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

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

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06 Apr 2009, 23:55
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Question 1
00:00

Question Stats:

68% (02:25) correct 32% (01:46) wrong based on 124

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Question 2
00:00

Question Stats:

70% (01:39) correct 30% (00:43) wrong based on 116

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Question 3
00:00

Question Stats:

16% (01:35) correct 84% (01:05) wrong based on 121

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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
aftereffect have not been borne out for reasons that researchers have been able to identify.

A price promotion entices only a brand’s (10) 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 (15) 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 (20) 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 (25) 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 (30) 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 (35) 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.
Q3:The primary purpose of the passage is to
* compare the arguments in favor of a certain strategy with those against it
* attack a certain strategy by enumerating its negative consequences
* justify the use of a certain strategy in light of certain criticisms that have been made against it
* advocate a particular strategy by arguing against an alternative
* explain the effects of a certain strategy and the primary motivations for adopting it

[Reveal] Spoiler:
E

Q4: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?
* Short-term price promotions do not produce an increase in sales.
* Customers come to regard the promotional price as the fair price and the regular price as excessive.
* Most customers select among competing products largely on the basis of price and very few are loyal to any particular brand.
* Customers who have not previously bought the promoted brand are almost never persuaded to do so by the short-term price promotions.
* 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

Q5:The passage suggests that evidence for price promotions’ “effect on the bottom line” (Last 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

Could you provide explanation on 3rd question?
[Reveal] Spoiler: Question #1 OA
[Reveal] Spoiler: Question #2 OA
[Reveal] Spoiler: Question #3 OA

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Re: RC - Price Promotion causes Demotion [#permalink]

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07 Apr 2009, 17:22
priyankur_saha@ml.com wrote:
Could you provide explanation on 3rd question?
---------------------------------- RC -----------------------------------------------
Extensive research has shown
that the effects of short-term price
promotions on sales are themselves
Line short-term. Companies’ hopes that
(5) promotions might have a positive
aftereffect have not been borne
out for reasons that researchers
have been able to identify.

A price promotion entices only a brand’s
(10) long-term or “loyal” customers;
brand merely because the price is
reduced. They simply avoid paying
more than they have to when one of
(15) their customary brands is temporar-
ily available at a reduced price. A
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.
So why do companies spend so
much on price promotions?
Clearly
price promotions are generally run
at a loss, otherwise there would
(30) 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
(35) reducing excess inventory, it is the
recognizable increase in sales that
is their main attraction to manage-
ment,
which is therefore reluctant
to abandon this strategy despite
its effect on the bottom line.
--------------------------------------------------------------------------------
Q3:
The primary purpose of the passage is to

* compare the arguments in favor of a certain strategy with those against it
* attack a certain strategy by enumerating its negative consequences
* justify the use of a certain strategy in light of certain criticisms that have been made against it
* advocate a particular strategy by arguing against an alternative
* explain the effects of a certain strategy and the primary motivations for adopting it
--------------------------------------------------------------------------------

The passage suggests that evidence for price promotions’ “effect on the bottom line” (line 40) 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
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Re: RC - Price Promotion causes Demotion [#permalink]

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07 Apr 2009, 22:09
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Re: RC - Price Promotion causes Demotion [#permalink]

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15 Apr 2009, 08:16
EDB
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rampuria

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Re: RC - Price Promotion causes Demotion [#permalink]

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15 Apr 2009, 16:20
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Re: RC - Price Promotion causes Demotion [#permalink]

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16 Apr 2009, 02:55
EBC.

Regarding the third question, the passage explains the effect of price promotion and motive behind it to increase sales. the passage does not advocate any strategy. Hence, D is out. It does not justify the use of any strategy. Hence, C is out. It also does not compare the argument in favor of price promotion with the one against it. Hence, A is out.

Both B and E look correct. However, E has better coverage. Hence, it should be the answer.
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Re: RC - Price Promotion causes Demotion [#permalink]

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16 Apr 2009, 07:39
rampuria wrote:
EDB

OA is same.
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Re: RC - Price Promotion causes Demotion [#permalink]

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21 May 2009, 19:35
rampuria wrote:
EDB

Rampuria
can u explain the 3rd one as to why it is B
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Re: RC - Price Promotion causes Demotion [#permalink]

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07 Jun 2009, 06:16
Id like to know why the answer for #3 is B as well. I had it pegged down to D, as the 'bottom line' referred to sales, I thought, and the last sentence does mention that these short term price discounts result in an increase in sales.
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Re: RC - Price Promotion causes Demotion [#permalink]

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11 Jun 2009, 23:05
I thought it's EDA. But if the OA is B, it could be because of
IMO, "which is therefore reluctant
to abandon this strategy despite
its effect on the bottom line."
This last sentence claims that price promotions are occurring often because of management's attraction but this frequency is hurting the bottom line.
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Re: RC - Price Promotion causes Demotion [#permalink]

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24 Jun 2009, 13:37
Got E and D for 3 and 4...Can someone please provide the explanation for 5???
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Re: RC - Price Promotion causes Demotion [#permalink]

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26 Jun 2009, 04:17
IMO E D D. answer to 5th question should be D but not B. i agree with the icandy explanation for 5th question..
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Re: RC - Price Promotion causes Demotion [#permalink]

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01 Jul 2009, 13:14
I am still confused in case of Q5 (why is the answer B?)
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Re: RC - Price Promotion causes Demotion [#permalink]

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05 Oct 2010, 07:11
gmatprep09 wrote:
I am still confused in case of Q5 (why is the answer B?)

It must be A/
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Re: RC - Price Promotion causes Demotion [#permalink]

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05 Oct 2010, 09:50
For last question I feel C should be that answer. Bottom line of promotions is to get new customers, however promotions fail to get new customers.
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Re: RC - Price Promotion causes Demotion [#permalink]

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05 Oct 2010, 10:03
KissGMAT wrote:
For last question I feel C should be that answer. Bottom line of promotions is to get new customers, however promotions fail to get new customers.

" A
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"
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Re: RC - Price Promotion causes Demotion [#permalink]

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05 Oct 2010, 20:58
can some one expain why option a is wrong for 5 q
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Re: RC - Price Promotion causes Demotion [#permalink]

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06 Oct 2010, 12:28
Can anybody explain the subtle line between these two choises? Am I right thinking that C is correct, but D portraites much bigger picture?

The passage suggests that evidence for price promotions’ “effect on the bottom line” (line 40) 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

Thanks.
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Re: RC - Price Promotion causes Demotion [#permalink]

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07 Oct 2010, 13:47
Financier wrote:
Can anybody explain the subtle line between these two choises? Am I right thinking that C is correct, but D portraites much bigger picture?

The passage suggests that evidence for price promotions’ “effect on the bottom line” (line 40) 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

Thanks.

yeah i went with C on the last one as well. Please explain. Thanks.
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Re: RC - Price Promotion causes Demotion [#permalink]

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30 Sep 2012, 03:14
vwjetty wrote:
Financier wrote:
Can anybody explain the subtle line between these two choises? Am I right thinking that C is correct, but D portraites much bigger picture?

The passage suggests that evidence for price promotions’ “effect on the bottom line” (line 40) 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

Thanks.

yeah i went with C on the last one as well. Please explain. Thanks.

There is still no explanation for Q5 ? Can anyone please explain the last ques ?
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Re: RC - Price Promotion causes Demotion   [#permalink] 30 Sep 2012, 03:14

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