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# Manufacturers sometimes discount the price of a product to

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Manager
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Manufacturers sometimes discount the price of a product to [#permalink]

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17 Dec 2016, 14:44
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Definitely D.

Solid question. These are the ones you need to kick a** on so you have room to breathe for the 700+ questions.

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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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04 Jan 2017, 05:18
Thank you so much for this detailed explanation

GMATmission wrote:
In questions where we have to evaluate a decision, I normally establish a relationship and then try to see which option has the most positive or negative impact on the relationship.
In this particular question, for example, the relationship is between the promotions and the profit earned. And the relationship is that the organization will earn more profit if promotions are not held. Lets ask the question: Why would it happen? There could be couple of reasons for that:

1. The customers are indifferent towards promotions and the sales of products is not increasing at all.
2. The discounted prices are not reaching customers at all. So customers are actually not aware of the promotions and they are buying the product at regular price. So if thats the case the company should not offer discounts.

Now lets evaluate options based on our understanding:

prasannar wrote:
Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Such promotion often result in a dramatic increase in amount of product sold by the manufacturers to retailers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers’ profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minimum needed to draw consumers’ attention to the product. - This statement is actually weakening the claim. INCORRECT

(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale price. - This statement talks nothing about the relationship between profit and discounted prices. INCORRECT

(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the minds of consumers and to attract consumers who are currently using competing products. -Again very vague statement and can not come to clear conclusions with this statement. Lets think like this, if this statement were true, will the organization earn more profit by not offering discount. The answer is NO. Infact on second thoughts, this statement weakens the conclusion. INCORRECT

(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price. - This one makes sense and is aligned with our previous thoughts. See thats the benefit of paraphrasing CORRECT

(E) If a manufacturer fails to offer such promotions but its competitor offers them, that competitor will tend to attract consumers away from the manufacturer’s product.- So what?? Out of scope. INCORRECT

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Manufacturers sometimes discount the price of a product to [#permalink]

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28 Mar 2017, 05:15
Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Such promotions often result in a dramatic increase in amount of product sold by the manufacturers to retailers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers' profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minimum needed to draw consumers' attention to the product.
(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale price.
(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the minds of consumers and to attract consumers who are currently using competing products.
(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price.
(E) If a manufacturer falls to offer such promotions but its competitor offers them, that competitor will tend to attract consumers away from the manufacturer's product.

* * * * *
D) (D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price. - This answer proves that manufacturers could sell more product at a higher price because the retailers are making the excess profit.

Now let's a manufacturer has a promotion and the retailer sells at fair value. They would normally sell at \$5 but sold at \$3. Therefore the manufacturer lost \$2 of sales. E is actually quite similar to D for the overall industry. D is more tempting but E to me has equal weight.

(E) If a manufacturer falls to offer such promotions but its competitor offers them, that competitor will tend to attract consumers away from the manufacturer's product.

See the questions asks about Manufacturers not Manufacturer's. Meaning we should be looking at the industry as a whole. The argument in E doesn't say we increase customers. Therefore E & D would both show that the industry as a whole loses. Let's do a quick example. Product normally is \$5 a deal makes it \$3. So company A doesn't sell for \$5 and company B gets the sale for \$3. Therefore \$2 in potential industry sales were lost due to the promotion.

I guess D is a little stronger considering it shows the promotions are mainly benefiting the retailer not the manufacturer. But E is not being properly assessed by people responding in this forum.

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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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05 May 2017, 00:55
this was a very very interetsing question indeed. We had to look for an answer in which the importance of promotion wasn't highlighted.

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Manufacturers sometimes discount the price of a product to [#permalink]

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08 Aug 2017, 04:05
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******* Its a good question. ********

Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Such promotions often result in a dramatic increase in amount of product sold by the manufacturers to retailers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers' profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minimum needed to draw consumers' attention to the product.
Option A is talking about the manufacturer's strategy during the promotion period that would result in a dramatic increase in amount of product sold by the manufacturers to retailers. But it fails to answer how manufacturers could often make more profit by not holding the promotions. Therefore, incorrect.
Also, as per this option holding promotions is not that bad. But the conclusion is against holding the promotions.

(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale price.
Option B is talking about the duration/length of promotion period to consumers. It also fails to cater why the manufacturers should not hold promotion and can still gain profits.
As the period of promotion is less, the customers are not getting used to the prices during the promotion. Even after the promotion, when the prices will be higher, the customer would still be buying the products as they are not used to the promotional sales price. Thus, promotions are not that bad. It weakens the conclusion.

(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the minds of consumers and to attract consumers who are currently using competing products.
Irrelevant. It talks about the purpose of such promotions for products that are not newly introduced. But we are not concerned about those products and even the promotions.

(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price.
This answers to our question why not holding promotions could still produce profits to manufacturers. CORRECT answer.
Detailed Explanation - Retailers have accumulated the products, bought from the manufacturers during the promotional period, in their warehouse inventory. After the promotion period is over, retailers will first try to finish/sell off the accumulated inventory and will then buy the fresh stock of products from manufacturers. So, after the promotion period, the sales of the manufacturers will slow down and thus this options supports the conclusion that the promotions are actually bad.

(E) If a manufacturer falls to offer such promotions but its competitor offers them, that competitor will tend to attract consumers away from the manufacturer's product.
It still is talking about the benefits of offering promotions to the consumers. As per this option promotions are good. But we are not concerned with that.
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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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08 Aug 2017, 23:57
ps_dahiya wrote:
Official Guide for GMAT Verbal Review, 2nd Edition

Practice Question
Question No.: 68
Page: 143
Difficulty:

Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Such promotions often result in a dramatic increase in amount of product sold by the manufacturers to retailers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers' profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minimum needed to draw consumers' attention to the product.
(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale price.
(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the minds of consumers and to attract consumers who are currently using competing products.
(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price.
(E) If a manufacturer falls to offer such promotions but its competitor offers them, that competitor will tend to attract consumers away from the manufacturer's product.

Retailers buy more product and store them in inventory and later sell these products at the regular price thus earning more profit.
If the manufacturer had not given discount to retailers then the manufacturers would have more profits

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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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09 Aug 2017, 00:35
arvind910619 wrote:
ps_dahiya wrote:
Official Guide for GMAT Verbal Review, 2nd Edition

Practice Question
Question No.: 68
Page: 143
Difficulty:

Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Such promotions often result in a dramatic increase in amount of product sold by the manufacturers to retailers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers' profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minimum needed to draw consumers' attention to the product.
(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale price.
(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the minds of consumers and to attract consumers who are currently using competing products.
(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price.
(E) If a manufacturer falls to offer such promotions but its competitor offers them, that competitor will tend to attract consumers away from the manufacturer's product.

Retailers buy more product and store them in inventory and later sell these products at the regular price thus earning more profit.
If the manufacturer had not given discount to retailers then the manufacturers would have more profits

arvind910619, I have one question for you here,

you wrote - Retailers buy more product and store them in inventory and later sell these products at the regular price thus earning more profit, but how does that affect the profits of the manufacturer?? As per your comment, what I get is that the manufacturers are not able to make more profits as retailers are selling these products at the regular price later. But thats not the case my friend.

It is basically because post-promotion the retailers will first sell off the accumulated inventory and then will buy the fresh products from manufacturers. So, during that time period sales of manufacturers will go down and thus there profits would be less, which could be more, if the promotions were not hold in the first place.

Please correct me, if I am wrong in anything. arvind910619
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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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09 Aug 2017, 01:27
why D is correct?

the manufacturer think that the retailers will pass the discount to customers and customers will buy more product, increasing profit substantially

D prove that the case is not like the case the manufacturer think. the retailer keep the discounted goods and sell latter , making the promotion unprofitable.

CR test us logic but we need to read very well to think in English. for non native, learning gmat is relearning of english more than learning gmat. this simple thinking gives you success on gmat.

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Manufacturers sometimes discount the price of a product to [#permalink]

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09 Aug 2017, 03:51
Top Contributor
thangvietnam wrote:
why D is correct?

the manufacturer think that the retailers will pass the discount to customers and customers will buy more product, increasing profit substantially

D prove that the case is not like the case the manufacturer think. the retailer keep the discounted goods and sell latter , making the promotion unprofitable.

Hello Dear,

I've read the the answer choice differently than you.I believe it's worth sharing with you.

IMO,Correct Answer D supports the claim about the manufacturers' profit by indicating that even though manufacturers increase their profit with their promotional approach,manufacturers can increase their profit even more without their promotional offerings,by which actually the retailers make more money than the manufacturers.

Thanks
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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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23 Aug 2017, 10:21
D is correct.

Reasoning: During promotion periods, manufacturers discount prices and dramatically increase the amount of product sold to retailers. However, manufacturers might make more profit without the promotions.
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Re: Manufacturers sometimes discount the price of a product to   [#permalink] 23 Aug 2017, 10:21

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