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

Given is the argument that appeared in a corporate memorandum of a beverage manufacturer. The Manufacturer had reduced their prices on its energy drinks for its promotion. The argument states that the promotional strategy has proven to be successful since there has been an increase in the unit sales. Further surveys were also conducted stating that majority of the consumers favorably received the promotion. Thus the company believe that in order to improve the profitability and to enhance its perception in the eyes of consumers, similar price reductions should be offered on all drinks which are produced by the firm. Certainly, the manufacturer conclusion is based on flawed assumptions.

Firstly, Although the promotional price has resulted in dramatic increase in unit sales and surveys has approved that majority of consumers received the promotions, yet it cannot be concluded that if the company does not provide promotional price the sales would not rise. Maybe there are other reasons contributing to increased sales such as taste or quality of energy drinks. Consumers prefer energy drinks for its taste and quality, and not solely for price.

Secondly, the promotional price strategy has been successful for energy drinks but based on this assumption it cannot be concluded that same strategy would result into benefiting other drinks produced by the same firm. Clearly what is good for one doesn't always tend to be good for all. Hence it would be inconvenient to assume it.

Further, in order to promote the products by reduction in price leads to increase in the cost of the company and thereby reduces the profitability. Therefore the assumption that increase in unit sales would lead to higher revenues and generation of more profits is faulty. The company should conduct a proper cost- analysis before coming to any such conclusion.

Finally, also the survey previously conducted did not state about consumers liking or preference for the beverage. It only stated about the receivables of the promotion by majority of consumers. Another surveys like whether consumers would still want to buy the product without promotional price or whether they would like promotional price on other products as well, would help the company to understand the consumers preference much better.

Therefore it would be advisable to evaluate the above stated inconsistencies before making any such conclusion. The company should analyse various factors before taking any such decisions and not assume plainly.