What's the best way to structure a revenue growth case?

Hi!

It depends very much on the industry. In some cases (Growth strategy) I will use a broad structure, in others (e.g. “how to increase the excessive luggage revenues for an Airline”) I will use P, Q and the Process. Here is the broad structure that you can adapt to your industry:

Analyze the market:

• Size and growth rates
• Segments (geographical, customer, product)
• Distributors / Suppliers
• Regulation
• Key market trends

Analyze the competitors:

• Market shares, growth rates, profits
• Product / customer / geographical mix
• Products (Value proposition)
• Unit economics (Value proposition vs. price vs. costs)
• Key capabilities (Distribution, supply, assets, knowledge, etc)

Analyze our company:

• Market share, growth rates, profit
• Product / customer / geographical mix
• Products (Value proposition)
• Unit economics (Value proposition vs. price vs. costs)
• Key capabilities (Distribution, supply, assets, knowledge, etc)

How to increase revenues:

• How to increase the scope: Product / customer scope, geographical scope
• How to improve value proposition (How to fix your weaknesses and improve your strengths; Potential increase in price and volumes)
• How to answer the competitors (Unique or hard to build property and contracts; Customers / suppliers / complements with lock-in; Reputation and relationships; Organizational capabilities; Product features and know-how)
• Other benefits of scale (Spreading Fixed costs, Change in technology, Bragaining power)

Best!

Hi Liam,

This is the structure I would suggest for a growth strategy case:

1. Clarify goal. How much do we want to grow, in which period of time and constraints (eg specific budget). If needed, clarify business model.
2. Identify segments where to grow. To do so you can consider the following:
   1. Analyse growth and size for segment covered by client and competitors. Compare the client to competitors performance to spot potential areas where to grow further
   2. For segments that could potentially allow to meet the goal, analyse further competitors, customer segments and barriers to entry
3. Identify feasible grow strategy for the selected segments. To do so you can consider the following strategies:
   1. On current product
      1. Ways to increase price
      2. Ways to increase volume
   2. On new product (either to perform organically or inorganically)
      1. Product variety
      2. Diversification
4. Select grow strategy providing the maximum result with the minimum amount of resources required, and meeting constraints identified at step 1
5. Consider risks/next steps following grow strategy. Eg increasing the price may lead to higher decrease in volume than expected – could be better then to test on specific areas.

Hope this helps,

Francesco

Hey Liam,

There's several different ways of approaching the same case (and they can all be right!), that said, below you can find the one I often prefer:

1. Analyze the external factors/market (I do like to know what's going on in the market before even understanding what's going on with the company; as you can imagine it's different if a company wants to grow revenues by 10% in a market growing 20% vs. a market that is even declining!)

- Evolution of market (previous and future)

- Competitive landscape

- Consumer tastes and trends

- Regulation 

2. Analyze the internal factors

- revenue tree (try to avoid simply stating Price * Quantity, try to give some tailoring to the industry you're talking about; e.g., for gyms you can say the number of clients who have a monthly pass * the monthly fee.. it will positively impress your interviewer!); if company is multi-product you should take that into consideration here and open multiple revenue streams in the branches!

- sometimes I also include company capabilities as a separe point, depending on the specifics of the case and goal

Hope this can be helpful, any query on it just let me know :)

Best

Bruno

Hi Liam,

You've already received excellent responses. What I will build on is the higher level structure when approaching problem solving (i.e. after asking clarification questions and understanding the objectives).

You should start with thinking about how revenue growth is achieved: organically or inorganically (or both). Under organic growth, you can achieve that through

1. Increasing the price, as you've mentioned

2. Increasing the quantity - either by increasing your market share with existing customers or by targeting new customers

3. Launching new products/services - could be complementary produts, or entirely new ones

4. Entering new markets

Out of the box answers:

5. Increase the utilization of your existing products - the toothpaste example is great. DM me for more details.

6. Target non-customers and make them customers - increase the entire market size

You can achieve inorganic growth through:

1. An Acquisitions - of companies or products

2. A Merger

Now that you've defined the high level structure, you cover all grounds to grow revenue and will not make the mistake of forgetting any points as you go along with the case, especially when the interviewer asks you how else could you grow revenue (under each category you could expand. Ex: licensing deals, contract manufacturing, commercial agreements etc...).

After defining the high level structure, you could then figure out where to start based on the case and your clarification questions to the interviewer and begin with the points mentioned by the other experts that have responded to you (analyze market, competitors etc...).

Hope this helps.

Rakan

Agreed with above. As stated by Bruno, the correct way to think about market expansion is to think about:

-demand evolution (external)

-supply evolution (external AND internal)

-effect on price (it's a market after all)

Now, two things that should never be forgotten, even if it's a revenue growth case

-how much does it cost and does it increase profits?

-what is impact to profit margins (a lot of times you don't go for market expansions that are margin dilutive, due to impact on stock price)

ask to your interviewer if there are any objectives for the two points above or any thresholds or you can ignore for the case.

hope it helps,

andrra

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

Hello,

So my approach is as follows:

1) New business areas

1a: New Products

1b: New Customer Segments

1c: New Geographical markets

2) Existing business areas

2a: Increase price

2b: Increase volume from existing customers

2bi) Selling more frequently of the same products

2bii) Cross sell different products to existing customers

All the best!

Rushabh

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

No please do not structure it like that in MBB, 95% chance you will fail. Rather group it in buckets relevant to the case. Warm regards, Frederic