Question:medium

Read the following situation and choose the best possible alternative.

The city of Nagar has a population of 10 million: 2 million are rich, 3 million are poor and 5 million belong to the middle class. Saundarya Cosmetics makes and sells beauty products to the rich class at a premium price, and its products are very popular with these customers. Many people from the middle and poor segments want to buy these products but cannot afford them because of the high prices. Lately, sales growth in the rich segment has been slowing down. Which of the following is the best option for Saundarya Cosmetics to increase its profits over the long term?

Show Hint

Think about why a premium brand cannot simply lower its price or reuse the same brand name for cheaper customer segments without hurting its existing business.
Updated On: Jul 10, 2026
  • Sell the same products at lower prices to the middle and poor classes as well.
  • Sell its products under different brand names to the middle and poor classes, keeping the price the same.
  • Sell similar products, but of different quality levels and under different brand names, to the middle class and the poor class separately.
  • Keep targeting only the rich class and hope that today's middle class becomes tomorrow's rich class.
Show Solution

The Correct Option is C

Solution and Explanation

Look at this as a market-sizing and brand-protection problem rather than a straight profit calculation. Nagar has 10 million people: 2 million rich, 5 million middle class and 3 million poor. The rich segment is already close to saturated, since its growth has slowed, so the real opportunity for more profit sits in the 8 million people in the middle and poor classes who currently cannot afford the brand.

  1. Same product, lower price for everyone: this reaches the 8 million new customers but wrecks the pricing that the 2 million rich customers are used to, since a product cannot stay premium and become cheap under the same name at the same time.
  2. Same product, same price, new brand name: changing the name alone does not fix the affordability problem, so the 8 million new customers still cannot buy it, and no real new sales get added.
  3. Keep serving only the rich segment: this ignores 8 out of 10 million potential customers entirely, and it bets the company's growth on a segment that is already slowing down, which is exactly the problem the question describes.

The option that actually works with the numbers is to keep the premium brand exactly as it is for the 2 million rich customers, and build separate, lower-quality product lines under new brand names for the middle class and for the poor class. That way the company adds up to 8 million potential new customers at prices they can pay, without touching the pricing or image of its existing premium line.

Let's summarize:

  • The rich segment, 2 million people, is close to fully tapped, so new profit has to come from the other 8 million.
  • Changing price or name alone for the same product either breaks the premium image or does not fix affordability.
  • Separate quality tiers under separate brand names let the company serve all three segments at once.

So the best option is to sell similar products of different quality, under different brand names, to the middle and poor classes, which is option 3.

Was this answer helpful?
0

Top Questions on Analytical Decision Making

Questions Asked in XAT exam

Read the scenario and answer the question:
The upper hinge of a dataset is the median of all the values to the right of the median of the dataset in an ascending arrangement, while the lower hinge of the dataset is the median of all the values to the left of the median of the dataset in the same arrangement.
For example, consider the dataset 4, 3, 2, 6, 4, 2, 7. When arranged in the ascending order, it becomes 2, 2, 3, 4, 4, 6, 7. The median is 4 (the bold value), and hence the upper hinge is the median of 4, 6, 7, i.e., 6. Similarly, the lower hinge is 2. 
A student has surveyed thirteen of her teachers, and recorded their work experience (in integer years). Two of the values recorded by the student got smudged, and she cannot recall those values. All she remembers is that those two values were unequal, so let us write them as A and B, where A < B. The remaining eleven values, as recorded, are: 5, 6, 7, 8, 12, 16, 19, 21, 21, 27, 29. Moreover, the student also remembers the following summary measures, calculated based on all the thirteen values: 
Minimum: 2
Lower Hinge: 6.5 
Median: 12 
Upper Hinge: 21 
Maximum: 29
View Solution
Read the following scenario and answer the questions that follow.
A T20 cricket match consists of two teams playing twenty overs each, numbered 1 to 20. The runs scored in any over is a non-negative integer. The run rate at the end of any over is the average runs scored up to and including that over, i.e., the run rate at the end of the kth over is the average number of runs scored in overs numbered \(1, 2, …, k,\) where \(1 \leq k \leq 20, k\) a positive integer.
The following table indicates the run rate of a team at the end of some of the overs during a T20 cricket match (correct up to 2 decimal places), where \(1 \leq N – 2 < N + 6 \leq 20\), N a positive integer. It is also known that the team did not score less than 6 runs and more than 15 runs in any over.
Over NumberRun Rate
N-28.00
N7.43
N+28.11
N+48.45
N+68.08
View Solution