An online media company plans to increase its share of market by

Question

An online media company plans to increase its share of market by deeply discounting its subscription prices for the next two months. The discounts will cut into profits, but because they will be heavily advertised, the company expects that they will attract buyers away from rival providers of similar media. The company foresees that, in the longer term, customers initially attracted by the discounts will remain loyal subscribers.

In assessing the plan's chances of achieving its aim, it would be most useful to know which of the following?

A) Whether the company's competitors are likely to respond by offering deep discounts on their own subscriptions
B) Whether the advertisements will be created by the company's current advertising agency
C) Whether some of the company's subscription options will be more deeply discounted than others
D) Whether the company will be able to cut costs sufficiently to maintain profit margins even when the discounts are in effect
E) Whether an alternative strategy will enable the company to enhance its profitability while holding a constant or diminishing share of the market

This is a  Data Sufficiency Butler Question

Check the links to other Butler Projects: 
 
   Data Sufficiency Butler 
   Problem Solving Butler  
   Sentence Correction Butler  
   Reading Comprehension Butler  
   Integrated Reasoning Butler

bronaugust · Answer

To solve this question, let us deploy  IMS's four-step technique .

STEP #1   ->  IDENTIFY THE QUESTION TYPE

Let us read the question stem to identify the question type.
 
The stem indicates an  evaluate  question.

STEP #2   ->  X-RAY THE ARGUMENT

In an evaluate question, it is a must to x-ray the argument and deconstruct it by figuring out the conclusion and the premise.
 
 CONCLUSION/PLAN:  An online media company plans to increase its share of market by deeply discounting its subscription prices for the next two months.
 PREMISE:  In the longer term, customers initially attracted by the discounts will remain loyal subscribers.
 INFORMATION:  The discounts will cut into profits, but because they will be heavily advertised, the company expects that they will attract buyers away from rival providers of similar media.

STEP #3   ->  FRAME A SHADOW ANSWER

To frame a shadow answer, we need to know what the correct answer should do. In this question, the correct answer should help us check whether the plan will achieve its aim of increasing market share.

SHADOW ANSWER:  Any situation that helps us check whether deeply discounting the subscription prices for the next two months will help the online media company increase its market share.

STEP #4   ->  ELIMINATE INCORRECT ANSWERS

Answer options that do not match the shadow answer can be eliminated.

A) Whether the company's competitors are likely to respond by offering deep discounts on their own subscriptions -  MATCHES THE SHADOW ANSWER  -  If the company's competitors are likely to respond by offering deep discounts on their own subscriptions, the plan at hand could well be foiled, for the customers of the rival companies will not have a great reason for shifting loyalties. Simply put, since their own company would be offering discounts, they would want to continue being a subscriber of that company or opt for one of the several companies offering discounts. In such a scenario, it is very unlikely for the market share of the company under discussion to go up. On the other hand, if the company's competitors are not likely to respond by offering deep discounts on their own subscriptions, customers of rival companies would have a great reason for shifting loyalties, meaning the plan is very likely to achieve its aim. This answer option clearly helps us assess the plan's chances of achieving its aim, and hence, we do not have a reason to eliminate it.  -  KEEP

B) Whether the advertisements will be created by the company's current advertising agency -  NOT A MATCH  -  Whether or not the advertisements will be created by the company's current advertising agency will not help us assess whether the market share of the company will go up.  -  ELIMINATE

C) Whether some of the company's subscription options will be more deeply discounted than others -  NOT A MATCH  -  Again, even if some of the company's subscription options are to be more deeply discounted than others, we will still not be able to assess whether the market share will go up; besides, we do not have any info to check whether the ones more deeply discounted are actually most sought after or not.  -  ELIMINATE

D) Whether the company will be able to cut costs sufficiently to maintain profit margins even when the discounts are in effect -  NOT A MATCH  -  Let us say the company will be able to cut costs sufficiently to maintain profit margins even when the discounts are in effect. Will we be able to check whether the company's market share will go up? No!  -  ELIMINATE

E) Whether an alternative strategy will enable the company to enhance its profitability while holding a constant or diminishing share of the market -  NOT A MATCH  -  The plan does not concern itself with enhancing profitability.  -  ELIMINATE

Hence, (A) has to be the correct answer.

LamboWalker · Answer

The company aims to increase its market share by reducing prices and advertising heavily. Need to find a statement that will help us evaluate the usefulness of this strategy.

A - seems good. If competitors themselves lower prices, then gaining market share will become difficult.

B, C - doesn't affect customer increase.

D and E and concerned with profit margins, which the argument does not care about.

Therefore, OA is A.

Bunuel · Answer

OFFICIAL EXPLANATION:

Reading the question: the prompt describes a plan of action, and a plan of action can be thought of as argument saying, "Let's do this; it's a great idea and will work." We have a case of understated terms, "most useful to know," so we'll be able to prove the correct answer by stronger terms.

Creating a filter: the "great idea" in this plan is to slash prices, take losses, and win customers for the long term. What would be most useful to know? Something that is important to the plan--critical, even. We can imagine some things we'd need to know to determine whether the plan will work. For example: 1) whether we are really getting customers and/or 2) whether we are really earning back money from them over time and/or 3) whether there is some big unidentified side effect or problem that we are missing.

Applying the filter: (A) is relevant; if competitors also slash, our plan might not work. Then, per our prediction 1) above, we might not actually get more customers. We'll keep (A) in. Choice (B) is not relevant; we have no reason to think ads are better in-house or out-of-house. Choice (C) is not relevant to whether the plan will work; whatever product or service we're pricing low is what's supposedly going to win the customers and those customers are the ones we're going to have to keep and win back profits from. Choice (D) contradicts the information we've been given; it is explicitly part of the plan that we suffer losses in the short term. Choice (E) is irrelevant; whether a different plan might work is relevant to what plan might be best, but it's not relevant to whether this plan specifically will work, which is the question at hand.

Logical proof: we're left only with (A). As we saw in Expiring Meters, when answer choices are phrased with the word "whether," we can use analysis by extreme cases to give logical proof to our answer. In one case, if competitors don't lower their prices, even raise their prices to very high levels, we have further reason to think that lowering prices will bring in customers. In another case, if competitors lower their prices below ours, then we have good reason to think our plan won't work. Evidently choice (A) highlights something important to the plan.

The correct answer is (A).

VerbalBot · Answer

Automated notice from GMAT Club VerbalBot:

A member just gave Kudos to this thread, showing it’s still useful. I’ve bumped it to the top so more people can benefit. Feel free to add your own questions or solutions.

This post was generated automatically.

An online media company plans to increase its share of market by

Prep Toolkit

Top 5 GMAT Debrief Videos

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards

GMAT Critical Reasoning (CR) Questions

An online media company plans to increase its share of market by

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards