Revenue loss from Kingsville - struggling to understand calculation

Question

In this case, we are told a new competitor has entered the Kingsville Casino scene and will poach our client's customers. We are told that 400M is spent by gamblers with a conversion of 100% to Kingsville. We are also told that 25% of our revenues come from Kingsville.

I can understand that 400M x 100% means that gamblers spend the entire 400M of the allocated revenues just in Kingsville. However, the solution states that this figure needs to be multiplied by 25% to give the total potential revenue loss at 100M.

Similarly, we are told that the total revenue loss by "experiencers" is 100M x 25% (revenue from Kingsville) x 50% (conversion of customers to Kingsville).

I don't understand the multiplication of 25% in the remaining calculations in this case as it doesn't make sense to me in the context of what we are measuring in terms of revenue loss. We know the conversion rates of the customers to Kingsville, so why isn't that the desired answer in and of itself?

Many thanks!

Answer 1

Hi there!

The case is indeed somewhat convoluted, but basically you need to multiply bt 25% because that's the share that actually comes from Kingsville, which is the only share that is relevant for the question.

Best,
Cristian

Answer 2

Hi there,

Please help us help you: The more you can provide screenshots of exactly where you're grabbing #s etc. the better we can help you!

From what I can see here, the 25% in your referenced calculation is from the poker inc customer segmentation exhibit

As in, we get $100M in revenues from experiencers, and 25% of all our revenue comes from Kingsville. So, $25M of our experiencers revenue is from kingsville….of which 50% will be converted.

Hope this helps!