Extensive research has shown that the effects of short-term : GMAT Reading Comprehension (RC)
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# Extensive research has shown that the effects of short-term

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Manager
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Extensive research has shown that the effects of short-term [#permalink]

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22 Jul 2009, 19:52
2
KUDOS
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;
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
If you have any questions
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22 Jul 2009, 21:05

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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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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27 Jul 2009, 10:01
Why not A?
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29 Jul 2009, 23:08
C...oa plz..
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05 Aug 2009, 01:16

From Line 21:
Nor do price promotions have lingering
aftereffects for a brand,
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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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09 Aug 2009, 03:53
B for me
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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]

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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]

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13 Feb 2013, 01:47
3
KUDOS
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]

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05 Aug 2014, 06:31
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Re: Extensive research has shown that the effects of short-term [#permalink]

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26 Aug 2014, 00:07
easy passage but the inference neccessary to answer the question is hard. a typical question of gmat. very nice question. B
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Re: Extensive research has shown that the effects of short-term   [#permalink] 26 Aug 2014, 00:07
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