Joined: 14 Feb 2013
, given: 0
Please rate my essay! Exam in 5 days! [#permalink]
23 Aug 2013, 23:20
Thanks in advance, guys. I really don't know where I am at in terms of AWA!
“The Easy Credit Company would gain an advantage over competing credit card services if we were to donate a portion of the proceeds from the use of our cards to a well-known environmental organization in exchange for the use of its symbol or logo on our card. Since a recent poll shows that a large percentage of the public is concerned about environmental issues, this policy would attract new customers, increase use among existing customers, and enable us to charge interest rates that are higher than the lowest ones available.”
Discuss how well reasoned . . . etc
As the Easy Credit Company would like to gain an advantage over its competitors, the author proposes that donating to an environmental organization in exchange of the use of its symbol on their cards will fulfill the company’s desires. However, this suggested plan suffers from misinterpretation of future benefits, overlook of polling population, and over-optimism in its assumptions. The above diminishes the credibility and effectiveness of the author’s argument.
First, there is a problem regarding the monetary benefit of the plan for the company. Would the additional profits and funds received from these new customers necessarily outweigh the cost of the marketing scheme? Not necessarily, as there is no information given as to how much additional revenue will be generated -- examples include numbers regarding the predicted number of customers to be gained and the expected profit from the increased interest rates. Furthermore, there is no information given as to how much it would cost the company to get the logo on their card. Other costs that should be taken into consideration in this analysis would the cost to demonstrate the company’s partnership with the organization. This would include significant advertising, as a small logo on a card does not necessarily showcase a company’s vested interest in the environment. In addition, if the plan breaks even in the first place, does the word “advantage” necessarily refer to purely monetary aspects? As this word is not defined, it could refer to other things such as customer satisfaction, corporate social responsibility, and shareholder support.
Second, the result of a poll may not be conclusive evidence as to what strategy the company should employ. Polls are generally completed by people with extreme views on the subject at hand. In this case, people who are more passionate about environmental issues will fill out the poll. As a result, the result of the poll is naturally inflated and is misleading – it is definitely not representative of the true population of credit card users. Also, the usefulness of the poll is diminished even further by the ignorance of the polling population itself. For example, the people polled may be strongly adverse to using credit cards themselves because of the capitalistic connotations the company carries.
Third, the author makes a faulty assumption regarding attracting new customers and increasing usage. According to Michael Porter, the switching costs of a product is a key determinant as to whether or not a company will have competitive success. The author in this argument fails to take into consideration the considerable switching costs with switching credit cards. Is a mere logo on a credit card able to convince a customer to change credit cards, which is typically a lengthy and tedious process. For example, credit checks and profile reviews are carried out for every credit card issuance, which can take a long time. There are also implications of the tediousness of changing banks that are associated with the company’s competitors. In regards to increasing usage, the author assumes that the customers have enough credit and have sufficient funds. However, if the customers are not willing to increase usage in the first place due to financial constraints, the argument that there will be an increase use among existing customer falls apart. Not to mention, the existing customer may not actually feel inclined by a mere logo to take the risk of being hit with higher interest rates. This would be counter-productive, as it would decrease the use of the cards.
In summary, the argument is flawed because of the lack of a cost-volume profit analysis, mis-use of poll results, and faulty assumptions. As it stands, it is not well reasoned. However, if the argument addressed the items as discussed above and provided supporting evidence, it would have been better support, more thorough, and far more convincing.