Extensive research has shown that the effects of short-term price promotions on sales are themselves short-term. Companies' hopes that promotions...
GMAT Reading Comprehension : (RC) Questions
Extensive research has shown that the effects of short-term price promotions on sales are themselves short-term. Companies' hopes that promotions might have a positive aftereffect have not been borne out for reasons that researchers have been able to identify.
A price promotion entices only a brand's long-term or "loyal" customers; people seldom buy an unfamiliar brand merely because the price is reduced. They simply avoid paying more than they have to when one of their customary brands is temporarily available at a reduced price. A price promotion does not increase the number of long-term customers of a brand, as it attracts virtually no new customers in the first place. Nor do price promotions have lingering aftereffects for a brand, even negative ones such as damage to a brand's reputation or erosion of customer loyalty, as is often feared.
So why do companies spend so much on price promotions? Clearly price promotions are generally run at a loss, otherwise there would be more of them. And the bigger the increase in sales at promotion prices, the bigger the loss. While short-term price promotions can have legitimate uses, such as reducing excess inventory, it is the recognizable increase in sales that is their main attraction to management, which is therefore reluctant to abandon this strategy despite its effect on the bottom line.
The primary purpose of the passage is to
1. Passage Analysis:
Progressive Passage Analysis
| Text from Passage | Analysis |
|---|---|
| Extensive research has shown that the effects of short-term price promotions on sales are themselves short-term. | What it says: When companies temporarily lower prices, any boost in sales doesn't last long. What it does: Introduces the main finding about price promotions Source/Type: Research findings (factual claim) Connection to Previous Sentences: This is our starting point - no previous sentences to connect to Visualization: Company normally sells 100 units/month at $50 During 1-month promotion at $40: sells 200 units After promotion ends: back to 100 units/month What We Know So Far: Price promotions give temporary sales boosts What We Don't Know Yet: Why this happens, what companies hoped for, specific details Reading Strategy Insight: This opening sentence gives us the "big picture" conclusion first - expect the rest to explain WHY this is true. |
| Companies' hopes that promotions might have a positive aftereffect have not been borne out for reasons that researchers have been able to identify. | What it says: Companies wanted lasting benefits from promotions, but didn't get them. Researchers know why. What it does: Restates sentence 1 from companies' perspective and promises explanation Source/Type: Researcher conclusions about company expectations Connection to Previous Sentences: - Sentence 1 told us: Effects are short-term - NOW Sentence 2: Companies WANTED long-term effects but didn't get them - This is the SAME information, just from a different angle! Visualization: Company expectation: Promotion → temporary boost → lasting higher sales Reality: Promotion → temporary boost → back to normal Reading Strategy Insight: Feel confident here - this isn't new complexity, it's just restating the same idea while setting up the explanation to come. |