Intern
Joined: 29 Jan 2017
Posts: 31
Location: Germany
Concentration: Strategy, Leadership
GPA: 3.3
WE:Consulting (Consulting)
Rate the AWA from my practice test!
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01 Mar 2017, 13:35
I thank you very much in advance for your feedback!
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.”
Discuss how well reasoned you find this argument. Point out flaws in the argument's logic and analyze the argument's underlying assumptions. In addition, evaluate how supporting evidence is used and what evidence might counter the argument's conclusion. You may also discuss what additional evidence could be used to strengthen the argument or what changes would make the argument more logically sound.
RESPONSE:
The author writes that promotional price reductions of energy drinks lead to an increase in unit sales and customer surveys indicate that the promotion was well received. Hence, similar price reductions should be offered on all drinks of the firm to improve the company's profitability and enhance its perception in the eyes of the consumers. However, the argument relies on false assumptions and lacks factual evidence.
First, it is stated that the promotional price redutcion of the energy drinks was successful because a dramatic increase in unit sales was achieved. However, the author does not provide any information on the costs and duration of the promotion. Even if a price reduction leads to higher unit sales, this does not mean that revenue or profit increased. The increase in unit sales may not compensate for the loss of revenue due to the reduced price. Also there is no information on the duration of the promotion. If the promotion was very short, then there is no knowledge if the increase in unit sales is sustainable or short-lived. With more information in this regard, the argument would be more convincing.
Second, the author claims that price reductions enhance the perception of the energy drinks in the eyes of the consumer. This is a very dubious claim as there are multiple counter-examples. The energy drink with the best brand, Red Bull, is also the most expensive one. Other brands such as Monster are also more valued than their cheaper competitors, such as "Black Cat" or "Booster". Presumably the consumers valued the price reduction, because the drink cost less for them. But it may negatively affect the brand perception in the long-term. Here the author needs to provide more evidence for his assertion.
Finally, the conclusion of the statement is that similar price reductions should be offered to all drinks produced by the firm. This conclusion is a careless generalization from energy drinks to all beverages. It cannot be assumed that findings for energy drinks apply equally to the other beverages. Maybe the energy drinks were overpriced in the first place, which may explain the positive results of the promotion. But this does not mean that the other drinks are also overpriced. Here the author needs to provide an explanation why the generalization can be made.
In conclusion, the argument is flawed and critical evidence is missing. The conclusion that was drawn is unconvincing. To improve the argument, the assumptions must be explained in more detail and evidence needs to be provided.