Cookie and Privacy Settings

This website uses cookies to enable essential functions like the user login and sessions. We also use cookies and third-party tools to improve your surfing experience on preplounge.com. You can choose to activate only essential cookies or all cookies. You can always change your preference in the cookie and privacy settings. This link can also be found in the footer of the site. If you need more information, please visit our privacy policy.

Data processing in the USA: By clicking on "I accept", you also consent, in accordance with article 49 paragraph 1 sentence 1 lit. GDPR, to your data being processed in the USA (by Google LLC, Facebook Inc., LinkedIn Inc., Stripe, Paypal).

Manage settings individually I accept
expert
Expert with best answer

Anton

100% Recommendation Rate

4 Meetings

1,087 Q&A Upvotes

USD 179 / Coaching

7

Revenue Frameworks

What is the best way to come up with a structure for cases such as 'A local Supermarket has seen its revenue decrease from its Fresh Fruit business over the past 12 months. They have helped you to determine hte cause of this trend'?

As it's a revenue question, I would ideally look at a structure such as the following

Revenue = Price x Volume

Volume = # of Customer x Average # of Purchases per Customers

One of my hypothesis would be that we are getting less customers into the store because we there has been a new store opened up nearby. Ideally I would another bucket to my framework, which is External Factors. But them I an unsure where I would put my hypothesis about a new store opening up, as it could go into both the # of Customers bucket or External Factors - so I'm having a hard time being MECE.

My other option is just to focus on the profit tree, and then brainstorm all possible ideas under Price and Volume, but then it just becomes a bit messy.

Any help would be much appreciated?

What is the best way to come up with a structure for cases such as 'A local Supermarket has seen its revenue decrease from its Fresh Fruit business over the past 12 months. They have helped you to determine hte cause of this trend'?

As it's a revenue question, I would ideally look at a structure such as the following

Revenue = Price x Volume

Volume = # of Customer x Average # of Purchases per Customers

One of my hypothesis would be that we are getting less customers into the store because we there has been a new store opened up nearby. Ideally I would another bucket to my framework, which is External Factors. But them I an unsure where I would put my hypothesis about a new store opening up, as it could go into both the # of Customers bucket or External Factors - so I'm having a hard time being MECE.

My other option is just to focus on the profit tree, and then brainstorm all possible ideas under Price and Volume, but then it just becomes a bit messy.

Any help would be much appreciated?

(edited)

7 answers

  • Upvotes
  • Date ascending
  • Date descending
Best Answer
Book a coaching with Anton

100% Recommendation Rate

4 Meetings

1,087 Q&A Upvotes

USD 179 / Coaching

Hi Nin,

I would suggest the following structure to the breakdown revenue.

Let’s draw the table:

  • Columns: Client Journey stage, Impact on number of clients, Impact on average bill
  • Lines (Client Journey stages): Planning to buy fruit, Being aware of your shop, Considering to visit your shop, Visiting your shop, Visiting fresh food section, Buying fresh food

The next step is to fill this table:

  • Planning to buy fruit (total number of potential customers 2nd column, average budget for buying fruit for each potential customer 3rd column)
  • Being aware of your shop (% of total number of potential customers who are aware of your shop 2nd column, average budget for buying fruit for each potential customers who are aware of your shop 3rd column)
  • Considering to visit your shop (% of total number of potential customers who want to visit your shop 2nd column, average budget for buying fruit for each potential customer who wants your shop 3rd column)
  • Visiting your shop (% of total number of potential customers who visit your shop 2nd column, average budget for buying fruit for each potential customer who visits your shop 3rd column)
  • Visiting fresh food section (% of total number of potential customers who visit fresh food section 2nd column, average budget for buying fruit for each potential customer who visits fresh food section 3rd column)
  • Buying fresh food (% of total number of potential customers who buy fresh food 2nd column, average bill for buying fruit 3rd column)

Once you identify bottlenecks (e.g. by comparing your current client journey with the one that your shop had 12 month ago) you can develop a hypothesis structure for each stage of client journey.

Note that this structure accounts for all possible reasons for a revenue decrease. For example a decreasing % of total number of potential customers who want to visit your shop could be a signal that a new competitor has entered the market. In this case you will have to identify why your client prefers this competitor). Another example: % of total number of potential customers who are aware of your shop has decreased - it could have happened because you stopped your marketing campaign).

Have a look at my post about brainstorming- it can help you to brainstorm recommendations for this case. Here is the link:

https://www.preplounge.com/en/consulting-forum/hello-how-should-i-approach-brainstorming-questions-during-mck-interviewer-led-cases-6745

Also you may find useful my post on how to evaluate an impact on revenue/market share coming from a new market entrant. Here is the link:

https://www.preplounge.com/en/consulting-forum/i-am-preparing-for-an-interview-at-mckinsey-6736

Let me know your thoughts!

Best,

Anton

Hi Nin,

I would suggest the following structure to the breakdown revenue.

Let’s draw the table:

  • Columns: Client Journey stage, Impact on number of clients, Impact on average bill
  • Lines (Client Journey stages): Planning to buy fruit, Being aware of your shop, Considering to visit your shop, Visiting your shop, Visiting fresh food section, Buying fresh food

The next step is to fill this table:

  • Planning to buy fruit (total number of potential customers 2nd column, average budget for buying fruit for each potential customer 3rd column)
  • Being aware of your shop (% of total number of potential customers who are aware of your shop 2nd column, average budget for buying fruit for each potential customers who are aware of your shop 3rd column)
  • Considering to visit your shop (% of total number of potential customers who want to visit your shop 2nd column, average budget for buying fruit for each potential customer who wants your shop 3rd column)
  • Visiting your shop (% of total number of potential customers who visit your shop 2nd column, average budget for buying fruit for each potential customer who visits your shop 3rd column)
  • Visiting fresh food section (% of total number of potential customers who visit fresh food section 2nd column, average budget for buying fruit for each potential customer who visits fresh food section 3rd column)
  • Buying fresh food (% of total number of potential customers who buy fresh food 2nd column, average bill for buying fruit 3rd column)

Once you identify bottlenecks (e.g. by comparing your current client journey with the one that your shop had 12 month ago) you can develop a hypothesis structure for each stage of client journey.

Note that this structure accounts for all possible reasons for a revenue decrease. For example a decreasing % of total number of potential customers who want to visit your shop could be a signal that a new competitor has entered the market. In this case you will have to identify why your client prefers this competitor). Another example: % of total number of potential customers who are aware of your shop has decreased - it could have happened because you stopped your marketing campaign).

Have a look at my post about brainstorming- it can help you to brainstorm recommendations for this case. Here is the link:

https://www.preplounge.com/en/consulting-forum/hello-how-should-i-approach-brainstorming-questions-during-mck-interviewer-led-cases-6745

Also you may find useful my post on how to evaluate an impact on revenue/market share coming from a new market entrant. Here is the link:

https://www.preplounge.com/en/consulting-forum/i-am-preparing-for-an-interview-at-mckinsey-6736

Let me know your thoughts!

Best,

Anton

Book a coaching with Clara

100% Recommendation Rate

50 Meetings

11,416 Q&A Upvotes

USD 229 / Coaching

Hello!

This is a usual, simple type of stucture.

As you very well say, the first node of the tree is easy:

  • Price
  • Quantity

Then is when you can really showcase your ability to deep-dive and think in an original and creative way.

  • Price:
    • Product mix
    • Changes in princing due to:
      • Tax
      • Regulation
      • Demand supply of raw materials
      • etc.
  • Volume:
    • Product mix -are we selling the sale volume overall but less from the more profitble categories?-.
    • Changes in volume due to:
      • Changes in our customer base
      • Changes in the industry overall
      • New players
      • etc

Hope it helps!

Cheers,

Clara

Hello!

This is a usual, simple type of stucture.

As you very well say, the first node of the tree is easy:

  • Price
  • Quantity

Then is when you can really showcase your ability to deep-dive and think in an original and creative way.

  • Price:
    • Product mix
    • Changes in princing due to:
      • Tax
      • Regulation
      • Demand supply of raw materials
      • etc.
  • Volume:
    • Product mix -are we selling the sale volume overall but less from the more profitble categories?-.
    • Changes in volume due to:
      • Changes in our customer base
      • Changes in the industry overall
      • New players
      • etc

Hope it helps!

Cheers,

Clara

Book a coaching with Vlad

97% Recommendation Rate

404 Meetings

11,337 Q&A Upvotes

USD 239 / Coaching

Hi,

Rule no 1 - never structure a retail case with price * qty. It's always:

Number of customers * average check

Rule no 2 - always segment the stores. Different stores may have different performance depending on location, format, new openings, etc

I would look at the following:

1) Average check

If you need you can split even further:

  • Length of the check
  • Prices and product mix in the check

2) Number of customers

  • Traffic
  • Conversion - important in fashion and consumer electronics. less relevant for grocery

Key drivers influencing check / traffic (I'm not splitting since many of them are impacting both):

1) Macro factors

  • Brand awareness
  • Format (assortment, quality of goods, prices)

2) Local

  • Location
  • Working hours
  • Parking
  • Signage, displays, etc

3) Instore experience

  • Look and feel (Cleanliness, smell, etc)
  • Additional experiences (e.g. cafe, kids room in hypermarkets)
  • Checkouts, queues to the checkouts
  • Carts, packaging, navigation, etc

4) Sales

  • Promo (Discounts, free trial, value pack, buy 2 get 1 for free, etc)
  • Sales (personal sales, upselling, cross-selling) - again less relevant for grocery
  • Loyalty programs
  • Merchandising
  • Stock availability

Best

Hi,

Rule no 1 - never structure a retail case with price * qty. It's always:

Number of customers * average check

Rule no 2 - always segment the stores. Different stores may have different performance depending on location, format, new openings, etc

I would look at the following:

1) Average check

If you need you can split even further:

  • Length of the check
  • Prices and product mix in the check

2) Number of customers

  • Traffic
  • Conversion - important in fashion and consumer electronics. less relevant for grocery

Key drivers influencing check / traffic (I'm not splitting since many of them are impacting both):

1) Macro factors

  • Brand awareness
  • Format (assortment, quality of goods, prices)

2) Local

  • Location
  • Working hours
  • Parking
  • Signage, displays, etc

3) Instore experience

  • Look and feel (Cleanliness, smell, etc)
  • Additional experiences (e.g. cafe, kids room in hypermarkets)
  • Checkouts, queues to the checkouts
  • Carts, packaging, navigation, etc

4) Sales

  • Promo (Discounts, free trial, value pack, buy 2 get 1 for free, etc)
  • Sales (personal sales, upselling, cross-selling) - again less relevant for grocery
  • Loyalty programs
  • Merchandising
  • Stock availability

Best

Book a coaching with Anrian

100% Recommendation Rate

81 Meetings

349 Q&A Upvotes

USD 149 / Coaching

Hi Nin,

I think the main problem here is Revenue. So, let's just focus on that.

Hypothesis: more stores' competitors nearby the client's presences (following yours)

Structure I:

  1. Quantity
    • How is the overall trend in the past 12 months?
    • What is the product mix?
    • How has the mix changed in the past 12 months? Specifically for the top 5 products
    • How is our goods-sold number compared to the market?
    • Where are we right now in terms of the goods sold compared to competitors/market?
  2. Price
    • Is there any change in the overall pricing in the past 12 months?
    • How is the pricing for the top 5 products change in the past 12 months?
    • How is the pricing compared to market practice?

From these 2 factors alone, then we can understand the high-level root cause from quantity or pricing or both, and a little bit of why from the 2nd layer.

You can use that, but you might need to be creative and have to come up with the next structure once you know the high-level issues (example: if pricing is the issue, then you need to ask on why there is change, is the customer price sensitive, etc).

This could be used in a candidate led interview, as it will just appear to be more conversational. You identify the high-level problem, then you go deeper only to the main issue.

Structure 2:

  1. Market
    • How is the overall fruit market condition in the past 12 months?
    • Who are their customers currently (age, income, location)?
    • Did the client have any defined segmentation?
    • Did the client change direction of segmentation in the past 12 months?
    • How is the performance of each segmentation in the past 12 months?
  2. Product Mix
    • What are their top 5 products in the past 12 months? and how much each product allocates to revenue?
    • How is the performance of those products in the past 12 months?
    • How are the products being priced? Is there any change to this?
    • What is the pricing component? Is there any change?
  3. Competitor
    • Who are the competitors? Is there any change in the past 12 months?
    • Where is our market share, and how does it change in the past 12 months?
    • Is there any new entrant? how has it performed?
  4. Operations
    • Is there any change to organization int the past 12 months
    • Did we change any personnel in the past 12 months?
    • How is the process starting from customer searches to checks out? Is there any change to that?

Now, the 2nd structure might appear to be more MECE, but putting this into a conversational kind of interview (candidate led) might sound a bit unnatural.

However, it is extremely recommended using 2nd structure in an interviewer led setup.

Hope that helps!

Hi Nin,

I think the main problem here is Revenue. So, let's just focus on that.

Hypothesis: more stores' competitors nearby the client's presences (following yours)

Structure I:

  1. Quantity
    • How is the overall trend in the past 12 months?
    • What is the product mix?
    • How has the mix changed in the past 12 months? Specifically for the top 5 products
    • How is our goods-sold number compared to the market?
    • Where are we right now in terms of the goods sold compared to competitors/market?
  2. Price
    • Is there any change in the overall pricing in the past 12 months?
    • How is the pricing for the top 5 products change in the past 12 months?
    • How is the pricing compared to market practice?

From these 2 factors alone, then we can understand the high-level root cause from quantity or pricing or both, and a little bit of why from the 2nd layer.

You can use that, but you might need to be creative and have to come up with the next structure once you know the high-level issues (example: if pricing is the issue, then you need to ask on why there is change, is the customer price sensitive, etc).

This could be used in a candidate led interview, as it will just appear to be more conversational. You identify the high-level problem, then you go deeper only to the main issue.

Structure 2:

  1. Market
    • How is the overall fruit market condition in the past 12 months?
    • Who are their customers currently (age, income, location)?
    • Did the client have any defined segmentation?
    • Did the client change direction of segmentation in the past 12 months?
    • How is the performance of each segmentation in the past 12 months?
  2. Product Mix
    • What are their top 5 products in the past 12 months? and how much each product allocates to revenue?
    • How is the performance of those products in the past 12 months?
    • How are the products being priced? Is there any change to this?
    • What is the pricing component? Is there any change?
  3. Competitor
    • Who are the competitors? Is there any change in the past 12 months?
    • Where is our market share, and how does it change in the past 12 months?
    • Is there any new entrant? how has it performed?
  4. Operations
    • Is there any change to organization int the past 12 months
    • Did we change any personnel in the past 12 months?
    • How is the process starting from customer searches to checks out? Is there any change to that?

Now, the 2nd structure might appear to be more MECE, but putting this into a conversational kind of interview (candidate led) might sound a bit unnatural.

However, it is extremely recommended using 2nd structure in an interviewer led setup.

Hope that helps!

(edited)

Book a coaching with Matteo

100% Recommendation Rate

39 Meetings

24 Q&A Upvotes

USD 219 / Coaching

In general when looking ad profit I would brek down the problem in the classif revenues-costs, and I would additionally break down those as follow, simple and mece solution:

Revenues:

- volumes

- price

- mix

Costs:

- variable

- fix

I hope this is useful, best,

Matteo

In general when looking ad profit I would brek down the problem in the classif revenues-costs, and I would additionally break down those as follow, simple and mece solution:

Revenues:

- volumes

- price

- mix

Costs:

- variable

- fix

I hope this is useful, best,

Matteo

Thanks Matteo, that is the way I am trying do it. But then would I just brainstorm different hypotheses in each bucket? Or would I create an external factors bucket? — Nin on May 07, 2020

Both ways are feasible, external factors cna influence all of them, so it can be better to include the external factor in each bucket, but that is a personal preference :) — Matteo on May 07, 2020

Book a coaching with Emily

100% Recommendation Rate

46 Meetings

2,132 Q&A Upvotes

USD 189 / Coaching

Hey there,

First, besides price and volume, you should ask about product mix and see whether there is change, i.e. are they selling more volume of cheaper fruit and less more expensive fruits, compared to before?

For competition e.g. new store opened, it doesn't have to be at the same level as # of customers in your framework. It can go under (or after) # of customers. # of customers (if indeed in this case has problem) answers the question of "what/where goes wrong". Once you identify the what, you need to switch to the "why it goes wrong" before you can further proceed to the "how to fix it". External factor answers the question of "why".

Hope it helps,

Emily

Hey there,

First, besides price and volume, you should ask about product mix and see whether there is change, i.e. are they selling more volume of cheaper fruit and less more expensive fruits, compared to before?

For competition e.g. new store opened, it doesn't have to be at the same level as # of customers in your framework. It can go under (or after) # of customers. # of customers (if indeed in this case has problem) answers the question of "what/where goes wrong". Once you identify the what, you need to switch to the "why it goes wrong" before you can further proceed to the "how to fix it". External factor answers the question of "why".

Hope it helps,

Emily

Book a coaching with Ian

100% Recommendation Rate

184 Meetings

14,942 Q&A Upvotes

USD 289 / Coaching

Related BootCamp article(s)

Focusing on The Core: Mock Interviews

It is to practice as many cases as possible - both as interviewee and as interviewee. Here are a couple of guidelines to help you get started

1 Q&A

Case Studies

The case study is the most important element of the case interview, which you'll have to nail in order to get into strategic consulting. Here you can learn the specific skills and concepts necessary to solve them.

1 Q&A

Related case(s)

MBB Final Round Case - Smart Education

Solved 15.0k times
MBB Final Round Case - Smart Education Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US. The mission of SmartBridge is to help as many students as possible to complete studies and prevent that they drop from the school system, in particular in disadvantaged areas. The client is considering starting operations for its services in the Chicago area. They hired us to understand if that makes sense. Due to the nonprofit regulation, SmartBridge should operate on its own in the market, without any partnership. How would you help our client?
4.6 5 520
| Rating: (4.6 / 5.0)

Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US. The mission of SmartBridge is to help as many students as possible to complete studies and prevent that they drop from the school system, in particular in disadvant ... Open whole case

Hot Wheels

Solved 4.7k times
Hot Wheels Problem definition: Our client is Korean Car Parts (KCP), a multi-national original equipment manufacturer (OEM) of car parts based in Korea. They've recently seen a decline in profits and have brought us in to understand how to address this falling profitability.
4.6 5 280
| Rating: (4.6 / 5.0)

Problem definition: Our client is Korean Car Parts (KCP), a multi-national original equipment manufacturer (OEM) of car parts based in Korea. They've recently seen a decline in profits and have brought us in to understand how to address this falling profitability. Open whole case

Chinese Chess - Airline Business During COVID-19

Solved 3.3k times
Chinese Chess - Airline Business During COVID-19 Sky China, a government-backed Chinese airline, has recently seen profits plummet due to COVID-19. Profits are down 80% in the months of February and March, but are showing early signs of a rebound in April.  They've brought you in to first investigate what can be done immediatedly to prevent hemorrhaging cash and surive in the short-term. They are also looking to see how the current situation can be viewed as an opportunity, and what can be done to prepare for the future. 
4.3 5 101
| Rating: (4.3 / 5.0)

Sky China, a government-backed Chinese airline, has recently seen profits plummet due to COVID-19. Profits are down 80% in the months of February and March, but are showing early signs of a rebound in April. They've brought you in to first investigate what can be done immediatedly to prevent hemor ... Open whole case

McKinsey Digital / BCG Platinion: Oil & Gas Upstream Technology

Solved 2.9k times
McKinsey Digital / BCG Platinion: Oil & Gas Upstream Technology [PLEASE NOTE: This is a technically difficult case and should only be completed by those coming in as a Technology specialist, i.e. recruiting for McKinsey Digital, BCG Platinion, etc.] Our client is a multinational oil and gas company. While they are vertically integrated and have upstream, midstream, and downstream divisions, they have recently been experiencing competitivity issues in the upstream gas division, which brings in $1B in profits annually. Our client’s upstream division has offices in Australia and Indonesia. Their work is highly dependent on their IT systems, as they have to constantly monitor wells and pipes (pressure, hydrocarbon count, fluid makeup, etc.) The upstream division has two large legacy IT systems that are primarily used for downstream operations but have been modified for upstream purposes. These systems are managed by a central team in the US which is responsible for all IT issues across the business. They triage issues/enhancements and then manage development teams in India and Finland who complete the work.
4.5 5 59
| Rating: (4.5 / 5.0)

[PLEASE NOTE: This is a technically difficult case and should only be completed by those coming in as a Technology specialist, i.e. recruiting for McKinsey Digital, BCG Platinion, etc.] Our client is a multinational oil and gas company. While they are vertically integrated and have upstream, midstr ... Open whole case

YodaPhone

Solved 2.2k times
YodaPhone Our client is Yoda's Phones, a national telecommunications company. They have embarked on a three-year, multi-million dollar digitization program. Unfortunately, two years into the program, they realize they are significantly behind schedule and over budget. You have been brought in to right the ship and ensure the digitization program is delivered as planned.
4.5 5 59
| Rating: (4.5 / 5.0)

Our client is Yoda's Phones, a national telecommunications company. They have embarked on a three-year, multi-million dollar digitization program. Unfortunately, two years into the program, they realize they are significantly behind schedule and over budget. You have been brought in to right the sh ... Open whole case