Executives at the Fizzles Beverage Company plan to boost profits in Co

Question

Executives at the Fizzles Beverage Company plan to boost profits in Country X on their range of fruit-flavored drinks by introducing new flavors based on tropical fruits that are little known there. The executives reason that since the fruit drinks of other companies have none of these flavors, Fizzles will not have to compete for customers and thus will be able to sell the drinks at a higher price.

Which of the following, if true, presents the most serious potential weakness of the plan?

A. The new fruit drinks would be priced significantly higher than other Fizzles fruit drinks with more conventional flavors.
B. In a telephone survey, at least one of the consumers contacted said that they preferred many of the new flavors to all of the more familiar flavors.
C. To build widespread demand for the new flavors, Fizzles would have to launch an advertising campaign to familiarize consumers with them.
D. Consumers choosing among fruit-flavored drinks of different brands generally buy on the basis of name recognition and price rather than the specific fruit flavor.
E. Few consumers who are loyal to a specific brand of fruit-flavored drinks would willingly switch to another brand that costs more.

CR07651.01
OG2020 NEW QUESTION

HarshaGM · Accepted Answer

The correct answer is option (D).

Objective of Fizzle Execs:  Increase profits
 Plan:  Introduce new, exotic (not well known) fruit flavoured drinks, sell at a higher price point
 Rationale:  As competitors do not have these flavours, there will not be any competition for customers, and customers will be happy to pay a higher price.

Question:  Find the weakness in the plan.

In what scenario would Fizzle not make a profit, even given the above?

1. What if there is no demand for these new flavours? The execs are assuming that customers will embrace these new flavours and be ready to pay for it?
Assumption: There exists a demand for these new flavours

2. What if not enough demand exists, and the company has to run marketing/advertising campaigns to promote the new flavours, and what if the cost of these campaigns is higher than any revenue that can be earned from the new flavours? Then the firm would not make a profit from these new flavours (Expense > Revenue).

Assumption 2: Any marketing/advertising effort for these new flavours does not cost more than the revenue that can be earned from these flavours.

A good weakener will work against the above assumptions. Let us analyse the answer choices.

A. The new fruit drinks would be priced significantly higher than other Fizzles fruit drinks with more conventional flavors. 
We already know that the new drinks will be priced higher than their regular offering. This option simply adds that the price will be significantly higher. However, this does not impact our argument anyway. Hence, not a weakener.

B. In a telephone survey, at least one of the consumers contacted said that they preferred many of the new flavors to all of the more familiar flavors. 
In other words, there are some (at least one => >=1, can be any number from 1 to all) customers who show a preference for the new flavours. So there is some demand. This is then a strengthener for the plan rather than a weakener.

C. To build widespread demand for the new flavors, Fizzles would have to launch an advertising campaign to familiarize consumers with them. 
Interesting option. If you have followed my analysis, you can see that this option needs consideration. But here, the option only mentions that Fizzles would have to launch an ad campaign to promote the new flavours. There is nothing to suggest that this campaign will have such a significant cost that profit will be impacted (Profit = Revenue - Expenses). Hence, in the absence of any information on the magnitude of costs, this option cannot be the correct weakener.

D. Consumers choosing among fruit-flavored drinks of different brands generally buy on the basis of name recognition and price rather than the specific fruit flavor. 
Correct choice! 
If you observe carefully, this option works against our assumption 1.

As per this option, consumers are 
1. Brand conscious (Name recognition). Not an issue because as far as we know, the brand is the same, only the flavours are different (Like Pepsi Blue!)
2. Price conscious. This means that consumers will definitely prefer a cheaper priced product when given a choice between a cheaper and pricier option. 
3. Not really flavour conscious. This means that as long as it is cheap and satisfies their need (thirst/refreshment), the customers do not care about the flavour.

The above means that:

Price sensitive, Flavour insensitive customer -> will not buy exotic flavour, high priced new drinks -> Revenue may not be significant enough -> no profits -> Weakens the plan successfully.

E. Few consumers who are loyal to a specific brand of fruit-flavored drinks would willingly switch to another brand that costs more. 
Interesting choice.

The problems with this option are:
1. We do not know the magnitude of 'few'. Insignificant number or significant number?
2. We do not know the magnitude of 'loyal to a specific brand'.

For example, if both 'few' and 'loyal' represent a huge, significant number of customers, then the above statement would read:

A significant majority of consumers would willingly switch to another brand that costs more. This actually strengthens the conclusion (they will buy the new high priced flavours).

Now, if both 'few' and 'loyal' represent a tiny, insignificant number of customers, then the above statement would read:

A small, insignificant number of customers would switch to another brand that costs more. i.e. the vast majority will not switch. Then the company won't make profits. Hence, it is a weakener.

The issue is that we have no idea which of the above two scenarios does 'few' and 'loyal' represent. So, we cannot definitely say that option (E) serves as a weakener.

Hope this explanation helps those are confused about option (E).

Cheers!

zhanbo · Answer

Indeed, E is a bit inviting at first glance. But statement E (Few consumers who are loyal to a specific brand of fruit-flavored drinks would willingly switch to another brand that costs more) only discuss the behavior of those loyal consumers. We do not know how many consumers are loyal customers. If, say, only 5% of consumers are loyal customers, the proposed plan won't suffer much.

DavidTutorexamPAL · Answer

The argument is that no competition for the alternative fruit flavors means that they will be easy to sell at a high price. The easiest way to weaken this is to show why they would be hard to sell at a high price, for example by showing that people don't want to buy flavors they're not familiar with, or that they don't have enough money. We'll directly look for an answer that says something like this, a Precise approach.

(D) directly says that consumers buy what they're familiar with, what we expected to see. This is our answer.

Note also that (C) is a bit off-target: we are not told that 'revenues would increase', which (C) would weaken, but rather that the product would be easier to sell, which (C) does not address. Watch out for these types of answers!

Skyline393 · Answer

A. The new fruit drinks would be priced significantly higher than other Fizzles fruit drinks with more conventional flavors. => This is stated in the argument 
B. In a telephone survey, at least one of the consumers contacted said that they preferred many of the new flavors to all of the more familiar flavors. =>a bit strengthen  
C. To build widespread demand for the new flavors, Fizzles would have to launch an advertising campaign to familiarize consumers with them. => Irrelevant 
D. Consumers choosing among fruit-flavored drinks of different brands generally buy on the basis of name recognition and price rather than the specific fruit flavor. => CORRECT, the new flavors have no impact on customer's choice, and customers who care abt brand name + price would pick lower priced product instead of higher-priced products with only different in flavor in the same brand=> The plan fails. 
E. Few consumers who are loyal to a specific brand of fruit-flavored drinks would willingly switch to another brand that costs more. => Irrelevant

Javierbc · Answer

How can we eliminate Answer E?? I chose it...

Abhishek009 · Answer

Indeed so !!!! Few can include any number or percentage.... Further few may include any number > 0 (Check the concepts here https://gmatclub.com/forum/negation-tes ... 98821.html ) Hope this adds, to the excellent explanation provided in the post.

ayusharora96 · Answer

karishma  whats wrong with E

Gmattired · Answer

Although I chose D but what if the brand is already well recognized in such a case wont D rather strengthen the argument ?

egmat · Answer

Hey Aman,

The passage tells us that Fizzles Beverage Company will  introduce new  (exotic) fruit-flavored drinks.

Now, as per option choice D -  Consumers choosing among fruit-flavored drinks of different brands generally buy on the basis of name recognition and price rather than the specific fruit flavor.

It is clear that Fizzles Beverage Company is not a recognized brand among fruit-flavored drinks of different brands.

Hadiagh · Answer

I eliminated option”D” because it talked about comparison with other companies and the stimulus states that no other companies have introduced such drinks so there won’t be any competition.

Please help

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KarishmaB · Answer

Aim: Boost profits Plan: Bring in new exotic flavours so no competition for customers. So increase pricing which will lead to higher profits. We need to weaken the plan. A. The new fruit drinks would be priced significantly higher than other Fizzles fruit drinks with more conventional flavors. Doesn't weaken the plan. B. In a telephone survey, at least one of the consumers contacted said that they preferred many of the new flavors to all of the more familiar flavors. Info about one consumer is irrelevant. C. To build widespread demand for the new flavors, Fizzles would have to launch an advertising campaign to familiarize consumers with them. We don't know whether widespread demand is needed to increase profits and also we don't know if the advertising campaign will be expensive. D. Consumers choosing among fruit-flavored drinks of different brands generally buy on the basis of name recognition and price rather than the specific fruit flavor. Name of the brand and price are deciding factors, not flavours. Looks like the plan will fail because price is a deciding factor, not flavour. People are then unlikely to pay extra for exotic flavours. E. Few consumers who are loyal to a specific brand of fruit-flavored drinks would willingly switch to another brand that costs more. Consumers don't usually switch to a more expensive brand. Doesn't matter. The aim is not 'increase the customer base'. It is 'increase the profit'. If the competition for customers stops (so current customers don't go away) and current customers start buying the more expensive juices, profits will increase. Answer (D) Video on Weaken Questions: https://youtu.be/EhZ8FKkfy0k

egmat · Answer

Hey Ayush,

Option E is an interesting choice.

It essentially talks about the behavior of customers. And we do not know exactly how many customers are loyal, therefore, the impact of option E on the conclusion is ambiguous.

Thanks

egmat · Answer

Option D essentially establishes that Fizzles Beverage Company is not a well-known brand among fruit-flavored drinks because since Consumers choosing among fruit-flavored drinks of different brands  generally buy on the basis of name recognition and price rather than the specific fruit flavor . Fizzles Beverage Company will not be able to sell these at higher prices - Belief in the conclusion weakened.

Thanks

jabhatta2 · Answer

GMATNinja  - lets say the fruit juice introduced by the Fizzles Beverage Company is Mangosteen juice (Mangosteen is a tropical fruit specifically)

Fact per statement -- no other company sells Mangosteen juice.

I don't see how option D is relevant when it comes to Mangosteen juice. 
-- No other company / Brand is selling Mangosteen juice.

Hence option D is not relevant to Mangosteen juice. Option D is relevant to OTHER non tropical fruit juices (like apple juice, apple being a non tropical fruit)

egmat · Answer

Hey! 
A quick note - Another key point about option D is that it talks about  all fruit flavoured drinks  (tropical, non tropical both included).

D. Consumers choosing among  fruit-flavored  drinks of different brands generally buy on the basis of name recognition and price rather than the specific fruit flavor.

This would mean that even for a tropical fruit flavour which is a completely new flavour in the market of country X, consumers would still generally make their purchase decision (to buy, or not to buy) on the basis of name recognition and price, rather than the specific fruit flavour.

This is what makes option D applicable here - if consumers are going to look at name recognition and price rather than the fact that a new tropical flavour is there to be bought and consumed, then Fizzle selling these tropical flavoured drinks  at a higher price  does not seem to be a good plan.

Regards,
Harsha

jabhatta2 · Answer

Hi  egmat   Harsha  - just so I understand -- Option D is telling us that 
i) if a customer who wants to buy Mangosteen juice (Mangosteen is a Tropical fruit) 
ii) no other company is selling this juice

If the customer goes to super market to initially buy Mangosteen juice -- seeing the cheaper juices that are non tropical (apple juice for example) on the shelves -- he will DROP his desire for Mangosteen flavor completely and BUY apple juice just because apple juice is cheaper (he is not interested in flavor at all) ?

egmat · Answer

Hey  jabhatta2

If a specific customer has a desire for Mangosteen and Mangosteen only, that means that till the point Fizzle brings Mangosteen juice into the market, this person never had the choice (no other company is providing this juice). This particular customer may still buy Mangosteen from Fizzle, even at a higher price when the product enters the market. But we do not know if a good chunk of the consumers are of this type. It seems a little extreme to assume that your regular customer who comes to these markets and buys a fruit drink is one who has a craving for Mangosteen (or any other specific tropical fruit) and goes back home buying some other juice. The higher probability customer type is the person who simply goes to the mall to get a fruit drink from the available options. If the typical customer is influenced more by a desire to try tropical flavours than factors like price and brand name, then Fizzle's plan is a good plan.

Option D works because it indicates that the typical customer (those who make a choice among the various available brands in the market) looks more at brand recognition and price rather than flavour in making a purchase decision, which is definitely a potential weakness of the plan. If your typical consumer does not care about the flavour, and gives more importance to price and brand, the plan would seem shaky!

Remember - The case of a specific customer who goes to the market only for Tropical fruit drink (say, Mangosteen), despite its unavailability in the market is an extreme case - Useful for Assumption questions when we are identifying which statement has to be true, and which is not "must be true", but not so much for these types of questions!

Hope this helps!
Harsha

RohitSaluja · Answer

Hi  ayusharora96  not an expert but one thing that could help you eliminate E is also the modifier "willingly". Option E says only small number of loyal customers will willingly switch , now there are two inherent problems.

The first one already mentioned by other posts is that we dont know how many customers are loyal, so this option could swing either way. 
Secondly, it says small no would make the switch willingly, now what if there is another base of customer who might make the switch unwillingly, only to look cool that they can afford and drink this expensive juice(Just satying)

Hope that helps!

btsaami · Answer

Option E says Few customers who are loyal to a specific brand would willingly switch from one to another brand that costs more which basically means that many will not switch to a new brand. So this can be a weakener, agreed
But here they are also talking about the specific brand and not a specific flavored drink. In our weakener, we need a point which counters the profitability assumption of the executives of Fizzle beverage i.e. customers will favor some other parameters than the flavor of the drink.
Additionally, many consumers not switching from one brand to other is ambiguous and doesn't tell us how it will boost profits for Fizzles beverage. Probably, there are more customers loyal to Fizzles beverage and they can or cannot switch to the new tropical flavor. In this case, profit might increase or decrease or remain same. On the other hand, there might be very few consumers loyal to Fizzles brand, resulting in reduced profit. Hence, we can't definitely tell how it is translating into greater profits as presumed by the executives.

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Executives at the Fizzles Beverage Company plan to boost profits in Co

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Executives at the Fizzles Beverage Company plan to boost profits in Co

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