Executives at the Fizzles Beverage Company plan to boost profits in Co

The correct answer is option (D).

Objective of Fizzle Execs: Increase profits
Plan: Introduce new, exotic (not well known) fruit flavoured drinks, sell at a higher price point
Rationale: As competitors do not have these flavours, there will not be any competition for customers, and customers will be happy to pay a higher price.

Question: Find the weakness in the plan.

In what scenario would Fizzle not make a profit, even given the above?

1. What if there is no demand for these new flavours? The execs are assuming that customers will embrace these new flavours and be ready to pay for it?
Assumption: There exists a demand for these new flavours

2. What if not enough demand exists, and the company has to run marketing/advertising campaigns to promote the new flavours, and what if the cost of these campaigns is higher than any revenue that can be earned from the new flavours? Then the firm would not make a profit from these new flavours (Expense > Revenue).

Assumption 2: Any marketing/advertising effort for these new flavours does not cost more than the revenue that can be earned from these flavours.

A good weakener will work against the above assumptions. Let us analyse the answer choices.

A. The new fruit drinks would be priced significantly higher than other Fizzles fruit drinks with more conventional flavors.
We already know that the new drinks will be priced higher than their regular offering. This option simply adds that the price will be significantly higher. However, this does not impact our argument anyway. Hence, not a weakener.

B. In a telephone survey, at least one of the consumers contacted said that they preferred many of the new flavors to all of the more familiar flavors.
In other words, there are some (at least one => >=1, can be any number from 1 to all) customers who show a preference for the new flavours. So there is some demand. This is then a strengthener for the plan rather than a weakener.

C. To build widespread demand for the new flavors, Fizzles would have to launch an advertising campaign to familiarize consumers with them.
Interesting option. If you have followed my analysis, you can see that this option needs consideration. But here, the option only mentions that Fizzles would have to launch an ad campaign to promote the new flavours. There is nothing to suggest that this campaign will have such a significant cost that profit will be impacted (Profit = Revenue - Expenses). Hence, in the absence of any information on the magnitude of costs, this option cannot be the correct weakener.

D. Consumers choosing among fruit-flavored drinks of different brands generally buy on the basis of name recognition and price rather than the specific fruit flavor.
Correct choice!
If you observe carefully, this option works against our assumption 1.

As per this option, consumers are
1. Brand conscious (Name recognition). Not an issue because as far as we know, the brand is the same, only the flavours are different (Like Pepsi Blue!)
2. Price conscious. This means that consumers will definitely prefer a cheaper priced product when given a choice between a cheaper and pricier option.
3. Not really flavour conscious. This means that as long as it is cheap and satisfies their need (thirst/refreshment), the customers do not care about the flavour.

The above means that:

Price sensitive, Flavour insensitive customer -> will not buy exotic flavour, high priced new drinks -> Revenue may not be significant enough -> no profits -> Weakens the plan successfully.

E. Few consumers who are loyal to a specific brand of fruit-flavored drinks would willingly switch to another brand that costs more.
Interesting choice.

The problems with this option are:
1. We do not know the magnitude of 'few'. Insignificant number or significant number?
2. We do not know the magnitude of 'loyal to a specific brand'.

For example, if both 'few' and 'loyal' represent a huge, significant number of customers, then the above statement would read:

A significant majority of consumers would willingly switch to another brand that costs more. This actually strengthens the conclusion (they will buy the new high priced flavours).

Now, if both 'few' and 'loyal' represent a tiny, insignificant number of customers, then the above statement would read:

A small, insignificant number of customers would switch to another brand that costs more. i.e. the vast majority will not switch. Then the company won't make profits. Hence, it is a weakener.

The issue is that we have no idea which of the above two scenarios does 'few' and 'loyal' represent. So, we cannot definitely say that option (E) serves as a weakener.

Hope this explanation helps those are confused about option (E).

Cheers!