Revenue structuring

case structure Case structure and frameworks MECE
Recent activity on Nov 15, 2018
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Anonymous A asked on Nov 15, 2018

Hey guys!

I have a question about revenue structuring. Let’s assume we have a case where we should focus on a company which only has one product generating revenue. Let’s say it’s a company selling railway tickets. Usually I structure that kind revenue by splitting it into price and quantity (for tickets that would be passengers * average revenue per passenger). Though I find that split pretty basic and not MECE sometimes.

For example, if we introduce a new product modification to target a customer which is not our client yet (let’s say we introduce a discount for students or make group tickets) it decreases the average revenue per passenger and increases the number of passengers. Or let’s say we just want to change the price - it’ll affect both price and quantity which is not MECE again

I know the 2x2 matrix with current/new product current/new customers though I rarely use it in cases as it’s not convinient. Is there a frameworks which is a mix of those two?

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Vlad
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updated an answer on Nov 15, 2018
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

Not sure if I understand your problem. Who said that one part of the tree can not influence the other? Ideally, your decrease in revenues due to prices should be offset by higher demand. But not necessarily (e.g. Uber that wants to grow the rides metric)

Also, you can have a third branch of your analysis - product mix. But again, I don't see any problem with price / demand correlation.

Best

(edited)

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Vlad

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