not increase
the number of long-term customers
of a brand, as it attracts virtually
(20) no new customers in the first place.
Nor do price promotions have lingering
aftereffects for a brand, even
negative ones such as damage to
a brand’s reputation or erosion of
(25) customer loyalty, as is often feared.
So why do companies spend so
much on price promotions? Clearly
price promotions are generally run
at a loss, otherwise there would
(30) be more of them. And the bigger
the increase in sales at promotion
prices, the bigger the loss. While
short-term price promotions can
have legitimate uses, such as
(35) reducing excess inventory, it is the
recognizable increase in sales that
is their main attraction to management,
which is therefore reluctant
to abandon this strategy despite
its effect on the bottom line.

The passage suggests that evidence for price promotions’ “effect on the bottom line” (line
40) is provided by
A. the lack of lingering aftereffects from price promotions
B. the frequency with which price promotions occur
C. price promotions’ inability to attract new customers
D. price promotions’ recognizable effect on sales
E. the legitimate uses to which management can put price promotions
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Re: Short term promotion [#permalink] New post 22 Jul 2009, 21:05
My answer is C.

C. price promotions’ inability to attract new customers

Because Price Promotions don't bring new customers, and "Loyal" customer buy stuff on reduced prices,
which in turn reduces the profit and affects "bottom line" of the company.
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Re: Short term promotion [#permalink] New post 27 Jul 2009, 07:29
The author relies on the frequency of the promotions to derive the conclusion about the effect on bottom line (clearly stated in passage) hence B
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Re: Short term promotion [#permalink] New post 27 Jul 2009, 10:01
Why not A?
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Re: Short term promotion [#permalink] New post 29 Jul 2009, 23:08
C...oa plz..
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Re: Short term promotion [#permalink] New post 05 Aug 2009, 01:16
My answer: A

From Line 21:
Nor do price promotions have lingering
aftereffects for a brand,
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Re: Short term promotion [#permalink] New post 07 Aug 2009, 12:34
Its A
Quote:
A price promotion does not increase
the number of long-term customers
of a brand, as it attracts virtually
(20) no new customers in the first place.
Nor do price promotions have lingering
aftereffects for a brand
, even
negative ones such as damage to
a brand’s reputation or erosion of
(25) customer loyalty, as is often feared.


Now it says P.P doesn't increase long term customers, doesn't mean P.P doesn't increase customer base at all.
Hence C can be rejected
I Select A for the highlighted portion
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Re: Short term promotion [#permalink] New post 09 Aug 2009, 03:53
B for me
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Re: Short term promotion [#permalink] New post 17 Aug 2009, 12:22
B

The question ask for proof that promotions hurt the bottom line.

ankur55 wrote:
...Clearly
price promotions are generally run
at a loss, otherwise there would
(30) be more of them...


There is your evidence that promotions hurt the bottom line.
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Re: Extensive research has shown that the effects of short-term [#permalink] New post 13 Feb 2013, 00:52
I select A ... is there an OE for this?
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Re: Extensive research has shown that the effects of short-term [#permalink] New post 13 Feb 2013, 01:47
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The effects on the bottom line are that losses are brought due to these promotions. So what does the passage state to provide support to the fact that these promotions do infact bring losses? "Clearly price promotions are generally run at a loss, otherwise there would be more of them". This sentence almost explicitly provides the reason. The right answer is hence B.
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Re: Extensive research has shown that the effects of short-term   [#permalink] 13 Feb 2013, 01:47
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