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Structure revenue growth case with multiple products

Case issue tree Revenue analysis revenues
Recent activity on Mar 06, 2018
2 Answers
2.6 k Views
Anonymous A asked on Mar 06, 2018

Hi,

I am relatively new to case studies and just worked through the tutorials and the bootcamp. I understand that when analyzing for example a decrease in revenue, I have to know what kinds of products the client offers, but what is the best way to structure the issue-tree accordingly?

Starting with revenue on top and then having "Revenue product 1" + "Revenue Product 2" + and so on, on the next "level" and then "price product 1" * "Sales volume product 1" below revenue for product 1?

Or should I start with revenue, on the enxt level of the issue-tree "Sales Volume" * "Price" and then have "Sales volume product 1" below the total sales volume and all the prices of the products below "price".

The structure in the first example seems better, but the second structure is faster in my opinion because I could just add all the sales volumes and calculate the average price to find the revenue while in the first example I have more smaller calculations.

Thanks for your advice

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Francesco
Expert
Content Creator
replied on Mar 06, 2018
#1 Coach for Sessions (4.500+) | 1.500+ 5-Star Reviews | Proven Success (➡ interviewoffers.com) | Ex BCG | 10Y+ Coaching

Hi Anonymous,

I would suggest to use the first method, but with a switch; you won’t need indeed to know price and volume for all the segments. More specifically:

  • I would start dividing in revenue streams (not necessarily by product – it could also be by customer or distribution channel)
  • I would then ask how revenues changed for each stream
  • I would start from the one that had the biggest decline in revenues. For that only, I would then move to divide in price and volume to identify the issue. In case we are not able to fix the issue, I would then move to the second-worst stream

The reason I believe this method is superior to an initial division of revenues in price * volume is that will allow to understand immediately the real reason for the problem, and for which segment. With an initial division in price*volume, that may not always be the case.

Assuming for example that the problem of the company is a decline in volume of the more expensive product A by 10 units and at the same time the cheaper product B increased by 20 units, dividing in price*volume will show an increase of volume and a decrease of the average price – thus apparently a price issue. Although you may eventually identify the issue is volume for product A, and thus not price related, this would take longer than following the previous steps.

Hope this helps,

Francesco

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Vlad
Expert
updated an answer on Mar 06, 2018
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

First of all, In the clarifying questions, I ask proactively how many products / revenue streams we have

Then:

  • If I have just two products or two revenue streams I would split the products on the revenue level (e.g. revenue from product 1, revenue from product 2)
  • If I have 2+ products I usually go with revenues, split them into price and quantity. Under price, I use a vertical numbered list of products. e.g. 1) x 2) y 3) z. Same with the quantity
  • In the last case, I will end up with a table under my structure since both price and qty (and maybe variable costs per unit as well) will have a numbered vertical list

Best

(edited)

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Justin on Mar 06, 2018

Thanks a lot, this was really helpful

Francesco gave the best answer

Francesco

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