Manufacturers sometimes discount the price of a product to retailers

hi GMATNinjaTwo.

my new interpretation on B
because of the short duration of promotion, the customers do not become used the sale price and the impact of promotion is weak, so they think buying commidities on regualr price is common action,
while, if the duration of promotion is long enough that customer view the low/sale price is normal new price, if the price goes back to formal regular price, which is higher than sale price, then customer would unwilling to buy them, leading decrease the sales.

another question come up,
my above new interpretation seems impact on retailers, I dont think it impacts on the manufacture's profits.

As per D,
I can think two scenarios -- promotion and non promotion, according to D, the total amount of production is the same when promotion as when no promotion
Scenario #1 promotion, -- the manufactures low their price to be $10 , then result in increase dramtic amount of productions, say 100, then the profit = 10*100 - cost
Scenario #2 non promtion -- the manufactures regular price is 15, the amount of prodctions is 100 as well, then the profit = 12*100 - cost,

so , we can see the profit during promotion is lower than that during non promotion.

Would you please point out my fault?

BTW, can you tell me the link that I can search SC and CR QOTDs ?
I get a link https://gmatclub.com/forum/gmat-question-of-the-day-2017-edition-239951.html from signature of GMATNinja, a one not easy to search,
I also get a link from GMATNinja's reply, https://gmatclub.com/forum/search.php?search_id=tag&tag_id=1196, there are only SC QOTDs and search tag's spectrum does not narrow to the SC list of the link,


Thank in advance

Have a nice day
>_~

zoezhuyan, your new interpretation of B sounds good! Yes, this would directly affect retailers. And if retailers are selling less product, then they would buy less product from the manufacturers. So, it would impact manufacturers' profits as well.

As for (D), the profit PER item might be lower, but if the manufacturers are selling much more product, then their overall profits will still be higher. Make sense?

Conclusion: The manufacturers could often make more profit by not holding the promotions.

Any answer choice that shows the negative side of promotions on profits of manufacturer is our answer.

(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. If it is carefully calculated chances of loss is less.

(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. Weakner

(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. Weakner

(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. Correct. if this happens the profit of manufacturer gets affected.

(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. Weakner

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.

The argument is that manufacturers can make more profit by not discounting the price of their products for sale to retailers. The evidence used to argue this point is pretty weak as it doesn't really tie in rogue pieces of info presented in the conclusion. We are told that during such promotions, retailers often "advertise" the products to consumers.

We aren't told whether the discounts are passed onto consumers by retailers and the argument assumes that retailers will continue to buy from manufacturer's whether the manufacturer's products are discounted or not.

A is incorrect as it just tells us how the discount is calculated. This isn't relevant to the argument.
B neither helps nor weakens he argument. It just tells us that if retailers discount their products as well then it would be effective as consumers don't get used to this sale price.
C is incorrect as it does nothing to the argument.
D is correct because it tells us that the retailers stockpile product at this discounted price instead of selling it straight too consumers. This infers the retailers may not necessarily be passing on the discounts to the consumers, so the manufacturer's are losing out on profit that they could have otherwise made.
E is incorrect because it doesn't explain why offering a discount in the first place would lead to lower profits than would selling at the regular price in relation to the scenario presented. E presents an alternate scenario that MAY or MAY NOT reduce the profitability of the manufacturer.

Manufacturers - want to increase profits by promotion, conclusion - the manufacturers could often make more profit by not holding the promotions.
Why: if retailers who buy the products hold and do not attract the customers, then there is no profit for manufacturer.

The correct answer is 'D'.

We need to prove that manufacturers could make more profits without these promotions. Option 'D' tells us that retailers buy excess goods at discounted price. They then sell most of these goods later at the good's regular price. If the retailers don't buy excess goods at the discounted price. After the promotions they will have to buy again from the manufacturer at the goods regular price. Thus, when manufacturers do not hold such promotions, they will make more profits .

Official Explanation

Argument Evaluation

Which of the answer choices provides the strongest evidence for the claim that the manufacturers could indeed make more profit by not holding promotions?

To promote a product during a period when it is advertised to consumers, manufacturers sometimes sell the product to retailers at a discounted price. This often results in a large boost in manufacturers' sales to retailers. However, we are told that manufacturers could make more profit by not offering the promotions.

The manufacturers' total profits on the product increase during the period of reduced-price sales to retailers; note that the price reduction results in a dramatic increase in the volume of sales to retailers.

Nevertheless, it is possible that this temporary increase in sales volume would reduce future sales volume to retailers at non-discounted prices. In such a case, it would be more likely that the manufacturers' overall profits on the product would be reduced.

A. It is reasonable for manufacturers to calculate the minimum needed to draw attention to a product if they wished to minimize the costs of the product promotion. However, this information gives little if any support for the claim that manufacturers could make more profit by not discounting prices to retailers.

B. The argument does not provide any information to suggest that the length of the promotion affects manufacturers' profits. According to the passage, many promotions last a short time, so consumers do not come to routinely expect a lower price on a product and thereby avoid purchasing it at the higher post-promotion price. However, this new information gives little if any support for the claim that manufacturers could make more profit by not discounting prices to retailers.

C. This choice implies that the manufacturer would risk making less overall profit, not more, if these promotions were not held.

D. Correct. The retailer profits by purchasing large volumes of the product at a manufacturer's discounted price and selling it to consumers at the higher post-promotion price. It follows that the increase in sales at the discount might in fact detract from non-discount sales. As noted above, this gives the strongest support for the claim about the manufacturers' profits.

E. This suggests that sales promotions are essential for manufacturers to compete in relevant markets. However, it gives little if any support for the claim made about manufacturers' profits.

The correct answer is D.

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.

Premise 1: in promotion period, mfg offers discount to retailers.
Premise 2: the amount of product sold increase dramatically
Conclusion: Nevertheless, mfg could make more profit by not holding promotion

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

To strengthen the claim, we should point out that the increase in product sale to retailer has some negative effects on the mfg sale of product later.

(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 weakens the claim. The mfg should promote more

(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. We don't care about consumer getting 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. we don't care about the purpose of promotion. We care about profit

(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. Oh yes. If retailers accumulate product when the goods are cheap, then they will not buy products in other periods. This action will hurt the profit of manufacturer in the long run. So, it's better not to hold promotion

(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. This one weaken the argument. Mfg should hold promotion more often

Dear Moderators,

Please correct the spelling of falls to fails in option E... leads to confusion.


Best !

The author’s argument that promotions are not needed can be strengthened by giving more reasons why such promotional campaigns hurt the manufacturers more- say it reduces brand value or someone else is reaping profits or the profits from added sales doesn’t compensate for the discount losses, etc. Option D implies that retailers would be getting the material at lower price and then selling them at higher prices later. Thus, the intended effect of increasing sales by offering discount to consumers is brought in danger. Also, since the retailers stock their inventories at lower cost, they would be averse to buy when the prices are raised later. So it might hurt the manufacturer in future. Hence D is the answer

Hi GMATNinja


Wouldn't B have similar effect as D?

Because imagine, our manufacturer sold an amount of product to retailers, however; during 1 week of promotion retailer barely made any sell or couldn't make any because consumer couldn't get accustomed to discounted prices. So products bought from discounted prices piled up. Once the promotion period will be over customers will buy products from original price and of course it will take a while to erode the products that didn't sell during the promotion period, preventing retailers to buy from manufacturers for a while...

In option D we have a similar scenario where retailers will not buy from manufacturers because they stocked plenty products and it will be long before reordering from manufacturers since it will take time to deplete the inventory

Thank you for your valuable reply

MartyTargetTestPrep IanStewart - how would you re-phrase B ?

I thought B strengthened the argument because

• Customers are NOT used to the discounted price
• Thus, when the discounted price GOES BACK UP to the original price, customers are not surprised
• Given customers are NOT SURPRISED (when the discounted price goes back up to the original price) , customer will buy the higher priced product in the same quantity as the customer has always been buying the higher priced product
• Thus, i thought this strengthens the argument because when there is no promotion
  --> we know customers will buy the higher priced product in the same quantity as customers have always been buying the higher priced product

Thus, the above thinking gives a little more assurance that customers are willing to buy higher priced product (when there is no promotion), thereby strengthening the argument (not by a lot but strengthening, neverthless)

Thoughts ?

The conclusion the correct answer must support is the following:

The manufacturers could often make more profit by not holding the promotions.

In other words, the conclusion is that the promotions cause a reduction in profits.

The fact that consumers do not become used to the sale price does not indicate that manufacturers could make more profit by not holding the promotions. If anything, it indicates that the promotions don't reduce profits by causing consumers to expect a lower price.

Hi MartyTargetTestPrep
Per the blue – I agree, we don’t know anything 'conclusively' about profits (what are the profits when products are discounted vs what are the profits when products are NOT discounted)

But in strengthen questions – we don’t need to prove anything 'conclusively'.
As long as the OA strengthens, even just a little bit – that should suffice for the purposes of the OA.

I thought the following was enough of strengthener
(1) During non promotions – customers are willing to pay the higher price
(2) This is what B is implying (I think)

Why do you think, (1) is not enough of a strengthener ? [for the argument that profits are better during non promotions]

Is it because, we need to know about ‘quantity of products sold’ when it comes to profits ?

If so, where do you draw the line between strengthening a little bit vs need more information

I personally thought (1) fell under the category of ‘just a little bit of a strengthener’, even a tiny bit

I know, it would be better if we were given information about ‘quantity of products sold’ but bullet (1) was a bit of a strengthener, regardless.

The conclusion is not that companies make greater profits during times when promotions are not held.

The conclusion is that promoting products by temporarily reducing prices causes overall reductions in profits.

The fact that consumers will still pay the higher price does not mean that the promotion caused a reduction in profits. Quite the contrary. It indicates that companies can promote products by reducing prices without worrying that consumers will become used to the new price.

For all we know, when the price is lower, the companies gain new customers and sell high volumes of products, and (B) does not give us any reason to believe that they don't.

Thank you so much for your response MartyTargetTestPrep - Between the red conclusion and the blue conclusion - i unfortunately dont see any real difference.

Isn't saying the red -- the same as --- saying the blue ?

Whats the difference ?

When i read the highlight in the yellow below, i actually thoguht the conclusion in red stated above was more directly inferrable (From the yellow) ?

For all we know from what the passage says, profits are higher during the times when promotion are held than during times when full prices are charged. Right? Where does the passage say that profits are lower during the times when the promotions are held? It doesn't.

The conclusion is that, regardless of what occurs when the promotions are held, the profits are lower overall because of the promotions.

We need a reason to believe that conclusion, and check this out. You are assuming that the reason is that profits are lower when the promotions are held. You are adding the support yourself. The passage does not say that.