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5. The second paragraph functions primarily to
A. propose solutions to certain problems inherent in customer loyalty programs.
B. emphasize certain risks inherent in customer loyalty programs.
C. address certain contentions put forth by advocates of customer loyalty programs.
D. defend certain specific aspects of customer loyalty programs against criticism.
E. reconcile competing view points regarding the efficacy of customer loyalty program.

Could anyone explain how you can arrive at solution to this in minimal time?

If we just read first sentence of second para (Still, advocates of loyalty programs contend that such programs are beneficial because the costs of serving highly loyal customers are lower, and because such loyal customers are less (45) price sensitive than other customers) , you might even arrive at option D (defend certain specific aspects of customer loyalty programs against criticism.)
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Hi all,

Could you please explain the question 5 and 6. Thanks.
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Hi all,

Could you please explain the question 5 and 6. Thanks.

Q6 is based on the following excerpt from passage: "Moreover, 100-percent-loyal buyers tend to be light buyers of the product or service."

Q5 The second paragraph functions primarily to

The last line of P1 (Such multi-brand loyalty means that one company’s most profitable customers will probably be its competitors’ most profitable customers as well.) raises questions on the loyalty of very-loyal customers.
The first sentence of P2 expresses the disagreement of the advocates of loyalty programs stating that even though very-loyal customers may be involved with the competitors, such customers are beneficial because of reason X.
Further, the author addresses these disagreements(contentions) expressing his doubts on reason X. (address= lecture/discuss)
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Dear Expert,

Could you please explain question 4. Following is last sentence of 1st paragraph.

Such multi-brand loyalty means that one company???s most profitable customers will probably be its competitors??? most profitable customers as well. .

As per above lines, i thought answer to question 4 is B.

But OA is E. I find B and E both correct. Could you pls let me know how should i select E over B.

Regards,
Amm
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GMATNinja,

Can you please provide your explanations for the Question 1.? (Primary passage)

Confused between A. and D.
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P1 - Customer loyalty programs, how it works, usefulness - not good.
P2 - usefulness, price discount - loyalty.

1. The primary purpose of the passage is to

A. question the notion that customer loyalty programs are beneficial

---------------------------------------------
2. The passage mentions each of the following as a potential reason for customers' divided loyalty EXCEPT

D. Customers will often buy a unfamiliar brand when it is new on the market

-------------------------------------------

3. According to the passage, advocates of the customer loyalty programs claim which of the following about highly loyal customers?

Still, advocates of loyalty programs contend that such programs are beneficial because the costs of serving highly loyal customers are lower,

B. They can be served at lower expense to a company than nonloyal customers

--------------------------------------------
4. The passage suggests that companies that invoke the "80/20" principle in customer loyalty programs believe which of the following?

In support of loyalty programs, companies often invoke the “80/20” principle,which states that about 80 percent of revenue typically comes from only about 20 percent of customers.

E. A relatively small number of loyal customers is responsible for about 80% of the company's profits.

--------------------------------------------
5. The second paragraph functions primarily to


C. address certain contentions put forth by advocates of customer loyalty programs.

------------------------------------------

6. The author of the passage suggests that which of the following is most likely to be true of a customer who is exclusively loyal to a particular brand of product?

usually, they are heavy consumers who simply prefer to buy a number of brands. Such multi-brand loyalty means that one company’s most profitable customers will probably be its competitors’ most profitable customers as well.

C. The customer is probably not a heavy consumer of that particular type of product.
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chibi
GMATNinja,

Can you please provide your explanations for the Question 1.? (Primary passage)

Confused between A. and D.
chibi - hope this will be helpful.
1. The primary purpose of the passage is to

For a better success in such questions, take care for 2 things. 1 - have a complete paragraph summary in your mind. a mapping will be fine. 2 - find 4 choices that are not answer. In other words eliminate choices that is not covering whole passage. While selecting answer pre-think - why author wrote this whole thing. what he wants to say.

A. question the notion that customer loyalty programs are beneficial --- best answer. covering both paras. start and end of 2nd para shows that author is incline towards "customer loyalty programs are beneficial"

B. examine the reasons why many customers buy multiple brands of products --- no

C. propose some possible alternatives to customer loyalty programs - no

D. demonstrate that most customers are not completely loyal to any one brand of product or service ---- very small part of para, not covering much. also look at author's intent. why wrote this abstract. is it for this ? You see this passage has a lot more to say then just this.

E. compare the benefits of customer loyalty programs with those of other types of purchase incentive programs ---- this was not the purpose, nor this is covering whole thing.
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ammuseeru
Dear Expert,

Could you please explain question 4. Following is last sentence of 1st paragraph.

Such multi-brand loyalty means that one company???s most profitable customers will probably be its competitors??? most profitable customers as well. .

As per above lines, i thought answer to question 4 is B.

But OA is E. I find B and E both correct. Could you pls let me know how should i select E over B.

Regards,
Amm
Quote:
4. The passage suggests that companies that invoke the "80/20" principle in customer loyalty programs believe which of the following?

A. A well designed customer loyalty program can increase the number of company's loyal customers by as much as 80 percent.

B. About 20 percent of any given company's most profitable customers are likely to be its competitors' most profitable customers as well.

C. It is unreasonable to expect more than 20 percent of customers to be 100 percent loyal to any particular brand of the product.

D. Even "loyal" customers cannot reasonably be expected to stick to one particular brand of product more than 80% of the time.

E. A relatively small number of loyal customers is responsible for about 80% of the company's profits.
The passage does indeed state that "one company’s most profitable customers will probably be its competitors’ most profitable customers as well."

However, that information is not relevant to this question. This question specifically asks about the "80/20" principle in customer loyalty programs, "which states that about 80 percent of revenue typically comes from only about 20 percent of customers." Companies that believe in the 80/20 principle believe that most of their revenue (and, hence, most of their profits) come from a relatively small number of loyal customers.

(E) is thus the best answer.

ammuseeru
What does 5 question, E option mean ?
Quote:
5. The second paragraph functions primarily to

A. propose solutions to certain problems inherent in customer loyalty programs.

B. emphasize certain risks inherent in customer loyalty programs.

C. address certain contentions put forth by advocates of customer loyalty programs.

D. defend certain specific aspects of customer loyalty programs against criticism.

E. reconcile competing view points regarding the efficacy of customer loyalty program.
Even if you don't quite understand the meaning of "reconcile" here, the second paragraph doesn't describe competing view points.

If we were given two competing view points, to "reconcile" them would be to make them consistent. For example, that might entail explaining how the two views actually share fundamental similarities despite apparent differences. Or that might entail describing inaccurate facts/assumptions taken by one or both of those views and then showing that, given the same facts/assumptions, the two different views would actual agree with one another.

Put simple, to reconcile two views is to make them both make sense given the facts.

Choice (C) is a much better answer here.

I hope that helps!

GMATNinja In question 3, why answer choice A is wrong? At the end of the last paragraph is written that "As for price sensitivity, highly loyal customers may in fact come to expect a price discount as a reward for their loyalty." So, isn't it what advocates of customers loyalty program saying? Many tks!
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ammuseeru
Dear Expert,

Could you please explain question 4. Following is last sentence of 1st paragraph.

Such multi-brand loyalty means that one company???s most profitable customers will probably be its competitors??? most profitable customers as well. .

As per above lines, i thought answer to question 4 is B.

But OA is E. I find B and E both correct. Could you pls let me know how should i select E over B.

Regards,
Amm
Quote:
4. The passage suggests that companies that invoke the "80/20" principle in customer loyalty programs believe which of the following?

A. A well designed customer loyalty program can increase the number of company's loyal customers by as much as 80 percent.

B. About 20 percent of any given company's most profitable customers are likely to be its competitors' most profitable customers as well.

C. It is unreasonable to expect more than 20 percent of customers to be 100 percent loyal to any particular brand of the product.

D. Even "loyal" customers cannot reasonably be expected to stick to one particular brand of product more than 80% of the time.

E. A relatively small number of loyal customers is responsible for about 80% of the company's profits.
The passage does indeed state that "one company’s most profitable customers will probably be its competitors’ most profitable customers as well."

However, that information is not relevant to this question. This question specifically asks about the "80/20" principle in customer loyalty programs, "which states that about 80 percent of revenue typically comes from only about 20 percent of customers." Companies that believe in the 80/20 principle believe that most of their revenue (and, hence, most of their profits) come from a relatively small number of loyal customers.

(E) is thus the best answer.

ammuseeru
What does 5 question, E option mean ?
Quote:
5. The second paragraph functions primarily to

A. propose solutions to certain problems inherent in customer loyalty programs.

B. emphasize certain risks inherent in customer loyalty programs.

C. address certain contentions put forth by advocates of customer loyalty programs.

D. defend certain specific aspects of customer loyalty programs against criticism.

E. reconcile competing view points regarding the efficacy of customer loyalty program.
Even if you don't quite understand the meaning of "reconcile" here, the second paragraph doesn't describe competing view points.

If we were given two competing view points, to "reconcile" them would be to make them consistent. For example, that might entail explaining how the two views actually share fundamental similarities despite apparent differences. Or that might entail describing inaccurate facts/assumptions taken by one or both of those views and then showing that, given the same facts/assumptions, the two different views would actual agree with one another.

Put simple, to reconcile two views is to make them both make sense given the facts.

Choice (C) is a much better answer here.

I hope that helps!
Can we conclude that revenue is equal to profit? I got confused by this only.
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ammuseeru
Dear Expert,

Could you please explain question 4. Following is last sentence of 1st paragraph.

Such multi-brand loyalty means that one company???s most profitable customers will probably be its competitors??? most profitable customers as well. .

As per above lines, i thought answer to question 4 is B.

But OA is E. I find B and E both correct. Could you pls let me know how should i select E over B.

Regards,
Amm
Quote:
4. The passage suggests that companies that invoke the "80/20" principle in customer loyalty programs believe which of the following?

A. A well designed customer loyalty program can increase the number of company's loyal customers by as much as 80 percent.

B. About 20 percent of any given company's most profitable customers are likely to be its competitors' most profitable customers as well.

C. It is unreasonable to expect more than 20 percent of customers to be 100 percent loyal to any particular brand of the product.

D. Even "loyal" customers cannot reasonably be expected to stick to one particular brand of product more than 80% of the time.

E. A relatively small number of loyal customers is responsible for about 80% of the company's profits.
The passage does indeed state that "one company’s most profitable customers will probably be its competitors’ most profitable customers as well."

However, that information is not relevant to this question. This question specifically asks about the "80/20" principle in customer loyalty programs, "which states that about 80 percent of revenue typically comes from only about 20 percent of customers." Companies that believe in the 80/20 principle believe that most of their revenue (and, hence, most of their profits) come from a relatively small number of loyal customers.

(E) is thus the best answer.

ammuseeru
What does 5 question, E option mean ?
Quote:
5. The second paragraph functions primarily to

A. propose solutions to certain problems inherent in customer loyalty programs.

B. emphasize certain risks inherent in customer loyalty programs.

C. address certain contentions put forth by advocates of customer loyalty programs.

D. defend certain specific aspects of customer loyalty programs against criticism.

E. reconcile competing view points regarding the efficacy of customer loyalty program.
Even if you don't quite understand the meaning of "reconcile" here, the second paragraph doesn't describe competing view points.

If we were given two competing view points, to "reconcile" them would be to make them consistent. For example, that might entail explaining how the two views actually share fundamental similarities despite apparent differences. Or that might entail describing inaccurate facts/assumptions taken by one or both of those views and then showing that, given the same facts/assumptions, the two different views would actual agree with one another.

Put simple, to reconcile two views is to make them both make sense given the facts.

Choice (C) is a much better answer here.

I hope that helps!
Can we conclude that revenue is equal to profit? I got confused by this only.
Profit and revenue definitely aren’t the same thing, and we can’t say they are equal. But in the context of the passage, it’s fair to say that if certain customers account for about 80% of revenue, they account for approximately 80% of profit. (E) simply states that loyal customers are responsible for about 80% of the company’s profits. So, it’s fair to say that the passage suggests (E).

I hope that helps!
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Vinit800HBS KarishmaB GMATNinja

6. The author of the passage suggests that which of the following is most likely to be true of a customer who is exclusively loyal to a particular brand of product?

Quote:
Studies have demonstrated that only about 10 percent of buyers for many types of frequently purchased consumer goods are 100 percent loyal to a particular brand over a one-year period.

Reading the above why can't (A) be the answer

On the other hand (C) says "The customer is probably not a heavy consumer of that particular type of product." BUT the passage says

Quote:
Moreover, 100-percent-loyal buyers tend to be light buyers of the product or service.

The passage says that the loyal consumers are light buyers, not light consumers. We could very well have a situation such that customer X doesn't buy a lot of product A rather he consumes more of it from his friends and family who purchase the product. To make option (A) correct aren't we assuming light buyer = light consumer. And that, I believe, is a big leap!
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Vinit800HBS KarishmaB GMATNinja

6. The author of the passage suggests that which of the following is most likely to be true of a customer who is exclusively loyal to a particular brand of product?

Quote:
Studies have demonstrated that only about 10 percent of buyers for many types of frequently purchased consumer goods are 100 percent loyal to a particular brand over a one-year period.

Reading the above why can't (A) be the answer

On the other hand (C) says "The customer is probably not a heavy consumer of that particular type of product." BUT the passage says

Quote:
Moreover, 100-percent-loyal buyers tend to be light buyers of the product or service.

The passage says that the loyal consumers are light buyers, not light consumers. We could very well have a situation such that customer X doesn't buy a lot of product A rather he consumes more of it from his friends and family who purchase the product. To make option (A) correct aren't we assuming light buyer = light consumer. And that, I believe, is a big leap!


Studies have demonstrated that only about 10 percent of buyers for many types of frequently purchased consumer goods are 100 percent loyal to a particular brand over a one-year period. Moreover, 100-percent-loyal buyers tend to be light buyers of the product or service.


6. The author of the passage suggests that which of the following is most likely to be true of a customer who is exclusively loyal to a particular brand of product?

A. The customer probably began buying that brand of product only within the past year.

Not correct. How do you define "loyalty"? When do you say that a customer is loyal? When he buys from the same company 5 consecutive times? When he buys from the same company for a month? When he buys from the same company for a year?
The point is that "Studies show that only 10% of buyers are 100% loyal to a particular brand" doesn't make sense on its own. When do we say a buyer is 100% loyal? Is it that he should've never bought that product from any other company? So we need to give a timeline. The study perhaps surveyed people and asked them about their purchase for the last year. Those who bought only from the same company for the whole year were called 100% loyal. Does it mean they started buying from this company one year ago? No. Some may have been buying for 5 years, some 10 years, some 2 years... we don't know. We will call them 100% loyal if in the past year they have bought only from this company. That is all it means.


C. The customer is probably not a heavy consumer of that particular type of product.

Correct. We do not make a distinction between buyer and consumer until and unless the passage/argument requires us to. The buyer is the consumer even if he buys to gift the product to someone else. The one who bought is the one who paid for it and led to the consumption of the product. Whether he himself used it to or gave it away to someone else doesn't matter. This person led to the consumption of the product.
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Hi KarishmaB! My apologies! I just edited my original post (question 4). Thank you! :)


4. The passage suggests that companies that invoke the "80/20" principle in customer loyalty programs believe which of the following?

A. A well designed customer loyalty program can increase the number of company's loyal customers by as much as 80 percent.

B. About 20 percent of any given company's most profitable customers are likely to be its competitors' most profitable customers as well.

C. It is unreasonable to expect more than 20 percent of customers to be 100 percent loyal to any particular brand of the product.

D. Even "loyal" customers cannot reasonably be expected to stick to one particular brand of product more than 80% of the time.

E. A relatively small number of loyal customers is responsible for about 80% of the company's profits.


In support of loyalty programs, companies often invoke the “80/20” principle, which states that about 80 percent of revenue typically comes from only about 20 percent of customers.

What is the 80/20 principle? That 80% revenue comes from 20% of customers i.e. most revenue comes from a small fraction of the customers. So the companies that invoke this principle believe that a small fraction of customers bring in most of the revenue. So they take measures to ensure that they stay loyal and give them incentives to keep coming back.


A. A well designed customer loyalty program can increase the number of company's loyal customers by as much as 80 percent.

No. They believe that 20% are loyal and they bring most business. So they try to ensure that these 20% are incentivised to keep coming back.

B. About 20 percent of any given company's most profitable customers are likely to be its competitors' most profitable customers as well.

Note that the passage does mention "Such multi-brand loyalty means that one company’s most profitable customers will probably be its competitors’ most profitable customers as well." but that is the author's view, not the belief of the company. We don't know what the company thinks about this.

C. It is unreasonable to expect more than 20 percent of customers to be 100 percent loyal to any particular brand of the product.

We are not given that the company thinks it is unreasonable to expect more than 20% customers to be 100% loyal. They try to establish loyalty as much as they can using their incentive programs.

D. Even "loyal" customers cannot reasonably be expected to stick to one particular brand of product more than 80% of the time.

We are given that loyal customers also usually have divided loyalty, but this is given as the opinion of the author, not of the company. Hence irrelevant.

E. A relatively small number of loyal customers is responsible for about 80% of the company's profits.

Correct. This is what they mean by 80/20 principle and this is what they believe when they invoke it.

Answer (E)
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Can someone explain what is wrong with option B in question 6?
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Can someone explain what is wrong with option B in question 6?

The passage mentions that 100-percent-loyal buyers tend to be light buyers of the product or service. (B) contradicts the idea that they are among the most profitable customers.
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Hi experts KarishmaB GMATNinja DmitryFarber GMATNinjaTwo sayantanc2k

4. The passage suggests that companies that invoke the "80/20" principle in customer loyalty programs believe which of the following?

(C) It is unreasonable to expect more than 20 percent of customers to be 100 percent loyal to any particular brand of the product.

In question-4, I am still unclear with option C.
I referred to the following lines in the passage to infer C and my reasoning is that we are given that ~10% of buyers are 100% loyal to a particular brand, thus, C looks good as ~10% is definitely not more than 20%.

"However, this profitable 20 percent are not necessarily loyal buyers, especially in the sense of exclusive loyalty. Studies have demonstrated that only about 10 percent of buyers for many types of frequently purchased consumer goods are 100 percent loyal to a particular brand over a one-year period."

Please let me know where exactly I am going wrong.
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We can certainly demonstrate that fewer than 20% of customers are completely loyal, but that's not what the question is asking. It's asking what the companies that invoke this principle believe. The part about limited loyalty comes from the author, and it's not clear to what extent companies know about this. Also, even if customers aren't loyal, that doesn't mean it's necessarily "unreasonable to expect" them to be so. Imagine that someone was cheating on their spouse, and we told the spouse "it's unreasonable to expect loyalty from this person."

Answer choice E gets directly at what the 80/20 principle is about, in the eyes of the businesses that cite it: 20% of customers provide 80% of revenue.
agrasan
Hi experts KarishmaB GMATNinja DmitryFarber GMATNinjaTwo sayantanc2k

4. The passage suggests that companies that invoke the "80/20" principle in customer loyalty programs believe which of the following?

(C) It is unreasonable to expect more than 20 percent of customers to be 100 percent loyal to any particular brand of the product.

In question-4, I am still unclear with option C.
I referred to the following lines in the passage to infer C and my reasoning is that we are given that ~10% of buyers are 100% loyal to a particular brand, thus, C looks good as ~10% is definitely not more than 20%.

"However, this profitable 20 percent are not necessarily loyal buyers, especially in the sense of exclusive loyalty. Studies have demonstrated that only about 10 percent of buyers for many types of frequently purchased consumer goods are 100 percent loyal to a particular brand over a one-year period."

Please let me know where exactly I am going wrong.
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