Understanding cause of conversion rate difference between competitors

Rootcauseanalysis
New answer on Mar 09, 2020
5 Answers
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Anonymous A asked on Mar 07, 2020

Today I did a case about telecom, and I have a piece of information: our client's conversion rate (% of cell phone purchaser who also bought a phone insurance plan) is 15%, while other competitor's conversion rate is 40%. I'm not sure whether it's okay to ask what is the competitor doing differently compared to the client. Should I try to "explore" different possibilities? Which option mentioned below would be recommended?

(1) Laying down internal (company/product) and external (client/competition) factors, and ask several questions in each bucket.

(2) What are the price difference and content difference of the insurance plan?

(3) Directly ask - do we know what is the competitor doing differently from us; what are their best practice?

Thanks!

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Anonymous updated the answer on Mar 08, 2020

Hi there,

It is clearly important to understand why there is such a big difference in coversion rate. And you should surely ask about it.

You can start by saying "I notice there is a huge gap btw the client's and the competitor's conversion rate, and I want to understand what is the competitor doing differently from us". But don't just stop there and expect the interviewer to give you the answer. You should go on to lay out a structure of where you want to look into and what you want to probe. For example you can then continue to lay out your structure by saying "To undertand that, I want to look into a few areas, e.g. Product, Pricing, Sales process etc. Is the competitor's product any different from ours, and if so, how?...Is the pricing set differently, and if so what's the difference?....Is the sales procoess done differently e.g. our client requires extra steps for a potential customer to convert?..."

By probing and asking the right questions at the enough depth, you will see the differences and see what is the best practice and how far the client is from the best practice. But you need to probe and drive the conversation, not just asking one direct question and then waiting for the interviewer to give you the answer.

Hope it helps.

Best,

Emily

(edited)

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Clara
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replied on Mar 09, 2020
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

That indeed is an interesting case, and representative.

Think it this way: what you are trying to solve here is why the competitor is achieving this great cross-sell and we are not. Hence, in real life, the 1st thing you would do is ask them, just in case they have conducted a deep-dive and have the answers off-the-shelf.

How does this translate into the to-do´s in a consulting interview? You need to indeed make the question, but in a smart way. Hence, you could say something like: "I will tackle this in my issue tree, ie, why are our competitors cross-selling better than us. However, before getting into that, has the client any info off-the-shelf that they could tell us a priori? Or shall I lay out the whole framework from the very beggining, since there is no relevant info to be shared?"

Hope it helps!

Cheers,

Clara

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Robert
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replied on Mar 08, 2020
McKinsey offers w/o final round interviews - 100% risk-free - 10+ years MBB coaching experience - Multiple book author

Hi Anonymous,

Great question and oftenly approached wrong by many candidates, so good you ask about it!

Before assuming you don't get the direct answer about differences between your client and competitors anyway, ask for it in an intelligent way something along the lines like "Does our client already have information why the conversion rate is lower compared to competition, or do you want me to analyze that further?".

Why does that make sense? Think about a real-life client situation - it would be a big tragedy if you try to find out more about the low conversion rate, spend a lot of time and (client) money on that, if an internal task force at the client did this already during the last 3 month and has the answers readily available in a nice presentation!

From a tactical perspective though, more often than not you will need to find out yourself - but it depends where your interviewer wants to take the case and where he really wants to focus on. So you don't know, that's why it's better to ask.

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

Robert

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Luca
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replied on Mar 08, 2020
BCG |NASA | SDA Bocconi & Cattolica partner | GMAT expert 780/800 score | 200+ students coached

Hello,

In this case it's crucial to understand what our competitors are doing differently from us.
Anyway, don't leave it as an open point but try to do specific deep dive. Take 30 seconds and think about how you can structure the process. You should ask:

  • Who is buying: Is the customers of our competitor similar to ours? Maybe they could focus on a different high-level segment that are more willing to pay an insurance
  • What is offered: Is the insurance plan of our client comparable to the one of competitor's?
  • Price: What is the price of our and competitor's insurance?
  • How is sold: What are the distribution channels used? Are they offering insurance in special package with the phone?

Hope it helps,
Luca

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Antonello
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replied on Mar 07, 2020
McKinsey | MBA professor for consulting interviews

The goal is to understand what they are doing differently from us. However, I suggest to be more proactive in posing the question to the interviewer, by trying to propose some solutions as brainstorming (e.g. price, ease in selecting and acquiring the best plan, brand, ...)

Best,
Antonello

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