55.
This company memorandum recommends that Excelsior conduct a temporary sales promotion for its new brand of coffee that includes offering free samples, price reductions, and discount coupons. This recommendation is based on the fact that Superior, the leading coffee company, used just such a promotion to introduce the newest brand in its line of coffees. This argument is unconvincing because it relies on three questionable assumptions.
First of all, the argument rests on the assumption that a promotional strategy that works for one company will work for another. However, Excelsior and Superior may not be sufficiently similar to warrant this assumption. Promotional techniques that work for a leader with established name recognition for its brand of coffees may be ineffective for a company with no similar name recognition new to the brand coffee market. Accordingly, Excelsior might be better advised to employ some other strategy, such as a media advertising plan, to first attain broad name recognition.
The argument also depends on the assumption that Excelsior can afford a promotional plan similar to Superiors. However, free samples, price reductions, and discounts all reduce profits and may actually result in temporary losses. While a leading company with other profitable products in the same line can absorb a temporary loss, for a fledgling competitor this strategy might be very risky and may even result in business failure.
Finally, the argument relies on the assumption that Superiors promotional campaign for its newest coffee was successful. However, the memo provides no evidence that this was the case. It is possible that the promotion was entirely ineffective, and that Superior remains the leader in its field despite this small failure. If so, Excelsior may be ill-advised to follow Superiors promotional strategy.
In conclusion, the two companies are too dissimilar to justify the recommendation that Excelsior model its promotional strategy on Superiors. To strengthen the argument, the author of the memo must establish that Excelsior has sufficient operating capital to launch the recommended sales campaign, and that this strategy would be more effective than another strategy, such as using extensive media advertising.
56.
Because Healthy Heart fitness centers experienced no significant increase in member usage as a result of building a new indoor pool, the author cautions other health dub managers against installing new features as a means of increasing member usage, instead, they are advised to lower membership fees. This argument is flawed in two critical respects.
First, the conclusion that installing new features at fitness centers will not increase member usage is based on too small a sample to be reliable. The only evidence offered in support of this conclusion is the fact that Healthy Heart fitness center did not experience an increase. Unless it can be shown that Healthy Heart is typical of all fitness centers, the fact that it experienced no increase in member usage is not grounds for concluding that all fitness centers will experience similar results.
Second, the author fails to consider other possible reasons why building an indoor pool failed to increase Healthy Hearts member usage. Perhaps Healthy Hearts members are primarily interested in body-building rather than cardiovascular exercise, or perhaps they prefer racquetball; or perhaps they just dont like swimming. Reasons such as these would help to explain why the addition of a new indoor pool failed to increase member usage. The authors failure to investigate or even consider other possible explanations for Healthy Hearts poor results renders the conclusion based upon them highly suspect.
In conclusion, the authors argument is not convincing. To strengthen the argument it would be necessary to show that Healthy Heart fitness center is typical of all fitness centers. Additionally, the author would have to show that other possible reasons for the lack of increase in member usage could be eliminated.