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     Home >> GMAT >> Essays >> Essay - 68


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    The following appeared in a memorandum from a company’s marketing department. “Since our company started manufacturing and marketing a deluxe air filter six months ago, sales of our economy filter—and company profits—have decreased significantly. The deluxe air filter sells for 50 percent more than the economy filter, Argument Page numbers but the economy filter lasts for only one month while the deluxe filter can be used for two months before it must be replaced. To increase repeat sales of our economy filter and maximize profits, we should discontinue the deluxe air filter and concentrate all our advertising efforts on the economy filter.” Discuss how well reasoned... etc.( 390 )

       The company’s marketing department recommends discontinuing a deluxe air filter and concentrating advertising efforts on an economy filter, which requires replacement more often than the deluxe model. This recommendation is based on reports showing that sales of economy filters, and company profits, have dropped significantly since the company began manufacturing and marketing the deluxe filter six months ago. The marketing department’s argument is specious in three important respects.

    First, the marketing department assumes that if the company discontinues the new deluxe air filter, customers will resume buying its economy filter. This assumption may not be correct. Customers who prefer the deluxe model may do so because it requires replacement less often. Thus, instead of buying the company’s economy filters again, these customers may just as likely turn to a competitor for a product similar to the deluxe model. In this event, the result would be lower profits.

    Secondly, the marketing department fails to recognize alternative strategies that might enhance profits more than discontinuing the deluxe filter would. It is possible that lowering the price of the economy model, raising the price of the deluxe model, or both, may actually maximize profits. A lower-priced economy filter might lure customers from competing products and retain current customers. At the same time, buyers of the deluxe model may place a premium value on its convenience and may be willing to pay an even higher price for the filter.

    Thirdly, the marketing department unfairly assumes that the availability of its deluxe filter is the cause of decreasing profits. It is equally possible that other factors, such as increased competition or supply prices, or decreased demand for these kinds of filters generally, are responsible for the decrease in profits. If so, discontinuing the deluxe filter may not serve to maximize, or even enhance, the company’s profits.

    In conclusion, the department’s argument for discontinuing the deluxe filter is weak because the department has not considered the possible adverse consequences of doing so, or the alternatives to doing so. Moreover, the department has failed to establish a clear causal connection between the availability of the deluxe filter and decreasing profits. To strengthen its argument, the department must consider and rule out pricing adjustments as a better strategy to maximize profits, and must provide better evidence that the deluxe filter is the cause of the decrease in profits.


     



     


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