Case

New magazine

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Problem Definition

Your client is the CEO of a publishing company that publishes an educational magazine and a women's magazine.

Although both businesses are profitable, they are not growing fast enough. Thus, the CEO is thinking about starting a third monthly magazine that is targeted towards 30 to 60-year-old men in the US. He wants to know whether he can reach his first-year goal of $15 million in revenue.


Comments

Since this is a candidate-led case, the candidate should drive the case from start to finish.

This case is mostly about market sizing. The interviewee should be able to both estimate the market and work with those estimates.

While there are no right or wrong answers in market sizing cases, the interviewer usually has a range of acceptable answers.

As long as their assumptions are realistic, the interviewee’s answer should be within one order of magnitude of the acceptable answers.


Short Solution (Expand)


Detailed Solution

Paragraphs highlighted in green indicate diagrams or tables that can be shared in the “Case exhibits” section.

Paragraphs highlighted in blue can be verbally communicated to the interviewee.

Paragraphs highlighted in orange indicate hints for you how to guide the interviewee through the case.

Suggested case structure:

I. Structure

To determine whether the client should launch the new magazine, the interviewee should first outline a structure to estimate the magazine’s potential first-year revenue. At this stage, the candidate should start with an issue tree rather than estimating numbers.

Information that can be shared on the interviewee’s inquiry:

Main revenue streams:

Retail sales Advertisement Subscriptions

After the interviewee has brainstormed potential revenue streams, share the revenue estimation tree (Diagram 2).

If the interviewee’s estimates are differing considerably from the given suggestion, you should decide whether you want to use the case-suggestion or the version of the candidate.

II. Estimate

After laying out a structure, the interviewee should consistently follow it. To calculate revenue, the interviewee should begin with the end-nodes (the nodes at the bottom of the tree) and estimate values to calculate the nodes’ values from the bottom to the top of the tree.

Since we need the total number of units sold to calculate the first two branches (retail and subscription sales) let’s start by branch number 3 (advertisement).

If they ask for the following information, have them estimate first. If their estimates are very different from the following numbers, you must decide whether to follow their estimates or to ask them to use the following numbers.

Information that is given: Percentage of men between 30 - 60 who buy magazines: 10% US population: 300 million

Share Table 1 and Diagram 3/4/5 containing background information for the calculation, if the interviewee inquires it.

But ONLY share Diagram 3 if the interviewee has problems calculating the size of the target market.

III. Calculation

(3) Advertisement revenue

(2) Retail sales revenue

(1) Subscription revenue

Total annual revenue

4

The revenue in the first year is then estimated to be ≈$17 million.

IV. Conclusion

Based on the estimated first-year revenue alone, the CEO of the publishing company should launch the new magazine.

The estimated potential first-year revenue is 16% higher than the CEO’s targeted first-year revenue ($15 million).

However, before giving a firm recommendation, the following factors should be investigated.

  • To verify whether 5% market share is a realistic first-year estimate, we should better study the competitive landscape.
  • To verify whether 10% of men between 30 and 60 years old really buy magazines, we should further investigate our target demographic.
  • Does the publishing company have competencies in this new market?
    1. Do we need to hire new writers for this magazine?
      1. We need writers who specialize in this target market
      2. We need more writers because of a higher workload
    2. Can we synergize with our current existing magazines?
      1. Selling advertisement across different magazines
      2. Featuring magazines across each other (advertising)
      3. Reporters working on different magazines
      4. Easier research for reporters due to bigger network

Difficult Questions

1. What risks do you think are related to the launching of this new magazine? How would you avoid them?

Possible answers:

Risks

  • Under-/Overestimation of viable market
  • Under-/overestimation of synergies
  • Failing of marketing at start

Counteractions

  • More detailed analysis of market before start
  • Sophisticated research on possible synergies
  • Hiring of marketing experts

2. How would you do the marketing of the magazine launch?

Possible answers:

  • Advertise the new magazine’s launch in the client’s two current magazines
  • Establish partnerships with well-known blogs that serve the target market
  • Run TV commercials during shows that the target group watches

Provide discounts when launching the magazine

3. How would you choose the topics this magazine should cover?

Possible answers:

  • Conduct market research on common topics that are important to the target group
  • Conduct surveys to determine the target group’s interests
  • Analyze current societal trends
  • Analyze the current target market to identify which magazines are popular

Additional questions

If the interviewee solves the case very quickly, you can come up with additional challenging questions to ask them

Questions on this case
Why advertising revenue only calculates men from 30-60?
Marco-Alexander
Expert
gave the best answer on Oct 27, 2019 - 1 answer
Former BCG | Case author for efellows book | Experience in 6 consultancies (Stern Stewart, Capgemini, KPMG, VW Con., Horvath, zeb)
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Hi Anonym, as I understand the description, the company has different magazines for different interest groups. In this particular case, the scope is simply on the one magazine that focuses men i... (more)

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Case exhibits



The total revenue is the sum of the revenues from

  • Retail sales (1)
  • Subscription sales (2)
  • Advertisement sales (3)



37.5% (=30/80) of the population is between 30 and 60 years old. (Assumption: Uniform age distribution and a lifespan of 80 years)