The following appeared in a memorandum from the vice president of Road Food, an international chain of fast-food restaurants: “This past year, we spent almost as much on advertising as did our main competitor, Street Eats, which has fewer restaurants than we do. Although it appeared at first that our advertising agency had created a campaign along the lines we suggested, in fact our total profits were lower than those of Street Eats. In order to motivate our advertising agency to perform better, we should start basing the amount that we pay it on how much total profit we make each year.”

The following appeared in a memorandum from the vice president of Road Food, an international chain of fast-food restaurants:

“This past year, we spent almost as much on advertising as did our main competitor, Street Eats, which has fewer restaurants than we do. Although it appeared at first that our advertising agency had created a campaign along the lines we suggested, in fact our total profits were lower than those of Street Eats. In order to motivate our advertising agency to perform better, we should start basing the amount that we pay it on how much total profit we make each year.”

Discuss how well reasoned you find this argument. In your discussion be sure to analyze the line of reasoning and the use of evidence in the argument. For example, you may need to consider what questionable assumptions underlie the thinking and what alternative explanations or counterexamples might weaken the conclusion. You can also discuss what sort of evidence would strengthen or refute the argument, what changes in the argument would make it more logically sound, and what, if anything, would help you better evaluate its conclusion.

The vice president of Road Food suggests that they should base the compensation of their advertising firm on the total amount of money the company makes each year. He claims that Street Eats has fewer restaurants than Road Food, yet they have spent more money on advertising. This allegation of advertising ineffectiveness is weakened by the fact that Street Eats only advertises, while Road Food operates multiple restaurants. Thus, even if Street Eats outspent Road Food, they may not have generated more customers. In addition, Road Food is a relatively small company, and a single campaign might bear little financial impact, whereas Street Eats operates thousands of restaurants worldwide. Therefore, the vice president of Road Food’s suggestion is flawed, and they should not base their compensation for advertising on that of Street Eats

By basing the compensation of their advertising firm on the amount of money the company makes each year, the vice president of Road Food is assuming a simplistic view of the relationship between advertising and sales. Advertising is a factor, but not the only one. Advertising is an investment that boosts sales by increasing awareness of the company’s products and services. If the vice president of Road Food wants a return on investment, he should consider other advertising methods. For instance, Street Eats might pay to have its name prominently displayed next to those of other restaurants, thus establishing it as a brand. This tactic might spark additional interest in their company and attract new customers, even if the advertising itself is ineffective. Advertising is most effective when it is consistent. Therefore, the advertising firm hired by Road Food should devise a campaign that reaches as many people as possible. In addition, the advertising firm should not attempt to advertise on every channel available. Instead, it should identify the most profitable channels. For example, the company might invest in television advertisements, which cost a significant amount of money, but bring in more customers than other channels, such as radio or social media. If the vice president sets a quota for the number of customers that each channel must attract, the advertising firm will be able to focus its efforts on the avenue that will yield the greatest return

The vice president of Road Food has neglected to consider other avenues for motivating their advertising firm. If the company wants more sales, the advertising firm should develop a strategy that focuses on increasing sales. For example, the advertising firm might introduce a rewards program that rewards customers for frequenting the restaurant. Or it might promote the restaurant on social media and target customers who live nearby. The advertising firm should also consider the competition. If Street Eats has lower prices, or advertises heavily on television, the advertising firm should find a way to counter Street Eats’ advantage. For example, Road Food might offer coupons that increase the perceived value of its products and services, or advertise on channels where Street Eats does not advertise

These strategies will not necessarily compensate for the advertising firm’s failure to generate more customers, but they will help generate additional revenue. The advertising firm must evaluate the effectiveness of each campaign, and make adjustments as necessary. If the advertising firm fails to generate sales, the vice president of Road Food might consider replacing it. The advertising firm has an important job, and it deserves to receive an appropriate compensation. The vice president of Road Food should base the compensation on the firm’s effectiveness, not on the amount of money the company makes.