Magazine publishers can boost newsstand sales of a single issue of a.

Question

Magazine publishers can boost newsstand sales of a single issue of a magazine by packaging a free gift with it. Doing so might cost the publisher one dollar per copy distributed to newsstands. By way of comparison, a one-dollar discount on the retail price (which is set by the publisher) can also boost sales, but the boost tends to be somewhat smaller. Clearly therefore, including a gift is the more cost-effective form of promotion.

Which of the following, if true, most seriously weakens the argument?

(A) A free gift has to be selected to appeal to the intended audience of the magazine, whereas a discount has universal appeal.

(B) When two competing magazines each simultaneously have issues on newsstands with a free gift, the effect of promotion on sales is diluted for both.

(C) In very competitive sectors of the market, promotional boosts in sales of a magazine do not translate into increased sales for the issues that succeed the promotion.

(D) Even when there is promotion, newsstands return a quarter or more of the copies they have bought to sell, and the publisher refunds the price the retailer paid for these copies.

(E) Some magazine publishers believe that offering occasional price discounts makes regular readers of the magazine more resistant to paying the full retail price.

gmatophobia · Accepted Answer

Let's pay close attention to the story and to the conclusion of the argument.

Story  
We are presented with two options that the magazine publishers are considering to boost the newsstand sales of a single issue of a magazine
   Package a free gift with the newspaper
  In this scheme the cost that the publisher may incur is $1 per copy     Give a one-dollar discount on the  retail price  (which is set by the publisher)  The boost tends to be somewhat smaller if this method is used.

Conclusion   - Including a gift is the  more cost-effective  form of promotion.

Note: The conclusion revolves around the fact that including a gift is more cost-effective than giving a $1 discount on the retail price of the newspaper. We are not concerned about anything else except the cost factor here.

Answer Choice Elimination

(A) A free gift has to be selected to appeal to the intended audience of the magazine, whereas a discount has universal appeal.

This option is indeed a tempting one! However, it suffers from two shortcomings 
   The premise of the argument states that the cost that the publisher may incur is $1 per copy. This is regardless of what type of gifts they choose.  
  The premise of the argument states that the boost tends to be somewhat smaller when a $1 discount is offered on the retail price. Hence, even if the free gift may not appeal to everyone and may appeal only to the intended audience of the magazine, we know for a fact that it still boosts sales more than offering a discount does.

Hence, this option doesn't really weaken the argument. We are not presented with any information that including a gift is the  NOT more cost-effective  form of promotion than offering a discount is.

(B) When two competing magazines each simultaneously have issues on newsstands with a free gift, the effect of promotion on sales is diluted for both.

In my opinion, this option is out of scope and barely touches the conclusion. In this option, we are presented with a scenario that occurs when two magazines offer discounts simultaneously. However, the conclusion that the argument presents is that out of the two options to boost sales including a gift is more cost-effective than offering a $1 discount on the retail price. Hence, we can eliminate this option.

(C) In very competitive sectors of the market, promotional boosts in sales of a magazine do not translate into increased sales for the issues that succeed the promotion.

Just like Option B, this option is also out of scope. This option presents a scenario that occurs prior to the promotion. Our conclusion is about comparing two methods. Hence, we can eliminate this option.

(D) Even when there is promotion, newsstands return a quarter or more of the copies they have bought to sell, and the publisher refunds the price the retailer paid for these copies.

Ah ha! This is a good one.

The option tells us that even when there is a promotion, newsstands return a quarter or more of the copies they have bought to sell. Once, the newspapers are returned publisher refunds the price the retailer paid for these copies. But what about the free gifts that the publisher had bought? Well, that cost is already incurred and is a cost that the publisher will have to bear. Hence, for each copy returned the publishers may lose one dollar.

However, let's assume that the publisher had offered a discount on the retail price, in that scenario there are no upfront overhead charges that the publishers incur at their end. Therefore, for the copies that are returned, the publishers do not make any loss.

All in all, this option gives us a reason to believe that including a gift is probably NOT a more cost-effective form of promotion.

Let's keep D.

(E) Some magazine publishers believe that offering occasional price discounts makes regular readers of the magazine more resistant to paying the full retail price.

This to an extent strengthens the argument. The argument tells us if the publishers offer occasional price discounts, the regular readers will not be willing to pay the full retail price. Hence, 'probably' giving a gift is a better choice instead. We need to weaken, hence eliminate this option.

Option D

KarishmaB · Answer

We are discussing how publishers can boost the sales of a particular issue (not overall brand or all subsequent issues etc.) say a of a beauty magazine publisher wants to boost the sales of the upcoming year end issue to improve the average and meet his targets. 
Say the magazine is usually priced at $10 (its cost price could be anything say $5). 
He has two options:
- He can buy a free gift worth $1 (say a trial pack of a good moisturiser) for each issue and give it along with the magazine.
- He can price the magazine at $9 instead (so it is like giving $1 along with the magazine).

The argument tells us that the first option is more successful. It will boost sales more.

Conclusion: Including a gift is the more cost-effective form of promotion.

The argument is assuming that cost wise, giving a $1 gift or $1 would be the same but the gift will give more sales boost.

What will weaken it?

(A) A free gift has to be selected to appeal to the intended audience of the magazine, whereas a discount has universal appeal.

Irrelevant. We know that the gift gives more boost, whether it has universal appeal or not. That's all we care about - bigger boost to sales.

(B) When two competing magazines each simultaneously have issues on newsstands with a free gift, the effect of promotion on sales is diluted for both.

Irrelevant. It discusses a special case of two magazines running promotions of free gifts. We need to compare discounted pricing with free gift option.
Anyway, we don't know whether the same case occurs in case of discounted pricing too. We are not considering free gift option alone vs another competitor also offering the same.

(C) In very competitive sectors of the market, promotional boosts in sales of a magazine do not translate into increased sales for the issues that succeed the promotion.

The later issues are irrelevant. We need to boost the sales of this issue through some promotion. It doesn't give us the diff between free gift vs $1 discount in any case.

(D) Even when there is promotion, newsstands return a quarter or more of the copies they have bought to sell, and the publisher refunds the price the retailer paid for these copies.

This says that a quarter or more of the issues remain unsold (which the newsstands return to publishers). If the publisher buys a gift for all issues, the gifts of unsold issues will be sunk cost. But if the gift itself is $1, he will get that $1 back because the newsstands need to be paid what the publisher charged them. 
So if the publisher gives a $1 discount and charges $9 for the magazine, when the newsstands return the magazine, the publisher will just need to give $9 back and will effectively get his $1 back in cash from unsold issues. 
But if he buys a gift instead, he will be left with a mountain of free gifts of $1 each from which he cannot get his money back. So then, even if discounts bring lower boosts, it is possible that they are the more cost effective solutions. Hence it weakens the argument.

(E) Some magazine publishers believe that offering occasional price discounts makes regular readers of the magazine more resistant to paying the full retail price.
 
Gives us a future con of price discounts. It is not related to our current argument of which option is a more cost effective means of promotion for one issue.

Answer (D)

MrWhite · Answer

I am confused between A & D.

Wouldn't the universal appeal of discounts render the solution MORE cost effective compared to offering free gifts - hence weaken the argument?

I can see D, also weakens this by suggesting the publisher's expenditure on gifts is wasted but not sure how to pick this over A, given official answer is D.

I suspect, since A doesn't specify the extent as clearly as D does, D is "better" answer choice. Any help from others who can shed more light on this would be greatly appreciated!

Anki111 · Answer

D has nothing related to the conclusion, which is the gift promotion. How on earth it can be the right answer. Anyone ?

YashYashkratos · Answer

Such a Good question also happens to be a very GMAT like question.

A) incorrect- do we want universal appeal or is the company focuses on a certain group- what will be better some people buying a lot or different types of people buying a little.

B) incorrect- but does the same effect happen for discounts or does it lead to less sales to an extent that discounts would have been better, it is a certainty trap commonly used by GMAT.

C) incorrect- talks about promotional efforts in general does nothing to determine why gifts are a bad idea instead of discounts.

D) CORRECT - when the publisher has to refund the price of the magazine to the retailer THEY ALSO HAVE TO REFUND THAT EXTRA DOLLAR OVER THE PRICE WHICH THEY PAID FOR THE GIFT AS COMPARED TO JUST THE PRICE OF THE MAGAZINE WHICH WOULD HAVE HAD A DISCOUNT.

E) incorrect- if anything it strengthens the argument by saying discounts are not a good idea because people will not pay more in the future.
 
Again such a good question, what is the source?

Thanks for reading.

MrWhite · Answer

Thank you Yash & gmatophobia for your ellucidation! Source is GMAT Focus official Practice Exam 6. The question came up towards the end of the VR Section. I am currently stuck around V85. CR seems to be the bottleneck for me, especially these types where I am having trouble picking the correct option choice out of two competing ones.

Engineer1 · Answer

I have no idea why D is the OA. I am stuck between A, B, C. 
C - Possibly incorrect because it is too specific, meaning it talks about "very competitive sectors".

B - Possibly incorrect because even if the profit is diluted, it could still mean higher boost of sales w/ a gift vs with a discount. Not really a weakener.

A - I am still not sure why A is incorrect. It directly attacks gift as a method of promotion. If it does not appeal to the customer, the sales likely won't lead to higher boost. Not the perfect choice, but seems like the best of 5.

D - Completely clueless why it is correct.

KarishmaB   GMATNinja   MartyMurray   GMATGuruNY   IanStewart  - Please help. Thank you.

MartyMurray · Answer

You could get some ideas for choosing between the last two choices from this post.

The Final Key Step in Getting a GMAT Critical Reasoning Question Right – Telling the Difference Between a Trap Choice and the Correct Answer

MartyMurray · Answer

The conclusion of the argument is about a comparison of the two types of promotions. (C) is about BOTH TYPES. So, it doesn't change the comparison because a fact that's true about both doesn't offset the advantage of the free gift form of promotion that the passage brings up.

Exactly, and the effect could be diluted if the prices of two competing magazines are discounted as well.

Notice that the passage STATES AS FACT that "a one-dollar discount on the retail price (which is set by the publisher) can also boost sales, but the boost tends to be somewhat smaller."

So, regardless of what choice (A) says, we know that the free gift approach boosts sales more.

So, (A) is written to seem to contradict that premise in the passage, but it doesn't and thus has no effect on the argument.

The conclusion of the argument is the following:

including a gift is the more cost-effective form of promotion (in comparison with a discount)

Here's the key part of the support for that conclusion that we have to notice:

Doing so might cost the publisher one dollar per copy distributed to newsstands.

We see that including a gift costs the publisher a dollar PER COPY DISTRIBUTED.

What we then have to figure out is that offering a discount costs the publisher only PER COPY SOLD. After all, offering a discount does not cost the publisher anything if the copy is not sold.

So, if what (D) says is true, then it's possible that offering a free gift is not as cost-effective as offering a discount since, in offering a gift the publisher may incur a one-dollar-per-copy cost for each copy returned by newsstands whereas offering a discount won't have the same result since there is no discount-related cost associated with returned copies of a magazine. When copies are returned, the discount disappears.

In other words, (D) presents a factor, additional cost, that may offset the greater size of the boost provided by the gift approach.

Thus, (D) indicates that, actually, offering a discount may turn out to be the more cost-effective form of promotion and thus serves to cast doubt on the conclusion.

Engineer1 · Answer

Thank you Karishma and Marty. Did not think of D in the way you mentioned. Now it sounds simple. Appreciate the detailed response.

Gemmie · Answer

1. Cost of Free Gift vs. Discount: 
The publisher spends one dollar per magazine copy on a free gift.
Offering a one-dollar discount also costs the publisher one dollar per copy.

2. Sales Boost:

The argument claims that including a gift results in a larger increase in sales than offering a discount.

3. Cost-Effectiveness:

For including a gift to be more cost-effective, the additional sales generated by the gift need to more than compensate for its cost.

What Option (D) Introduces:  Even when there is promotion, newsstands return a quarter or more of the copies they have bought to sell, and the publisher refunds the price the retailer paid for these copies.

Why this weakens the argument: If a significant portion of magazines (a quarter or more) are returned by newsstands, the publisher not only have to refund the retailer for these unsold magazines but also loses the one dollar spent on the gift for these returned copies

Example Calculation:    Let's say 100 magazines are sent to newsstands, costing the publisher $100 for the gifts. If 25 of these magazines are returned: 
 The publisher needs to refund the retailer for 25 magazines (full price).
The publisher loses the $25 spent on gifts for these unsold copies.

==> Therefore, the total cost for the promotion increases from $100 (for gifts) to $125 (including refunds). This additional cost weakens the argument that the gift is more cost-effective than a discount, which does not incur these additional return-related costs.

Hrley · Answer

Was pondering between A and D, and ended up choosing D which was fortunate.

Why D is a good answer:
- Let’s say there are 4 copies sold to a newsstand, and it then returns 1 to the publisher
Each cost 2 dollars

Gift:

- Publisher spends ? dollars more, and is then given back 2 dollars
(?, not 4 * 1 = 4 because the argument says that gifting MIGHT - look for the word - cost the publisher one dollar per copy.
So, that cost could be more less)

Discount (now each magazine costs the newsstand 1 dollar):

- The publisher spends 4 dollars more, and is given back 1 dollar
So, we got -? + 2 or -4 + 1. Depending on what the value of ? is, one can be greater than the other.
So, that's the explanation using arithmetic. A more concise explanation would be that with Gifting, the publisher might spend more money adding gifts to the newspaper issues than the money he gets back from the refunds, assuming that the cost per gift is higher than expected. With Discount, the publisher has a more definite result in terms of how much it spends and saves.

With A, the answer is worse because it less directly attacks the argument than D. The answer itself is a decent weakener, but not as much of a sucker punch as D. D directly works with the premises of each plan's costing, while A introduces a hypothetical situation that may or may not happen.

Magazine publishers can boost newsstand sales of a single issue of a.

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GMAT Critical Reasoning (CR) Questions

Magazine publishers can boost newsstand sales of a single issue of a.

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