A car wash service has decided to discontinue its repeat customer

Question

A car wash service has decided to discontinue its repeat customer coupons wherein customers who purchase 5 car washes get a 6th car wash for free. This is a smart move for the car wash service, because it must pay its workers for every car washed. Because the coupons forced the car wash service to give away numerous free car washes, the repeat customer coupons caused the company’s profits to decline.

Which of the following is a reason the argument is most vulnerable to criticism?

(A) The argument ignores the fact that another customer coupon initiative could take the place of this one.

(B) The author neglects to take into account whether the profit earned by the company during the coupons initiative was greater than its costs.

(C) The argument mistakenly believes the operating costs of the car wash service can be adjusted by removing the coupon program.

(D) The author fails to consider the fact that the car wash service may be exaggerating the number of free car washes it was forced to give out.

(E) The argument overlooks potential rewards from the customer coupons initiative while focusing only on its costs.

The correct answer is (E).

The conclusion here is that getting rid of the customer coupons is a “smart move.”

Why? Because the company had to “give away numerous free car washes,” and thus the profits declined.

The author fails to take into account any benefits the initiative may have had on business.

For example, patrons may have returned for their 2nd, 3rd, 4th, and 5th car washes solely based on the initiative.

It may be that without the initiative, the car wash service’s profits would have been much less than with the initiative.

KyleWiddison · Accepted Answer

This question is a bit challenging because it's difficult to identify the type of question. Looking at the question itself - "Which of the following is a reason the argument is most vulnerable to criticism" - we can see that the question is dealing in some way with weakening the argument. It's basically asking, "why would you be able to weaken this argument?". In order to weaken the argument, you need to identify an assumption (the unstated portions of the argument that must be true in order for the conclusion to be valid) and then attack the assumption. So, the key to this question is really to identify the assumption.

The assumptions will sit between the conclusion and the premises. Here the conclusion is that the car wash company made a good move by removing is couponing program. The premises are 1) the workers are paid by the car so that 5th car wash includes costs but no revenues and 2) the success of the program required many of the 6th, "cost-only" car washes, which would cause the overall company's profits to decline.

What would we have to assume in order for the conclusion (it's a good move to stop the coupon program) to remain valid? Since the argument is solely focused on expenses here and profits are revenue minus expenses we should be thinking about assumptions that are related to revenues.

A) Remember that assumptions sit in the space between conclusion and premise. Adding a different program may be a good move for the company, but it has no connection to the removal of the current couponing program.
B) This one is a bit tricky. Here the answer is shifting meaning on us. The premise refers to the declining profits but this answer choice is referring to the overall profits of the company. The GMAT likes to play these little meaning shift games on incorrect answers - be careful.
C) This is not an accurate statement. Since labor costs are variable (each wash costs money), the operating costs would be impacted by removing the program.
D) This one tries to make you think that if the problem were smaller we could change our mind about the effectiveness of the program. However, the argument is based on the variable costs of each wash, so whether we have a huge number of washes or a small number of washes, we would have declining profits either way. 
E) Finally something strong about revenues. Here we have a necessary assumption that is placed in a weakening statement. In order to believe the conclusion that removing the coupons is a good move, we first have to believe that there were no benefits (particularly related to revenues) achieved from the program between the 1st and 5th washes. As the OA states, the program may have induced many customers to purchase additional car washes in order to hit the 6th wash. So, even though that 6th wash causes a reduction in company, the profits would have been greatly increased by the those additional purchases. This statement makes the argument vulnerable to criticism.

KW

KyleWiddison · Answer

First of all, answer choice E is implying revenues when in talks about rewards. The GMAT will assume that you have a working knowledge of revenue - cost = profits. So revenues in E are not the same as profits in B.

Let me talk about B for a second. It really makes no sense from a business standpoint. The fundamental business question is whether revenues are greater than costs. If so, you have profit and life is good. If not, you don't have a profit and you go out of business. Comparing the level of profit for the company (total revenues less total costs) against the costs of the initiative really makes no sense and certainly won't tell us if stopping the coupon program is a good idea.

KW

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nitin6305 · Answer

Can someone please help me with eliminating option C. Aren't we talking about profits here? 
Conclusion says that move is smart because it will avoid profit declines.

pqhai · Answer

Hi nitin I'm quite confused. You posted OA is C, but you ask everybody to give you reasons to eliminate C. :?:

So, what is the OA actually? I did pick B and I'm not convinced by C (if C is the OA). The stimulus say "the company must pay its workers for every car washed". It means the company pays its employees for every car they wash. ==> the fewer cars the employees wash, the less salaries they receive. Labor cost is operating cost. (I'm 100% sure because I'm an accountant.) ==> by removing the coupons program, the company can adjust its operating costs. ==> The operating costs of the car wash service CAN BE ADJUSTED by removing the coupon program. Hence, C is not a flaw of reasoning. Please confirm nitin6305. Thanks.

argha · Answer

Hi,

I presume the reasoning for B will be as follows:

The company ignored profits earned during the initiative and considered only costs. Hence, the company should re look at the argument as profits might be more than the costs thereby falsifying the argument presented.

However, I think even this is not correct.

The company in its argument is talking not whether it earned actual profits or not. It is rather saying that its profits declined due to increased labor cost arising out of the 6th free cost. Thus the argument is only and only on the cost incurred on the 6th free wash and how that contributes to the profit decline.

Hence, option C, which talks of attending to the cost of the 6th free wash by removing it takes the cake.

Regards

Argha

Chetangupta · Answer

Answer is E. For issuing a coupon, a customer has to visit 5 times. No coupon and a customer might not visit for any wash.

Below is OE.

The correct answer is (E).

The conclusion here is that getting rid of the customer coupons is a “smart move.” Why? Because the company had to “give away numerous free car washes,” and thus the profits declined. The author fails to take into account any benefits the initiative may have had on business. For example, patrons may have returned for their 2nd, 3rd, 4th, and 5th car washes solely based on the initiative. It may be that without the initiative, the car wash service’s profits would have been much less than with the initiative.

roopika2990 · Answer

Can anyone explain the difference between B and E ... isn't profits and potential rewards the same thing?

shriramvelamuri · Answer

on a second note, I think there should be 'NOT' in the quesiton stem.

This is smart move for the car wash service....... (there should be a NOT)

does anything the same.

KyleWiddison · Answer

Be careful with the logic string here. The question is asking why the argument as presented is vulnerable to criticism. The argument states that removing the coupons is a smart move and our job is to find the answer choice that tells us why that isn't a smart move.

KW

dave13 · Answer

"" VeritasKarishma can you pls explain the highlighted part above " 5th car wash includes costs but no revenues " 5th car wash price normally would include costs+profit

in option E " potential rewards from customers" sounds vague .... rewards from customers could be of different types

for example " a thank you letter put into frame" so that company CEO could hang it on the wall

btw why B is incorrect... if profits of coupon campaign exceed costs

KarishmaB · Answer

Program: Buy 5, get 6th free.
This made the company give many free washes which reduced the profit.

Conclusion: It is good that the company is cancelling the program.

Which of the following is a reason the argument is most vulnerable to criticism?

Let's think about it first. Why are some initiatives brought it? To increase repeat customers. Since getting 5 washes from the same place will give 1 free, people will try to stick to the same place. The argument is saying that the 6th wash involves cost but no revenue. Hence, it is a good idea to cancel the program. But what if the 5 washes happened because of the program? What if otherwise, people might have come for 2 washes only and visited other places for the other 3 washes. If there is no incentive to repeatedly visit the same place, they may not have. In that case, the revenues and eventually the profits might have been far lower. The point is that we cannot evaluate a program based on just the cost. We need to evaluate those along with the benefits the program might be getting.

(A) The argument ignores the fact that another customer coupon initiative could take the place of this one.

Irrelevant.

(B) The author neglects to take into account whether the profit earned by the company during the coupons initiative was greater than its costs.

Profits during the coupons initiative is the profit the company earned while the program was on. How much of the profits were "normal" and how much were because of the initiative, we are not given. Also, profits cannot be compared to costs. Revenues are compared to costs to find what profits we get. 
If we do compare what the option says, (cost = 100, revenue = 150 and profit = 50 OR cost = 100, revenue = 250 and profit = 150 during the initiative) what conclusion can we draw by comparing profits with cost? None. 
We need to find the revenue, cost and profit without the program vs with the program.

(C) The argument mistakenly believes the operating costs of the car wash service can be adjusted by removing the coupon program.

Makes no sense.

(D) The author fails to consider the fact that the car wash service may be exaggerating the number of free car washes it was forced to give out.

Irrelevant. Even if it exaggerating, it would still be giving out some free car washes.

(E) The argument overlooks potential rewards from the customer coupons initiative while focusing only on its costs.

Correct. The argument ignores the benefit that the company may have got.

Answer (E)

KarishmaB · Answer

This looks like a typo. The 6th car wash includes cost but no revenues.

RutujaDeshmukh19 · Answer

Let us break down the argument and try to analyze it:

A car wash service has decided to discontinue its repeat customer coupons wherein customers who purchase 5 car washes get a 6th car wash for free. 
 
 A car wash service used to give its repeat customers coupons who purchased 5 car washes to get a 6th car wash for free. 
 The service has decided to discontinue this.  
 This is a smart move for the car wash service, because it must pay its workers for every car washed.  
 
 The author considers this to be a smart move, because even if the customers are getting the 6th car wash for free, that means, they are not paying anything for the 6th car wash, the service still needs to pay its workers for every car washed.  
 This strategy is causing the reduction in the inflow of money.  
 Because the coupons forced the car wash service to give away numerous free car washes, the repeat customer coupons caused the company’s profits to decline. 
 
 Coupons forced the service to:
 
 Give free car washes 
 Company's profits to decline

Summary: 
 
 The company’s profits declined because it had to give away numerous free car washes and thus lost the money they could earn from the 6th car wash, thus not being able to pay its workers. Hence, the plan is to discontinue the repeat customer coupons. 
 An answer where it indicates that the repeat customer coupon strategy can cause an increase in its profits.

(A) The argument ignores the fact that another customer coupon initiative could take the place of this one. - Incorrect  
 
 This answer choice indicates to a point that has no relevance with the passage. 
 The passage does not show a scope for the introducing another customer coupon initiative.

(B) The author neglects to take into account whether the profit earned by the company during the coupons initiative was greater than its costs. - Incorrect  
 
 One of the costs to the service is the wages of the workers. 
 We need to know the wages of the workers and the cost required for each car wash. 
 This answer is hence not preferable as it requires more data to answer the question.

(C) The argument mistakenly believes the operating costs of the car wash service can be adjusted by removing the coupon program. - Incorrect  
 
 The author does not mention anything about operating costs.  
 Hence, we cannot conclude anything about the adjustment of different costs.

(D) The author fails to consider the fact that the car wash service may be exaggerating the number of free car washes it was forced to give out. - Incorrect  
 
 There is no reason in the argument to believe that the number has been exaggerated in the passage.

(E) The argument overlooks potential rewards from the customer coupons initiative while focusing only on its costs. - Correct  
 
 The argument overlooks potential rewards from repeat customer coupons initiative as it may attract more customers to the car wash service.  
 This would offset any price lost on multiple car washes and may also bring profits after a certain amount of car washes.

RutujaDeshmukh19 · Answer

Let us break down the argument to understand it in a better way:

A car wash service has decided to discontinue its repeat customer coupons wherein customers who purchase 5 car washes get a 6th car wash for free.
 
 A car wash service used to give its repeat customers coupons who purchased 5 car washes to get a 6th car wash for free. 
 The service has decided to discontinue this.  
This is a smart move for the car wash service, because it must pay its workers for every car washed. 
 
 The author considers this to be a smart move, because even if the customers are getting the 6th car wash for free, that means, they are not paying anything for the 6th car wash, the service still needs to pay its workers for every car washed.  
 This strategy is causing the reduction in the inflow of money.  
Because the coupons forced the car wash service to give away numerous free car washes, the repeat customer coupons caused the company’s profits to decline.
Coupons forced the service to:
 
 Give free car washes,  
 Company's profits to decline

Summary: 
 
 The company’s profits declined because it had to give away numerous free car washes and thus lost the money they could earn from the 6th car wash, thus not being able to pay its workers. Hence, the plan is to discontinue the repeat customer coupons. 
 An answer where it indicates that the repeat customer coupon strategy can cause an increase in its profits.

(A) The argument ignores the fact that another customer coupon initiative could take the place of this one. - Incorrect 
 
 This answer choice indicates to a point that has no relevance with the passage. 
 The passage does not show a scope for the introducing another customer coupon initiative.

(B) The author neglects to take into account whether the profit earned by the company during the coupons initiative was greater than its costs. - Incorrect. 
 
 One of the costs to the service is the wages of the workers. We need to know the wages of the workers and the cost required for each car wash. 
 This answer is hence not preferable as it requires more data to answer the question.

(C) The argument mistakenly believes the operating costs of the car wash service can be adjusted by removing the coupon program. - Incorrect 
 
 The author does not mention anything about operating costs.  
 Hence, we cannot conclude anything about the adjustment of different costs.

(D) The author fails to consider the fact that the car wash service may be exaggerating the number of free car washes it was forced to give out. - Incorrect 
 
 There is no reason in the argument to believe that the number has been exaggerated in the passage.

(E) The argument overlooks potential rewards from the customer coupons initiative while focusing only on its costs. - Correct 
 
 The argument overlooks potential rewards from repeat customer coupons initiative as it may attract more customers to the car wash service.  
 This would offset any price lost on multiple car washes and may also bring profits after a certain amount of car washes.

VerbalBot · Answer

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A car wash service has decided to discontinue its repeat customer

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A car wash service has decided to discontinue its repeat customer

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