Re: Last August the XT chain of gasoline stations had a temporary sales pr
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30 Jun 2022, 10:57
In the promotion, any customer who made a purchase of ten or more gallons of gasoline was entitled to a free car wash.
For the month of August, XT experienced a ten percent increase in gasoline sales as compared to sales in August the previous year,
Conclusion: the promotion was successful as a means of boosting sales.
Here was the first thing that came to my mind: They are comparing sales in aug this time vs sales in aug last year. That's too much of a time gap. What if this year, the revenue has anyway gone up?
Note that the conclusion is based on "increase in total sales". There is no distinction between transactions of less than 10 gallons and more than 10 gallons.
What would help us evaluate this conclusion?
The only relevant options are (A) and (C) so let's look at them.
(A) In the areas in which XT’s gasoline stations operate, how did total combined gasoline sales for all gasoline stations last August compare with sales for the previous August?
This questions whether the overall gasoline revenue has seen arise this time.
- Say combined gasoline sales for all stations this time is 10% more than the previous August. Then most gasoline stations would have seen this 10% rise in August sales. Hence the promotion would have had no impact.
- Say combined gasoline sales for all stations this time is no more than the previous August. Then we can say with more certainty that the promotion has had impact.
Hence how we answer this question affects our conclusion.
(C) Were there any customers who bought ten or more gallons at an XT gasoline station during the promotion who would have or more gallons at an XT gasoline in lower quantities, but more frequently, if the promotion had not been in effect?
Here is the reason this is not helpful to evaluate. The station is trying to increase its overall revenue - whether it is through 10 gallons sales or fewer gallons sale is immaterial. The overall sales has increased.
When we compare customers who bought 10 or more gallons fewer times compared to earlier when they bought the SAME amount of fuel but by visiting more frequently, it doesn't impact the station. These people are today also buying the same amount of fuel that they were buying a year ago. Whether they did it in small amounts or one big, it doesn't impact the success of the promotion at all. What impacts is whether there are people who were not buying at this station or were buying less total amount in the month before but are now buying higher amount. That is what we need to evaluate. That is what will define the success of the promotion.
Answer (A)