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# Extensive research has shown that the effects of short-term

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Senior Manager
Joined: 31 Oct 2011
Posts: 338

Kudos [?]: 1231 [0], given: 18

Extensive research has shown that the effects of short-term [#permalink]

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13 Apr 2012, 18:17
Question 1
00:00

Question Stats:

55% (00:59) correct 45% (01:01) wrong based on 38

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Question 2
00:00

Question Stats:

78% (00:39) correct 22% (00:21) wrong based on 36

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Question 3
00:00

Question Stats:

22% (00:16) correct 78% (00:18) wrong based on 36

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Question 4
00:00

Question Stats:

63% (00:15) correct 37% (00:07) wrong based on 43

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Extensive research has shown that the effects of short-term price promotions on sales are themselves line short-term. Companies’ hopes that promotions might have a positive after effect have not been borne out for reasons that researchers have been able to identify. A price promotion entices only a brand’s long-term or “loyal” customers; people seldom buy an unfamiliar brand merely because the price is reduced. They simply avoid paying more than they have to when one of their customary brands is temporarily available at a reduced price. A price promotion does not increase the number of long-term customers of a brand, as it attracts virtually no new customers in the first place. Nor do price promotions have lingering aftereffects for a brand, even negative ones such as damage to a brand’s reputation or erosion of customer loyalty, as is often feared.

So why do companies spend so much on price promotions? Clearly price promotions are generally run at a loss, otherwise there would be more of them. And the bigger the increase in sales at promotion prices, the bigger the loss.While short-term price promotions can have legitimate uses, such as reducing excess inventory, it is the recognizable increase in sales that is their main attraction to management, which is therefore reluctant to abandon this strategy despite its effect on the bottom line.
Q11: The primary purpose of the passage is to
A. compare the arguments in favor of a certain strategy with those against it
B. attack a certain strategy by enumerating its negative consequences
C. justify the use of a certain strategy in light of certain criticisms that have been made against it
D. advocate a particular strategy by arguing against an alternative
E. explain the effects of a certain strategy and the primary motivations for adopting it

[Reveal] Spoiler:
E

Q12: According to the passage, which of the following is the reason why short-term price promotions do not attract new long-term customers to a brand?
A. Short-term price promotions do not produce an increase in sales.
B. Customers come to regard the promotional price as the fair price and the regular price as excessive.
C. Most customers select among competing products largely on the basis of price and very few are loyal to any particular brand.
D. Customers who have not previously bought the promoted brand are almost never persuaded to do so by the short-term price promotions.
E. Any customers that a brand gains by means of a short-term price promotion are liable to be lost when a competing brand has a similar promotion.

[Reveal] Spoiler:
D

Q13: The passage suggests that evidence for price promotions’ “effect on the bottom line” is provided by
A. the lack of lingering aftereffects from price promotions
B. the frequency with which price promotions occur
C. price promotions’ inability to attract new customers
D. price promotions’ recognizable effect on sales
E. the legitimate uses to which management can put price promotions

[Reveal] Spoiler:
B

Q14: It can be inferred from the passage that if a company ceased to run short-term price promotions for a particular product, an effect of this change would be to
A. reduce excess inventory of the product
B. lose some of the product’s long-term customers
C. reduce the product’s overall sales
D. inhibit growth in the number of the product’s customers
E. threaten the product’s profitability

[Reveal] Spoiler:
C

Why not b for question 14?
[Reveal] Spoiler: Question #1 OA
[Reveal] Spoiler: Question #2 OA
[Reveal] Spoiler: Question #3 OA
[Reveal] Spoiler: Question #4 OA

Kudos [?]: 1231 [0], given: 18

Manager
Status: I will not stop until i realise my goal which is my dream too
Joined: 25 Feb 2010
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Re: GWD #4 V 6 [#permalink]

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15 Apr 2012, 08:58
Indeed the last lines finalizes the answer C
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Regards,
Harsha

Note: Give me kudos if my approach is right , else help me understand where i am missing.. I want to bell the GMAT Cat

Satyameva Jayate - Truth alone triumphs

Kudos [?]: 62 [0], given: 16

Manager
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Re: GWD #4 V 6 [#permalink]

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06 May 2012, 03:34
price promotion does not increase
the number of long-term customers

of a brand, as it attracts virtually
(20) no new customers in the first place.Nor do price promotions have linger-
ing aftereffects for a brand, even
negative ones such as damage to
a brand’s reputation or erosion of
(25) customer loyalty,
as is often feared.

Price promotion does nothing (either negative or positive) except for reducing inventories

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Intern
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Re: Extensive research has shown that the effects of short-term [#permalink]

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11 Nov 2014, 04:30
Can some expert please explain question no. 13. "“effect on the bottom line”

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Re: Extensive research has shown that the effects of short-term [#permalink]

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29 Dec 2014, 22:17
Q13: The passage suggests that evidence for price promotions’ “effect on the bottom line” is provided by
A. the lack of lingering aftereffects from price promotions
B. the frequency with which price promotions occur
C. price promotions’ inability to attract new customers
D. price promotions’ recognizable effect on sales
E. the legitimate uses to which management can put price promotions

Para#2 discuses this:
While short-term price promotions can have legitimate uses, such as reducing excess inventory, it is the recognizable increase in sales that is their main attraction to management, which is therefore reluctant to abandon this strategy despite its effect on the bottom line.

The question itself is not clear to me.Anyways for me,its C. I appreciate inputs from fraternity on this.
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Re: Extensive research has shown that the effects of short-term [#permalink]

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03 Jul 2017, 13:55
Why companies do this ? – Some benefits (explanation)
Consider Option E : explain the effects of a certain strategy (this is true, the author discussed this in the first para) and the primary motivations for adopting it (this is also true, the author explains this in the end of the passage – clearance, and reluctance to to abandon in hopes of profit margins later on)
Option E therefore is correct!
Consider Option C: justify the use of a certain strategy(does he justify the use of price promotion?) in light of certain criticisms that have been made against it.
Understand that the tone of the author overall is more or less negative wrt price promotions. The word “justify” implies that the author argues in support for this strategy. This is NOT true! C is therefore wrong.
2)""people seldom buy an unfamiliar brand merely because the price is reduced."
3)What does the passage state to provide support to the fact that these promotions incur losses? It is the sentence that says, “Clearly price promotions are generally run at a loss, otherwise there would be more of them”. Hence B.
4)"While short-term price promotions can have legitimate uses, such as reducing excess inventory, it is the recognizable increase in sales that is their main attraction to management, which is therefore reluctant to abandon this strategy despite its effect on the bottom line.". Main reason to go for short term is because it helps in boosting sales. So, if you cease it obviously sales will go down.Hence C
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Thanks & Regards,
Anaira Mitch

Kudos [?]: 180 [0], given: 855

Re: Extensive research has shown that the effects of short-term   [#permalink] 03 Jul 2017, 13:55
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