Grocery Wholesaler

Hi,

The general framework for pricing is: Cost base - Value based - Competitor based - pricing strategy

1. Cost based - you actually check what are the costs and apply standard industry / target markup

2. Value based pricing can be done in 2 ways:

• For existing products you compare the value proposition and features of your product vs. the VP of your competitors. If you have a significant difference in value prop - you have to define how much value you propose to the customer in $ terms.
• For new products you have to calculate the value of the closest alternatives and think how much additional value we provide by replacing them. Think of the discount airlines compared to trains or buses

3. Competitor based pricing - basically it's benchmarking against competitors. Make sure you take into account the segment (i.e. in premium higher price may be the proxy for quality)

4. Pricing strategy - here you define how you will price the product taking into account 1,2,3 and your company strategy. Maybe you decide to have a zero margin if you can crossell other services. Or maybe you would like to subsidize to win the competition. Also think of price differentiation and having different pricing tiers (e.g. basic, premium or even fremium) and how it helps to drive price perception and fulfill strategic goals

Good luck!

Hi,

1) You proactively ask in the beginning, even before drawing the structure (something like "What kind of products / revenue sources do we have) and then split the structure into price, qty, product mix. Distribution and customers I usually check within qty part

2) Not sure if I understand the question. Your company does not necessarily replicate industry trend, so you have to look at it separately

Hi Kay,

this is indeed one of the fundamental things that you need to learn in order to rigorously disaggregate the value drivers of a business. The driver tree allows you to identify the numerical drivers and sub-drivers of profits. The qualitative elements (such as consumer demand, market structure, company operations, etc.) then have to be mapped to the sub-branches of the tree!

Hence, your analysis has two steps. Imagine you want to run a diagnostic on why profits have fallen. First you need to identify the numerical driver of the problem (e.g., customer base is shrinking). This gives you an understanding of the WHAT. The second step is the understanding of the WHY! To do this, you have to examine the qualitative elements that link to the "number of customers"-sub-branch in your driver tree (e.g., competitive situation, market entries, new substitutes, relative price point, customer preferences, product/service properties vs. competition, etc.)

You can think of these qualitative elements as the typical business situation framework elements (see V. Cheng et al.) - but here, they are not hanging in the air, but they are embedded in a rigorous thinking frame which emerges from the disaggregation of value drivers and linking it to qualitative reasons.

Cheers, Sidi

Hi,

I would start with either market sizing or with profitability cases since they are much easier:

1) In market sizing cases I would try to understand the basic approach:

• How to structure market sizing case
• Key tools (Assumptions, Households, using personal experience, adjustments, age groups, Income split via 80/20, peak / off-peak calculations, replacement rate, using size of the area to calculate markets, calculating adjacent markets, sanity checks, etc).
• How to do math in the case interview

2) In Profitability cases, I would learn

• How to ask clarifying questions
• How to structure profitability cases
• How to work with data (Comparing with competitors, segmentation, historical data)
• How to answer the questions on creativity
• How to provide recommendations

3) Then I will switch to Market context cases (Market Entry, New product, Acquisition, etc). In addition, I would learn how:

• Structure market context questions
• How to analyze graphs and tables

4) After that I would look at other case types: Operational math problem (e.g. Should we increase the speed of an elevator or just buy a second one? How should we reduce the queues? Etc.), Cost Cutting, Valuation, Private equity due diligence, Synergies, etc.

Also, I would try to focus on the most common industries in the following priority(sorted by probability of getting a case): 1-retail and CPG; 2-airlines; 3-Telecom; 4-banking; 5-natural resources; 6-tech

Best!

Hi Moji,

it seems your issue is not the math computation, but rather how to structure the math part once you receive a question (that is, the logic behind that you should apply). This means you should not work on your computation skills only, as this is not the reason for the problem. Based on my experience, there might be two reasons for struggling on the math approach, besides lack of computation skills:

1. You cannot structure the approach due to excessive pressure. Some people can easily find the solution of a math problem when doing that quietly on their own, but are unable to do so once they receive time pressure (eg You have 5 seconds to give me the solution of this – what is 83% of 83?). In this case, I would suggest to cover the problem doing math exercises with a timer, so that you can test yourself with a specific time deadline.
2. You lack business knowledge of what is the right way to perform math. For example, you don’t know what’s the formula for discount cash flow, price elasticity, etc. In this case, I would suggest to solve the problem reading a good amount of cases, which involves math. You can identify them taking some of the several consulting MBA handbooks online, skim them and stop and read the case when you see some math present. You can then review online the topic you found for further reference. This should give you quickly and for free the right knowledge you need for cases.

Hope this helps,

Francesco