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17 Aug 2015, 09:59
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C
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
15%
(low)
Question Stats:
86% (01:00) correct
14%
(01:06)
wrong
based on 94
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After a luxury-watch maker raised the price of its flagship model, the Timekeeper, the new price became 25 percent higher than that of the segment’s next-best-selling rival. The company made no changes in advertising, distribution, or product features. In the three months following the price increase, Timekeeper sales rose 15 percent.
Which of the following, if true, best explains the increase in Timekeeper sales despite the price increase?
A. Many gift purchasers of luxury watches look specifically for the most expensive item within their budget range.
B. The rival watch’s buyers are so brand-loyal that they rarely switch brands.
C. A significant share of luxury-watch consumers considers a high price an indicator of superior status.
D. Some online reviewers downgraded the rival watch shortly before the Timekeeper’s price change.
E. Most Timekeeper owners already own at least one other high-end watch.
Which of the following, if true, best explains the increase in Timekeeper sales despite the price increase?
A. Many gift purchasers of luxury watches look specifically for the most expensive item within their budget range.
B. The rival watch’s buyers are so brand-loyal that they rarely switch brands.
C. A significant share of luxury-watch consumers considers a high price an indicator of superior status.
D. Some online reviewers downgraded the rival watch shortly before the Timekeeper’s price change.
E. Most Timekeeper owners already own at least one other high-end watch.
17 Aug 2015, 09:59
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Official Solution:
After a luxury-watch maker raised the price of its flagship model, the Timekeeper, the new price became 25 percent higher than that of the segment’s next-best-selling rival. The company made no changes in advertising, distribution, or product features. In the three months following the price increase, Timekeeper sales rose 15 percent.
Which of the following, if true, best explains the increase in Timekeeper sales despite the price increase?
A. Many gift purchasers of luxury watches look specifically for the most expensive item within their budget range.
B. The rival watch’s buyers are so brand-loyal that they rarely switch brands.
C. A significant share of luxury-watch consumers considers a high price an indicator of superior status.
D. Some online reviewers downgraded the rival watch shortly before the Timekeeper’s price change.
E. Most Timekeeper owners already own at least one other high-end watch.
Paradox to explain: The Timekeeper’s price was raised above its nearest competitor’s, yet its sales increased. Any satisfactory explanation must show why a higher price attracted buyers rather than driving them away. Also, we are after the strongest and best explanation, not just any.
A. Many gift purchasers of luxury watches look specifically for the most expensive item within their budget range. [Incorrect] This answer choice limits the effect to gift buyers; the broader status-signaling in Choice C offers a more comprehensive explanation.
B. The rival watch’s buyers are so brand-loyal that they rarely switch brands. [Incorrect] This explains why the competitor’s customers stay put but not why additional customers flock to the now-costlier Timekeeper.
C. A significant share of luxury-watch consumers considers a high price an indicator of superior status. [Correct] In prestige markets, a higher price can signal higher status; by becoming the most expensive option, the Timekeeper becomes more desirable to these status-conscious shoppers, so sales rise despite the price hike.
D. Some online reviewers downgraded the rival watch shortly before the Timekeeper’s price change. [Incorrect] Negative reviews might push some customers away from the rival, but the paradox centers on why higher price itself increased demand for the Timekeeper and while some review downgrades for a competitor may help with sales, it would not be likely driving many sales with a price increase happening at the same time.
E. Most Timekeeper owners already own at least one other high-end watch. [Incorrect] — Prior ownership does not clarify why a price increase would spur more purchases; it adds background detail without resolving the discrepancy.
Answer: C
After a luxury-watch maker raised the price of its flagship model, the Timekeeper, the new price became 25 percent higher than that of the segment’s next-best-selling rival. The company made no changes in advertising, distribution, or product features. In the three months following the price increase, Timekeeper sales rose 15 percent.
Which of the following, if true, best explains the increase in Timekeeper sales despite the price increase?
A. Many gift purchasers of luxury watches look specifically for the most expensive item within their budget range.
B. The rival watch’s buyers are so brand-loyal that they rarely switch brands.
C. A significant share of luxury-watch consumers considers a high price an indicator of superior status.
D. Some online reviewers downgraded the rival watch shortly before the Timekeeper’s price change.
E. Most Timekeeper owners already own at least one other high-end watch.
Paradox to explain: The Timekeeper’s price was raised above its nearest competitor’s, yet its sales increased. Any satisfactory explanation must show why a higher price attracted buyers rather than driving them away. Also, we are after the strongest and best explanation, not just any.
A. Many gift purchasers of luxury watches look specifically for the most expensive item within their budget range. [Incorrect] This answer choice limits the effect to gift buyers; the broader status-signaling in Choice C offers a more comprehensive explanation.
B. The rival watch’s buyers are so brand-loyal that they rarely switch brands. [Incorrect] This explains why the competitor’s customers stay put but not why additional customers flock to the now-costlier Timekeeper.
C. A significant share of luxury-watch consumers considers a high price an indicator of superior status. [Correct] In prestige markets, a higher price can signal higher status; by becoming the most expensive option, the Timekeeper becomes more desirable to these status-conscious shoppers, so sales rise despite the price hike.
D. Some online reviewers downgraded the rival watch shortly before the Timekeeper’s price change. [Incorrect] Negative reviews might push some customers away from the rival, but the paradox centers on why higher price itself increased demand for the Timekeeper and while some review downgrades for a competitor may help with sales, it would not be likely driving many sales with a price increase happening at the same time.
E. Most Timekeeper owners already own at least one other high-end watch. [Incorrect] — Prior ownership does not clarify why a price increase would spur more purchases; it adds background detail without resolving the discrepancy.
Answer: C
03 Oct 2020, 03:35
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I don't really agree with C as the answer.
Rationale: 'Premium watch buyers' are already a subset of the population and only some of those buyers, which is a subset of a subset and hence how will that help in increasing the sales?
Rationale: 'Premium watch buyers' are already a subset of the population and only some of those buyers, which is a subset of a subset and hence how will that help in increasing the sales?
