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A recent survey has shown that every five years only 15

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A recent survey has shown that every five years only 15 [#permalink]

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A recent survey has shown that every five years only 15 percent of people who are fond of wearing jeans switch brands because once a person is comfortable wearing jeans of a particular brand, he prefers not to experiment with other brands. Yet companies have been spending almost 15 percent of their revenues on advertising. It follows from these figures that inducing people to switch brands doesn't produce the desired results, and that companies would have been no worse off economically if they had stopped their advertising.

The best criticism of the conclusion is that it is based on:

(A) Calculating advertising costs as a percentage of revenues, not of the overall costs of manufacturing.
(B) Past behaviour of a consumer may not accurately predict the future needs.
(C) The assumption that a consumer is loyal to a single brand at any one time.
(D) The assumption that each company makes only one brand of jeans.
(E) The figures for the textile industry as a whole may not hold for a particular company.
[Reveal] Spoiler: OA

Last edited by broall on 05 Jul 2017, 19:19, edited 4 times in total.
OA added

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Re: A recent survey has shown that every five years only 15 [#permalink]

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New post 03 Sep 2013, 11:51
IMO-C
C.The assumption that a consumer is loyal to a single brand at any one time.

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Re: A recent survey has shown that every five years only 15 [#permalink]

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New post 03 Sep 2013, 14:30
Hi amit.
Please add the question stem. It is very important!
Best!
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Re: A recent survey has shown that every five years only 15 [#permalink]

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New post 03 Sep 2013, 19:32
Sorry guys.. i missed the question stem... it is updated now..

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Re: A recent survey has shown that every five years only 15 [#permalink]

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Tough question.

This question is a reverse form of “biased sample”, also known as biased statistic or prejudiced sample.

The original form of “biased sample” is:
1. Sample S, which is biased, is taken from population P
2. Conclusion C is drawn about population P based on S


The reverse form is:
1. Sample S is taken from population P
2. Conclusion: EVERY member in population P has the same characteristics like those of Sample S.

Fallacy: Sample is just a sample, it definitely has standard deviation. We can’t assume every thing which is correct for S also correct for every member in population P.

ANALYZE THE STIMULUS:

Fact: Every five years only 15 percent of people who are fond of wearing jeans switch brands
Fact: But companies have been spending almost 15 percent of their revenues on advertising.
Conclusion: Inducing people to switch brands doesn't produce the desired results, and that companies would have been no worse off economically if they had stopped their advertising.

Question: The best criticism of the conclusion is that it is based on:

We can translate the conclusion like: Paying more money for advertising (15% of revenue) is wasteful because ONLY 15% of people switching brands.

ANALYZE EACH ANSWER:

Calculating advertising costs as a percentage of revenues, not of the overall costs of manufacturing.
Wrong. Out of scope. We do NOT compare revenues with manufacturing. We have NO information which one is better for calculating advertising costs.

Past behavior of a consumer may not accurately predict the future needs.
Wrong. Actually, B strengthens the conclusion by showing that the information of the survey is meaningless.

The assumption that a consumer is loyal to a single brand at any one time.
Wrong. TEMPTING. C is wrong because it is half right, half wrong.
There are two scenario:
(1) One company has only one brand --> Consumer switch brand --> Switch company --> Sales may decrease. Thus, company has to pay more for advertise to attract customers from competitors. --> Advertising cost is NOT wasteful --> C does NOT weaken
(2) One company has some brands --> Consumer may switch brand of the same company --> Sales may not decrease. Thus, company does NOT have to pay more for advertise to attract customers from competitors. --> Advertising cost may be wasteful --> C weakens

The assumption that each company makes only one brand of jeans.
Wrong.
Like scenario #1 in option C.
If each company makes only one brand --> Consumer switch brand --> Switch company --> Sales decreases. Thus, company has to pay more for advertise to attract customers from competitors. --> Advertising cost is NOT wasteful. To some extent, D strengthens the conclusion.

The figures for the textile industry as a whole may not hold for a particular company.
Correct. This is exactly the fallacy of the argument. The author uses information form a survey (which means a sample) to apply for EVERY member in the population. This is wrong. The conclusion may be correct for company A, but may not be correct for company B.
For example:
Company A has 100 customers, 15 will switch to company B, which currently has 50 customers.
==> For A: revenue will decrease 15%
==> For B: revenue will increase 15/50 = 30%. So the fact that B pay 15% of revenue is NOT too much to have 30% revenue increase.

Hope it helps.
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Re: A recent survey has shown that every five years only 15 [#permalink]

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Re: A recent survey has shown that every five years only 15 [#permalink]

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I think. E explains better (You cannot take general Scenario and make it true for a particular scenario.

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Re: A recent survey has shown that every five years only 15 [#permalink]

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New post 05 Jul 2017, 03:28
Please explain this one! chetan2u
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Re: A recent survey has shown that every five years only 15 [#permalink]

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New post 05 Jul 2017, 06:44
goforgmat wrote:
Please explain this one! chetan2u
sayantanc2k


Most of the 15% people who are changing brands may be doing so only from Company A to Company B. So definitely this scenario has an adverse impact on Company A's revenues and so spending on advertising may still be justified. Option E says this.

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Re: A recent survey has shown that every five years only 15   [#permalink] 05 Jul 2017, 06:44
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