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A decision to discontinue a given product on the basis of contribution margin data should include consideration of the probable impact of the discontinuance on the sales of other products.

a)True
b)False

1 Answer

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Final answer:

A decision to discontinue a product must consider impact on sales of other products, as true. Marketing strategies like tying sales and product bundling show the interconnectedness of product sales.

Step-by-step explanation:

The statement that a decision to discontinue a given product on the basis of contribution margin data should include consideration of the probable impact of the discontinuance on the sales of other products is true. When analyzing contribution margin data, it is important to factor in the potential effects that discontinuing a product may have on complementary products, substitute products, and the overall brand. Tying sales and product bundling are marketing strategies that can create dependencies between products. For example, tying sales compel consumers to buy a product they may not want, as to obtain a desired one, they must purchase an additional, related product. In contrast, product bundling can be beneficial by offering multiple products or services at a discounted rate, which can also influence sales of included products if one is discontinued. These strategies highlight the interconnected nature of product sales in business decisions.

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