Hello everyone
I wrote the following essay on one of my
MGMAT CATs. However, I do not have any resource available for the right judgement of the article. Request you all to please provide your reviews of the same.
Essay Question:
The following appeared in a corporate memorandum of a beverage manufacturer:
“Our promotional price reductions on energy drinks have been highly successful, as we have seen a dramatic increase in unit sales. Further, surveys of our consumers indicate that this promotion was favorably received by the majority of our customers. Therefore, to improve our company’s profitability and enhance its perception in the eyes of consumers, similar price reductions should be offered on all drinks produced by our firm.”My Response:
The given argument, while putting forward the findings of a promotional experiment and generalizing the observations from it, suggests a similar course of action for an entire range of things, all drinks manufactured by the firm in this case.
However, while batting for the measure of offering price reductions across all the drinks produced to increase profitability and enhance perception, the case fails to consider that the promotion campaign which serves as the basis of the price reduction proposal was carried out for only energy drinks and not for other products belonging to company's portfolio. It could very well be that the energy drinks are already humongously popular and attract huge number of consumers anyway on a daily basis. The dramatic increase then, as a result of discounted price making the product even more affordable for everyone, would be fairly expected. Putting the same discount formula however, for other products which are not that popular among masses may not increase profitability, but in fact, jeopardize the product's financial viability. Since different products from the same manufacturer can be of varying quality, and hence can be liked differently depending on their taste and standard, the logic of crediting only the promotional reduction in price with all the popularity and liking might be slightly misplaced.
Furthermore, the argument also fails to consider the occasion and time during which the promotional campaign was launched. If the price reduction was introduced during the season of sports and games tournaments, festivals etc., when the consumption is anyway way higher than usual, then a similar dramatic rise in sales might not be achievable at a different time and for all the products. In addition to the same, sales also a lot of times are greatly influenced by the attractive ways of advertising, the celebrity endorsing the product etc. If one of these factors hold true for this case too, then the simple price reduction of all drinks might not pep up sales as much as the promotional campaign mentioned in the argument did. Lastly, the case also rests on the assumption that what may be financially profitable for a certain batch of promotional products limited in number will be equally rewarding in terms of profits as far as all the products and the entire company goes.
The argument therefore, although proposes a definite way to increase the profitability of the company and its subsequent development, fails to consider many underlying factors that could've influenced the sales of energy drinks during the promotion. It also in subtle ways relies on assumptions that generalize the findings of one specific case and apply it on a way more expansive scale, which may otherwise require more thorough study.
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Please let me know what you think of it. Thanks.