Dear GMAT club members,
Can anyone evaluate following AWA? Please evaluate my AWA
Sajjad1994----------------------------------------------------------------------------------------------------------------------------------------------------------
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.”-----------------------------------------------------------------------------------------------------------------------------------------------------------------------
The announcement made by the publisher of The Mercury is a call-to-action, making a case for reducing the selling price of the newspaper to below the selling price of a competiting newspaper, The Bugle. The argument made by the publisher in support of this price reduction can be summarised as:
1. On account of The Bugle, a competiting lower-priced newspaper, our circulation has declined by 10,000 readers.
2. Reducing our newspaper's selling price may entice readers to purchase our newspaper, which would help gain back our market share.
3. Increasing circulation shall also bring with it, increasing advertisement revenues as more businesses would be attracted to purchase advertisement in our newspaper.
While the goal of the publisher of increasing the circulation of The Mercury needs no justification, the approach to achieve that goal is quite poorly thought out.
First and foremost, publisher assumes that decline in readership of The Mercury occured on account of The Bugle being lower-priced. The publisher does undertake any studies / surveys to examine the root cause of the readership decline. Perhaps, the decline in readership occured on account of poor quality of journalism of The Mercury. Or perhaps, The Bugle includes articles that suits the taste of all the readers - right from the children to senior citizens, from local news as well as international news, while the articles in The Mercury may satisfy the needs of a niche group of readers. In such a case mere reducing in price of The Mercury would not incentivize the readers to but The Mercury in place of The Bugle. On the contrary, The Mercury would face further revenue decline.
Second, the publisher also fails to examine the effect that revenue decline would have on their business operations. Perhaps, on account of revenue decline, The Mercury may be compelled to layoff a portion of the reporters or editorial staff. In place of arresting a readership decline, a revenue decline may bring about a further decline in circulation as current reader too may migrate to other newspapers, including The Bugle. Ofcourse, in such a scenario, increase advertising revenues that publisher is hoping shall never materialize. Reducing sales price of the newspaper, without having an appropriate business plan in place on how business operations will be managed in light of revenue decline, may push The Mercury in a vicious circle, ultimately leading to shut down of its business.
Third flaw is that publisher simply assumes that increased circulation will attract more business to advertise in their newspaper without offering any supporting evidence in favor of this claim. Perhaps, businesses have entered into long-term advertising contracts with The Bugle and if The Bugle and The Mercury cater to the same demographic dividend, the businesses may be reluctant to advertise again in The Mercury.
As stated earlier, publisher's concern about circulation decline and publisher's aim to increase newspaper's circulation are completely justified. However, knee-jerk reactions are no solution to any problem. The publisher shall have a better chance of achieving increased circulation if publisher undertakes a detailed study into the factors that caused the loss of 10,000 readers. A survey of previous readers of The Mercury may help. The publisher may also conduct a survey of The Bugle's reader to identify factors that make them prefer The Bugle over The Mercury and attempt to imitate those flavors in The Mercury. The publisher may ofcourse, undertake any other actions as well. However, our last word is that whichever path the publisher decides to embark upon, it has to be well thoughtout.
---------------------------------------------------------------------------------------------------------------------------------------------------------------
Thank you very much for all your help and support.