“Our promotional price reductions on energy drinks have been highly successful, as we have seen a dramatic increase in unit sales. Further, surveys of our consumers indicate that this promotion was favorably received by the majority of our customers. Therefore, to improve our company’s profitability and enhance its perception in the eyes of consumers, similar price reductions should be offered on all drinks produced by our firm.”
The beverage company claims that the prices of all their beverages should be lowered because a previous price reduction strategy on energy drinks was successful. This thinking is somewhat correct but clearly fails to mention several key factors.
First of all, additional detailed information about the company and its products is needed to analyse this situation. The success of this promotional price reduction could be related to other factors. Perhaps the energy drinks were overpriced prior to price reduction. We also need to know the prices of company's other beverages. After all, the conceived value of an item is what counts.
Another important point is the demand for a particular product. Maybe there was a sudden increase in demand in the market for energy drinks. This might be the reason for increased sales as well. The sales would have increased in this case even if there were no price reductions.
Finally, the advertising activities of the company need to be accounted for. This might have boosted sales too. The reasons behind the increased sales must be investigated thoroughly first to understand this success.
Due to above mentioned reasons, the argument is flawed and therefore unconvincing. Without further information, we cannot conclude that the same strategy applied to other products will succeed. The argument could be considerably strengthened by clearly mentioning all relevant factors and giving more detailed information.