souvonik2k wrote:
An online media company plans to increase its share of market by deeply discounting its subscription prices for the next two months. The discounts will cut into profits, but because they will be heavily advertised, the company expects that they will attract buyers away from rival providers of similar media. The company foresees that, in the longer term, customers initially attracted by the discounts will remain loyal subscribers.
In assessing the plan's chances of achieving its aim, it would be most useful to know which of the following?
A) Whether the company's competitors are likely to respond by offering deep discounts on their own subscriptions
B) Whether the advertisements will be created by the company's current advertising agency
C) Whether some of the company's subscription options will be more deeply discounted than others
D) Whether the company will be able to cut costs sufficiently to maintain profit margins even when the discounts are in effect
E) Whether an alternative strategy will enable the company to enhance its profitability while holding a constant or diminishing share of the market
OFFICIAL EXPLANATION:
Reading the question: the prompt describes a plan of action, and a plan of action can be thought of as argument saying, "Let's do this; it's a great idea and will work." We have a case of understated terms, "most useful to know," so we'll be able to prove the correct answer by stronger terms.
Creating a filter: the "great idea" in this plan is to slash prices, take losses, and win customers for the long term. What would be most useful to know? Something that is important to the plan--critical, even. We can imagine some things we'd need to know to determine whether the plan will work. For example: 1) whether we are really getting customers and/or 2) whether we are really earning back money from them over time and/or 3) whether there is some big unidentified side effect or problem that we are missing.
Applying the filter: (A) is relevant; if competitors also slash, our plan might not work. Then, per our prediction 1) above, we might not actually get more customers. We'll keep (A) in. Choice (B) is not relevant; we have no reason to think ads are better in-house or out-of-house. Choice (C) is not relevant to whether the plan will work; whatever product or service we're pricing low is what's supposedly going to win the customers and those customers are the ones we're going to have to keep and win back profits from. Choice (D) contradicts the information we've been given; it is explicitly part of the plan that we suffer losses in the short term. Choice (E) is irrelevant; whether a different plan might work is relevant to what plan might be best, but it's not relevant to whether this plan specifically will work, which is the question at hand.
Logical proof: we're left only with (A). As we saw in Expiring Meters, when answer choices are phrased with the word "whether," we can use analysis by extreme cases to give logical proof to our answer. In one case, if competitors don't lower their prices, even raise their prices to very high levels, we have further reason to think that lowering prices will bring in customers. In another case, if competitors lower their prices below ours, then we have good reason to think our plan won't work. Evidently choice (A) highlights something important to the plan.
The correct answer is (A).
close
15 May 2018, 09:16
14%
(01:31)
wrong 
