|
64. 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... etc. In this memorandum, the vice president of Road Food suggests that the company motivate its advertising agency to perform better by basing the agencys pay on the Road Foods profits. In support of this suggestion, the vice president points out that although Road Food initially thought the ad agency was following company recommendations, competitor, Street Eats earned higher profits last year. The vice president also notes that Street Eats has fewer restaurants than Road Food, and that Road Food spent nearly as much money on advertising as Street Eats did. This argument is unconvincing, since it relies on dubious assumptions and comparisons. First, the vice president assumes that the ad campaign caused the low profits. However, the vice president ignores many other factors that contribute to profitability. In particular, the fact that Road Food has been spending less advertising money per restaurant than Street Eats suggests that its unwillingness to spend more may be the main reason for disappointing profits. | 
