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Surveys show that every year only 10 percent of cigarette [#permalink]
23 Jul 2006, 12:01
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Surveys show that every year only 10 percent of cigarette smokers switch brands. Yet the manufacturers have been spending an amount equal to 10 percent of their gross receipts on cigarette promotion in magazines. It follows from these figures that inducing cigarette smokers to switch brands did not pay, and that cigarette companies would have been no worse off economically if they had dropped their advertising.
Of the following, the best criticism of the conclusion that inducing cigarette smokers to switch brands did not pay is that the conclusion is based on
(A) computing advertising costs as a percentage of gross receipts, not of overall costs
(B) past patterns of smoking and may not carry over to the future
(C) the assumption that each smoker is loyal to a single brand of cigarettes at any one time
(D) the assumption that each manufacturer produces only one brand of cigarettes
(E) figures for the cigarette industry as a whole and may not hold for a particular company
Total Industry spending = 100
Company X spent on advertising = 1
Smokers switched = 10%
Out of these 10%, 9.9% switched to company X's brands.
Even though advertising did not work for industry as a whole but it worked for company X. So companies should continue advertising. Argument fails. _________________
Yeah, going with E after reading OA But one could arrive at the answer through PoE...
A) A cost is a cost. Doesn't matter what ratio you show it as. Does not affect conclusion.
B) We are talking about immediate returns from the advertising - not about the future.
C) Doesn't matter... A smoker may be loyal to multiple brands of cigs, and still he can shift from one brand to another.
D) Doesn't matter too! A cig company may try to move smokers from cheaper smokes to the more expensive brands in their own company line up.
E) Last man standing...
But this is all in retrospect... I could not solve this one Hope nothing like this comes up in my test!
I have to say, I don't like any of the answer choices. The real problem with the argument is that if they stopped advertising altogether, they would lose market share to other manufacturers that continued to advertise. In other words, they have to advertise just to maintain their market share - they alternative would be to lose market share. Advertising, in this case, would not really relate to the number of people that switch brands. The passage seems to suggest that dropping advertising altogether would be an option, but that would call for all manufacturers to collude and stop advertising.
Also, another major flaw is that cigarette manufacturers do not only spend money on advertising to get customers to switch from other brands. They pay for advertising to get non-smokers to use their product. This concept is completely ignore by the passage, which only compares gross receipts to brand-switchers. A cigarette manufacturer might well be willing to spend 10% of its gross receipts on advertising of ZERO people switched form other brands, as long the advertising attracted enough new customers. Again, advertising doesn't at all relate to getting people to swtich brands.
Since the above flaws are not among the options, I will go with A. One could reason that even though only 10 percent of cigarette smokers switch brands each year, it may cost far more than than 10% of gross receipts to acquire these new customers.
I will also say that this question is logically flawed and that GMAT questions do not have unexplained holes like this question has. As a 99.9% scorer on the LAST (9 years ago, yikes!) and a graduate of a top 5 law school I feel qualified to say so. I'm curious as to where this question is from. I would wager that it did not come from the OG?
Check out this awesome article about Anderson on Poets Quants, http://poetsandquants.com/2015/01/02/uclas-anderson-school-morphs-into-a-friendly-tech-hub/ . Anderson is a great place! Sorry for the lack of updates recently. I...