I recently finished one of the CAT exams and the following is the AWA question. I am aiming to get a 5-6 score on essay, but am not sure where I am currently. Could anyone review that for me? Thanks a lot!
ESSAY QUESTION:
The following appeared in a corporate memorandum of a beverage manufacturer:
“Our promotional price reductions on energy drinks have been highly successful, as we have seen a dramatic increase in unit sales. Further, surveys of our consumers indicate that this promotion was favorably received by the majority of our customers. Therefore, to improve our company’s profitability and enhance its perception in the eyes of consumers, similar price reductions should be offered on all drinks produced by our firm.”
Discuss how well reasoned you find this argument. Point out flaws in the argument's logic and analyze the argument's underlying assumptions. In addition, evaluate how supporting evidence is used and what evidence might counter the argument's conclusion. You may also discuss what additional evidence could be used to strengthen the argument or what changes would make the argument more logically sound.
My response is as followed:
In the corporate memorandum, the author argued that the company need to offer complimentary prices on all drinks in order to improve the company's profitability and safeguard its perception in the eyes of consumers. The conclusion is based on the premises that a recent reduction of price on energy drinks has caused the sales of that specific product to surge, and that a survey indicated the popularity of the cost reduction among customers. At the first glance, the argument appears to be somewhat convincing. However, close scrutiny reveals that the author failed to take into account several vitally relevant aspects and made many logical flaws and invalid assumptions.
The most egregious reasoning flaw is the author's use of "After This, Therefore Because of This" fallacy. The author credited the promotional price reductions with the drastic rise in unit sales, but he/she overlooked the possibility of many other factors that might have contributed partly to the phenomenon. For example. it is completely possible that customer awareness of energy drinks has increased due to a national marketing campaign launched by many firms in the market. It is equally possible that due to seasonal changes that drive people to exercise, one may simply need the drinks to energize themselves. Without considering and ruling out these and other possibilities, the author's claim that it is the price reductions that gave rise to the increased unit sales is really open to doubt for the reason that any of the possibilities, if true, would serve to undermine his/her tentative conclusion.
Another threshold problem with this memorandum involves the survey itself. The author assumes without justification that the result of the survey is completely reliable. To the contrary, we have strong reasons to question the credibility and neutrality of the survey in which the conductor has vested interest and thus may manipulate the statistics to his/her own advantage. Even if we assume the conductor has the right ethics so that he/she does not misrepresent or misinterpret the figures, the statistical reliability of the survey is also dubious because the author provided no evidence to show that the number of customers surveyed is statistically significant. Common sense tells us the less the size of the sample, the less reliable the result of the survey and thus the less solid any conclusion drawn from it. That is to say, if the number of the poll, a number not pointed out in the memorandum, is proven to be just a fraction of the total number of consumers, then the outcome of the survey is merely a useless one on which cannot be relied to draw the conclusion that the price reduction is favored by the customers. Further, even if we do acknowledge the reliability of the statistical significance of the survey, we cannot trust the result for the simple reason that customers, by their nature, love lower priced products with the same quality. However, it does not mean that the customers will treat the products as they did. In fact, if a premium brand frequently conduct significant price reductions, customers generally will rank down the company as a whole and think of it as a secondary brand, thus harming the brand image of the company. Therefore, a more detailed survey is needed to understand the psychological perceptions of the customers on this and other potential price reductions.
Moreover, the argument is based on the gratuitous assumption that increased unit sales can directly lead to increased revenues and therefore, increased profitability. Even if we do attribute the surging units of goods sold to the price reduction, nothing assures us that the increased volume sold is not offset by the decreased prices. If we take into account the extra costs incurred by the marketing efforts, we may actually see the profit to decline.
Last but not least, the author has also made the fallacy of "All Things Are Equal". The facts that happened to energy drinks are not necessarily applicable to other drinks in general. The author, however, failed to take into account the major differences between energy drinks and other drinks, such as coffee, cola or soda. Instead, he/she presumes that all the background conditions, all the customers purchasing criteria, and all the channels of the different products are the same or have no influence on the potential outcome of a price reduction. However, this is not the case. Different products target at different customers and require different marketing and sales strategies. Failing to realize that equals to not knowing how to communicate with customers and ultimately, failing to gain revenues and market share.
In sum, the author failed to establish a casual relationship between the increased unit sales and the price reduction, stumbled to prove that such reductions really brought about higher profits, listed out an unconvincing survey which cannot show the real attitude of the customers, and falsely assumed that the other products of the company can be treated in the same way as were energy drinks. To strengthen his/her argument, the author needs to further investigate the different factors relating to the units sales, revenues and profits, conduct a more thorough customer survey to understand the key purchasing criteria of different customer segments, and study the different natures of different products and come up with specific strategy to boost the sales of each of them. Only in this way can he/she realize his/her ultimate goal---increase the profitability of the whole company.
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