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Extensive research has shown
    that the effects of short-term price
    promotions on sales are themselves
Line    short-term.  Companies’ hopes that
 (5)    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
(10)    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
(15)    their customary brands is temporar-
ily available at a reduced price.  A
price promotion does not increase
the number of long-term customers
of a brand, as it attracts virtually
(20)    no new customers in the first place.
    Nor do price promotions have linger-
    ing aftereffects for a brand, even
negative ones such as damage to
a brand’s reputation or erosion of
(25)    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
(30)    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
(35) reducing excess inventory, it is the
recognizable increase in sales that
is their main attraction to manage-
ment, which is therefore reluctant
to abandon this strategy despite
its effect on the bottom line.




Q5:

The passage suggests that evidence for price promotions’ “effect on the bottom line” (line 40) is provided by

A. the lack of lingering aftereffects from price promotions
B. the frequency with which price promotions occur
C. price promotions’ inability to attract new customers
D. price promotions’ recognizable effect on sales
E. the legitimate uses to which management can put price promotions

togmatefl

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