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Good Luckpearceg13 wrote:
The following appeared in an announcement issued by the publisher of The Mercury, a weekly newspaper:
“Since a competing lower-priced newspaper, The Bugle, was started five years ago, The Mercury’s circulation has declined by 10,000 readers. The best way to get more people to read The Mercury is to reduce its price below that of The Bugle, at least until circulation increases to former levels. The increased circulation of The Mercury will attract more businesses to buy advertising space in the paper.”
Discuss how well reasoned . . . etc.
In this announcement by the publisher of The Mercury the author argues that the Newspapers decrease in circulation is due to a lower cost competitor. Additionally, they state that if The Mercury lowered their prices they would both regain circulation and become more attractive to businesses looking for advertising space. This argument contains some fundamental flaws in reasoning which makes the conclusion doubtful.
Firstly, the author states that the decrease in The Mercury’s circulation is due to the entrance of The Bugle, a lower-priced competitor without supporting evidence. The decrease in circulation could be due to a number of other factors, none of which the author addresses. The fact that the there has been a decline in circulation does not necessarily support the claim that the entrance of The Bugle was the driving factor. For example, the overall market for newspapers may be declining or The Mercury’s content may simply be inferior to competitors. If either of these were the case, it would undermine the argument and lowering prices would not increase circulation. Some useful additional evidence to support the authors claim would be the sales of the entire Newspaper industry broken down into different cost segments, data on competitors sales and customer feedback on quality.
Secondly, the author assumes lowering the price will result in an increase in circulation. In addition to the flaws stated above, there is no evidence provided that, even if the original decrease was driven by low-cost competition, that The Mercury will be able to increase their circulation by lowering the price. For example, The Mercury may be viewed as a higher quality newspaper and even when they lower their price readers may stay with their current newspaper. Additionally, as mentioned above if the entire market is declining this decrease in cost may have no effect.
Finally, the author claims without evidence that increasing the circulation of The Mercury will attract more businesses to buy advertising space in the newspaper. However, the fact that circulation increases does not necessarily mean businesses will be more attracted to buy advertising space. For example, businesses may simply be uninterested in purchasing advertising space in The Mercury due to their readers’ demographics or because it is not an economically sustainable place for them to advertise. Additionally, the author provides no information on the pricing of the advertising. Further information showing The Mercury’s price relative to competitors, data on the Newspaper Advertising market as a whole or on Mercury’s past and current advertising income would provide more evidence for the author to base their conclusion on.
Overall, this argument is based on flawed reasoning and is unsupported by the evidence necessary to make it convincing. The author makes unsupported claims about the reason for the decline in The Mercury’s circulation and draws an unsupported conclusion that more circulation will make The Mercury more attractive to businesses looking for advertising space.