Structure of ATK website case

Recent activity on May 21, 2018
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Anonymous A asked on May 21, 2018

Hi Experts ,

I found this case on ATK website . They havent given the structure if the case as such . Can anyone help me out for the same ?

Our client is a national grocery and drug store chain, which has been steadily losing market share to its competitors. Our client utilizes a high-low pricing strategy, in which regular prices are typically slightly higher than those of an everyday low-price retailer. However, periodically high-low retailers drop prices significantly. During the time period in which a product’s price is decreased, the product is also promoted through print and in-store advertising. Our client expects a significant lift in sales during the periods in which a product is promoted. However, benchmarks against industry averages indicate that our client does not experience as large of a lift in sales as its competitors do during promotions. What would be your approach to increase sales lift when an item is promoted?

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replied on May 21, 2018
McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 350+ candidates secure MBB offers

Hi Anonymous,

I always recommend to use a logic tree for structures. Candidates are very rarely able to do it (given how cases are tought in the usual guide books), but it is by far the best way to visualize a crystal clear logic and to avoid "getting lost" in between.

So I would first clarify what exactly is meant with "Sales" here. Is it (a) Sold units (quantity) or is it (b) Revenue?

If it is (b) Revenue, then an uplift means that during a promotion the quantity effect (+x%) is overcompensating the price effect (-y%). So in my logic tree, I would just decompose revenue into its sub-components: quantity and price. The reason for a lower uplift than competitors is either a stronger price drop or a weaker quantity junkp. The former can probably be excluded, given the basic information given in the case description. So it must be about the QUANTITY.

Hence, the core question to answer is:

"What drives the additional quantity sold during promotions, and how can we maximize it?"

From here on, you can explore the ususal "Business situation" dimensions (drivers) that influence the quantity (customer segments, preferences etc. / our product features / our brand perception / consumption patterns / etc....). Since we know that there is a difference to our competitors, compare each dimension and distill where the deviation stems from.

Cheers, Sidi

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McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 350+ candidates secure MBB offers
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