65. 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.
Second, the author implies that the ad agency failed to implement Road Foods
guidelines, and that this failure was the reason for disappointing profits. However, it is
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