A question on "sales"

growth strategy profitability
Recent activity on May 06, 2020
5 Answers
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Anonymous A asked on Mar 10, 2020

When it's a case related to decline in "sales", is it assumed it's decline in "revenue"? Or should I clarify that with the interviewer if they are referring to revenue or volume?

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Anonymous replied on May 06, 2020

Hi there,

It is always better to clarify. Although sometimes sales and revenue is used interchangeably, you really need to understand the business model to see whether they are equal or not. For a business that is commission based, these could be two different things.

For example, for an online grocery business like InstaCart, the way the company makes money is by taking a commission out of every transaction consumer makes. If a consumer makes an order on InstaCart of USD100, this USD100 would be sales (or GMV in eCommerce term). But the revenue for InstaCart would be USD 5, if the commission rate is 5%.

Makes sense?

Emily

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Robert
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replied on Mar 10, 2020
McKinsey offers w/o final round interviews - 100% risk-free - 10+ years MBB coaching experience - Multiple book author

Hi Anonymous,

Most likely "decline in sales" was used synonymously with "decline in revenue" - but never assume anything in a case interview implicitly. Just ask that straight forward and clarify with your interviewer.

Same is in a real-life client interaction - if you are not perfectly sure what your client refers to, you will just ask > the same should be true for case interviews as well!

Hope that helps - if so, please give it a thumbs-up with the green upvote button below!

Robert

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Adam
Expert
replied on Mar 10, 2020
Ex Bain/ A.T. Kearney: Principal with >10 years global consulting and recruiting experience and >150 interviews

A decline in sales is ambiguous. Its not clear whether they mean the quantity of sales (i.e. volume) or revenue?

If they mean volume then you would want to dig into the drivers of why demand (volume) has fallen? Some reasons could be an increase in price, a new competitor taking share or perhaps changing customer preferences over time.

If the decline is revenue then you need to dig further to understand whether its volume or price. A fall in price could perhaps (amongst other reasons) be due to greater discounting (which you would hope would drive higher volumes unless its a response to competitor action) or it could be a change in mix towards lower priced products, which in turn could be due to multiple factors, including competitor action or changing consumer preferences.

In summary, never assume what the interviewer means, always clarify if you are not sure otherwise you run the risk of going down the wrong path.

Hope this is helpful!

Kind Regards,


Adam

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Luca
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replied on Mar 11, 2020
BCG |NASA | SDA Bocconi & Cattolica partner | GMAT expert 780/800 score | 200+ students coached

Hello,

The first and the most important rule to start the case is to clarify all the definitions and the objectives. Talking about "Sales" is really ambigous, and you have to ask if it's referred to volumes or revenues. Don't be afraid to ask questions to your interviewer, he's an important source of information.

Best,
Luca

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Clara
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replied on Mar 10, 2020
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

Precisely this kind of "vague" promp is the one that 100% needs further clarifying.

Decline in sales could be in number of units sold, in total revenues obtained, or both. It completly changes and the 1st thing to be done is to understand in which scenario we are.

For instance, if it´s a decrease of units but revenue stays the same, we could have experimented a pricing change, which can mean a change in stregy towards pricier segments (changes in marketing, go-to-market, packaging, etc.) Same way, if for instance you are selling the same number of units but you are getting less revenues, it could be a pricing change or a change in the product. mix.

Hope it helps!

Cheers,

Clara

Hope it helps!

Cheers,

Clara

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