A primary concern among manufacturers polled in a 1998 survey was the

Question

﻿A primary concern among manufacturers polled in a 1998 survey was the inefficiency of trade promotions- inducements offered by manufacturers to retailers to encourage them to reduce retail prices temporarily so as to boost sales volume. Such inducements may include temporarily reduced costs of goods, free goods, or display allowances (fees manufacturers pay retailers to encourage them to allocate premium shelf space to a product). At the heart of manufacturers' dissatisfaction lies concern regarding widespread retailer opportunism. Although consumers know from experience the approximate frequency of promotional pricing, they do not typically have complete information about ongoing trade promotions in a given period, so retailers can profit by sometimes choosing not to pass along their own savings to their customers. Inefficient use of trade promotion dollars has prompted several large manufacturers to adopt an "everyday low price" policy for their goods, but at least  one diaper manufacturer  found it had to revert to its former pricing strategies in the face of increasing promotional competition from other brands. Adopting an alternative approach, some manufacturers have themselves advertised ongoing promotions. By informing at least some customers about promotions, manufacturers believe they can regulate retailer opportunism by increasing customers' propensity to search for discounted prices.
   1 
 1. It can be inferred that the diaper manufacturer mentioned in the highlighted text of the passage discovered that consumers

A. were unlikely to continue to purchase a brand that had a lower regular price in the face of temporary discounts on diapers of other brands
B. tended to equate higher prices on diapers with higher quality, and so were willing to pay full price for expensive brands
C. usually became loyal to a particular brand of diaper and would purchase that brand whether or not it was on sale
D. bought fewer diapers per shopping trip when they knew the diapers would always be available at the same "everyday low price"
E. were more willing to search for discounted prices on diapers than for other products typically available in the same stores

2 
﻿ 2. The author of the passage would be most likely to agree with which of the following statements about consumers' knowledge of retail pricing strategies?

A. Consumers believe that retailers do not have the option to charge full price for items that manufacturers tell them to discount.
B. Consumers assume that a retailer who offers discounts on some items will inflate the prices of other items to compensate for it.
C. Consumers are aware that they can expect to find familiar brands available at discounted prices at fairly predictable intervals.
D. Consumers believe that retailers must pay the same price for goods whether or not they offer them at a discount to customers.
E. Consumers often do not realize that price discounts typically originate from manufacturers rather than individual retailers.

3 
 3. ﻿According to the passage, some manufacturers have attempted to counteract retailer opportunism by

A. selling goods to retailers at reduced prices
B. offering more frequent but less potentially lucrative promotions
C. alerting consumers when promotions are happening
D. offering certain goods to retailers at no charge
E. paying retailers fees to prominently display certain goods

MartyMurray · Accepted Answer

Explanation for Question 1

1. It can be inferred that the diaper manufacturer mentioned in the highlighted text of the passage discovered that consumers

A. were unlikely to continue to purchase a brand that had a lower regular price in the face of temporary discounts on diapers of other brands

Rereading the sentences around the highlighted text, we see the following:

Inefficient use of trade promotion dollars has prompted several large manufacturers to adopt an "everyday low price" policy for their goods, but at least  one diaper manufacturer  found it had to revert to its former pricing strategies in the face of increasing promotional competition from other brands.

We see that the fact that the diaper manufacturer "had to revert to its former pricing strategies" implies that it had used an "everyday low price" policy but didn't get good results because of "increasing promotional competition from other brands."

So, we can infer that the diaper manufacturer discovered that consumers were unlikely to continue to purchase a brand that had a lower regular price ("everyday low price") in the face of temporary discounts on diapers of other brands (promotional competition).

Keep

B. tended to equate higher prices on diapers with higher quality, and so were willing to pay full price for expensive brands

The passage says nothing about "higher quality" or "full price for expensive brands."

Eliminate.

C. usually became loyal to a particular brand of diaper and would purchase that brand whether or not it was on sale

This choice is contrary to what the passage says. After all, the fact that the diaper manufacturer "found it had to revert to its former pricing strategies in the face of increasing promotional competition from other brands" suggests that consumers were not loyal but rather were purchasing whatever was on sale.

Eliminate.

D. bought fewer diapers per shopping trip when they knew the diapers would always be available at the same "everyday low price"

The passage indicates that offering diapers at the same "everyday low price" did not work for the diaper manufacturer. However, the reason mentioned is not that consumers "bought fewer diapers per shopping trip." In fact, the passage says nothing about how many diapers consumers bought per shopping trip.

Eliminate.

E. were more willing to search for discounted prices on diapers than for other products typically available in the same stores

This choice is a little tricky to eliminate since the fact that the diaper company "found it had to revert to its former pricing strategies in the face of increasing promotional competition from other brands" suggests that customers were searching for discounts.

However, this choice is incorrect because the passage says nothing about how "willing" consumers were to search for discounted prices on diapers or any other products.

Eliminate.

The correct answer is (A).

Explanation for Question 2

﻿ 2. The author of the passage would be most likely to agree with which of the following statements about consumers' knowledge of retail pricing strategies?

A. Consumers believe that retailers do not have the option to charge full price for items that manufacturers tell them to discount.

The passage says nothing about what consumers believe about retailers' options.

We could get the impression that this choice is supported since the passage says, "they (consumers) do not typically have complete information about ongoing trade promotions in a given period, so retailers can profit by sometimes choosing not to pass along their own savings to their customers."

Notice, however, that the fact that consumers don't have information on when promotions are ongoing is different from the idea that customers believe that retailers do not have the option to charge full price when promotions are ongoing.

Eliminate.

B. Consumers assume that a retailer who offers discounts on some items will inflate the prices of other items to compensate for it.

The passage does not say or imply anything about retailers inflating the prices of items. It discusses discounts only.

Eliminate.

C. Consumers are aware that they can expect to find familiar brands available at discounted prices at fairly predictable intervals.

Scanning the passage for "consumers" and "predictable intervals," we find the following:

consumers  know from experience  the approximate frequency  of promotional pricing

If "consumers know from experience the approximate frequency of promotional pricing," then it makes sense that "Consumers are aware that they can expect to find familiar brands available at discounted prices at fairly predictable intervals." After all, if consumers know the frequency, then they can predict the intervals.

So, the author would likely agree with this choice.

Keep.

D. Consumers believe that retailers must pay the same price for goods whether or not they offer them at a discount to customers.

The passage says nothing about what consumers believe about the prices retailers pay for goods.

Eliminate.

E. Consumers often do not realize that price discounts typically originate from manufacturers rather than individual retailers.

This choice almost seems correct since the passage says the following:

they (consumers) do not typically have complete information about ongoing trade promotions in a given period

Notice, however, that the fact that consumers don't have information about ongoing trade promotions is different from their not realizing from where discounts originate. In other words, not being aware of  when promotions exist  is not the same as not being aware of  where they come from .

Eliminate.

The correct answer is (C).

Explanation for Question 3

3. ﻿According to the passage, some manufacturers have attempted to counteract retailer opportunism by

A. selling goods to retailers at reduced prices

Regarding selling goods to retailers at reduced prices, the passage says the following:

﻿ A primary concern among manufacturers ... was the inefficiency of trade promotions .... Such inducements may include temporarily reduced costs of goods .... At the heart of manufacturers' dissatisfaction lies concern regarding widespread retailer opportunism.

We see that the passage does say that manufacturers sell goods to retailers a "reduced costs," i.e., "reduced prices."

However, the purpose of the reduced prices is not to "counteract retailer opportunism." Rather, the passage indicates that "A primary concern among manufacturers ... was the inefficiency" of the "inducements" such as "reduced prices" due to "retailer opportunism."

So, rather than indicate that the reduced prices are a way to "counteract retailer opportunism," the passage indicates that selling goods to retailers at reduced prices  is problematic because of  retailer opportunism.

Eliminate.

B. offering more frequent but less potentially lucrative promotions

The passage says nothing about offering more frequent promotions.
 
It does say that manufacturers have tried "everyday low price" policies, but having consistently low prices is not the same as offering promotions, which would involve prices that are not consistently low but rather lower during promotional periods only.

Eliminate.

C. alerting consumers when promotions are happening

Scanning the passage for "alerting consumers when promotions are happening," we find the following:

By  informing at least some customers about promotions , manufacturers believe they can regulate retailer opportunism by increasing customers' propensity to search for discounted prices.

We see that the passage says that manufacturers "inform" i.e., "alert," customers about promotions to "regulate" i.e., "counteract," retailer opportunism, saying basically what this choice says.

Keep.

D. offering certain goods to retailers at no charge

The passage says nothing about offering goods at no charge.

Eliminate.

E. paying retailers fees to prominently display certain goods

The passage does say, "Such inducements may include temporarily reduced costs of goods, free goods, or  display allowances (fees manufacturers pay retailers to encourage them to allocate premium shelf space to a product) ."

However, the "inducements" mentioned are not to "counteract retailer opportunism." Rather, the passage indicates that "A primary concern among manufacturers ... was the inefficiency of trade promotions- inducements offered by manufacturers" due to "retailer opportunism."

So, rather than indicate that the inducements are a way to "counteract retailer opportunism," the passage indicates that the inducements  are problematic because of  retailer opportunism.

Eliminate.

The correct answer is (C).

KarishmaB · Answer

Gist of the passage:  
Talks about a concern among manufacturers - inefficiency of trade promotions (when manufacturers give discount to retailers to pass on to customers, retailers don't pass it on to customers i.e. they buy from manufacturers at discount and sell off to customers at full price for extra profit)
Although consumers know from experience the approximate frequency of promotional pricing, they do not have complete information, so retailers make extra profit.

Because of this several large manufacturers are adopting an "everyday low price" policy for their goods (no discounts, just low regular price). But at least  one diaper manufacturer  found it had to revert to its former pricing strategies (occasional discounts) because of promotional competition.
Adopting an alternative approach, some manufacturers have themselves advertised ongoing promotions.

Question 1.

1. It can be inferred that the diaper manufacturer mentioned in the highlighted text of the passage discovered that consumers

A. were unlikely to continue to purchase a brand that had a lower regular price in the face of temporary discounts on diapers of other brands
B. tended to equate higher prices on diapers with higher quality, and so were willing to pay full price for expensive brands
C. usually became loyal to a particular brand of diaper and would purchase that brand whether or not it was on sale
D. bought fewer diapers per shopping trip when they knew the diapers would always be available at the same "everyday low price"
E. were more willing to search for discounted prices on diapers than for other products typically available in the same stores

The diaper manufacturer had to go from "everyday low pricing" back to "occasional discounts." Why? Has to be because  "everyday low pricing" would not have been working. So we need an option to that effect.

Option (A) works.
A. were unlikely to continue to purchase a brand that had a lower regular price in the face of temporary discounts on diapers of other brands

If he found that people were not buying low priced diapers when others gave discounts, he would have realised that the low pricing strategy does not work and that he would need to give occasional discounts too.

Option (E) can be a source of confusion but note that it compares "discounted diapers" with "other products typically available in the store". Our comparison is between "discounted diapers" and "diapers at low regular price". It doesn't talk about how people react to low priced diapers. Hence (E) is incorrect.

Answer (A)

Question 2.

﻿ 2. The author of the passage would be most likely to agree with which of the following statements about consumers' knowledge of retail pricing strategies?

A. Consumers believe that retailers do not have the option to charge full price for items that manufacturers tell them to discount.
B. Consumers assume that a retailer who offers discounts on some items will inflate the prices of other items to compensate for it.
C. Consumers are aware that they can expect to find familiar brands available at discounted prices at fairly predictable intervals.
D. Consumers believe that retailers must pay the same price for goods whether or not they offer them at a discount to customers.
E. Consumers often do not realize that price discounts typically originate from manufacturers rather than individual retailers.

This is what we are given about consumers' knowledge: " Although consumers know from experience the approximate frequency of promotional pricing, they do not have complete information "
Hence only option (C) works.
C. Consumers are aware that they can expect to find familiar brands available at discounted prices at fairly predictable intervals.

Rest, we are given nothing about consumer's knowledge so we cannot say what the author woudl agree with.

Answer (C)

Question 3.

3. ﻿According to the passage, some manufacturers have attempted to counteract retailer opportunism by

A. selling goods to retailers at reduced prices
B. offering more frequent but less potentially lucrative promotions
C. alerting consumers when promotions are happening
D. offering certain goods to retailers at no charge
E. paying retailers fees to prominently display certain goods

We have been given two methods: "Everyday low pricing" and "themselves advertised ongoing promotions."

Hence (C) works. It is the second method above "themselves advertised ongoing promotions."

Answer (C)

Borrat · Answer

1. It can be inferred that the diaper manufacturer mentioned in the highlighted text of the passage discovered that consumers

A. were unlikely to continue to purchase a brand that had a lower regular price in the face of temporary discounts on diapers of other brands --  keep 
B. tended to equate higher prices on diapers with higher quality, and so were willing to pay full price for expensive brands --  quality is a speculation 
C. usually became loyal to a particular brand of diaper and would purchase that brand whether or not it was on sale --  loyal is a speculation, also if anything this goes the opposite direction 
D. bought fewer diapers per shopping trip when they knew the diapers would always be available at the same "everyday low price" --  fewer per shopping trip is a speculation 
E. were more willing to search for discounted prices on diapers than for other products typically available in the same stores --  nearby trap

﻿ 2. The author of the passage would be most likely to agree with which of the following statements about consumers' knowledge of retail pricing strategies?

A. Consumers believe that retailers do not have the option to charge full price for items that manufacturers tell them to discount. -- spec
B. Consumers assume that a retailer who offers discounts on some items will inflate the prices of other items to compensate for it. -- spec
C. Consumers are aware that they can expect to find familiar brands available at discounted prices at fairly predictable intervals. --yes
D. Consumers believe that retailers must pay the same price for goods whether or not they offer them at a discount to customers. -- spec
E. Consumers often do not realize that price discounts typically originate from manufacturers rather than individual retailers. -- not realizing <> not knowig the complete picture - stretch

3. ﻿According to the passage, some manufacturers have attempted to counteract retailer opportunism by

A. selling goods to retailers at reduced prices
B. offering more frequent but less potentially lucrative promotions
C. alerting consumers when promotions are happening yes
D. offering certain goods to retailers at no charge
E. paying retailers fees to prominently display certain goods

A primary concern among manufacturers polled in a 1998 survey was the

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GMAT Reading Comprehension (RC) Questions

A primary concern among manufacturers polled in a 1998 survey was the

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