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69. The companys 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 departments 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 companys 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 companys profits.
In conclusion, the departments 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.
69. The companys 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 departments 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 companys 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 companys profits.
In conclusion, the departments 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.
