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Real-world

Want to walk through a real world example of a case you might see during our interview process?

Background and set-up

• You are the owner of the nearest “Sammy’s Sandwich Shop” franchise here in McLean
• It’s late 2007, and SSS is looking for a new marketing campaign.
• You as the franchise owner have been approached by the national office who wants to introduce a new marketing campaign – “$5 for a 12 inch sandwich”
• You need to decide whether or not you’d like to participate in the campaign

Tips & Tricks: Starting off on the right foot

• Make sure you understand the scenario, and what you’re being asked to solve for.
• Don’t be afraid to ask clarifying questions
• Oftentimes, it helps to repeat back what you’re solving for to the interviewer, to make sure you’re on the same page.
• Ask for time to gather your thoughts prior to structuring and delivering your response - your interviewer will be happy to give you a minute

Question 1:

Q1 : What are some factors we should consider that would inform your decision?

Candidates should present a framework for analyzing the problem. Here is a sample response:

Revenues

• Current price per sandwich sold & how much of each type of sandwich is sold
• Projected increase in number of sandwiches sold

Expenses

• Fixed Costs of owning a sandwich shop (e.g., labor, rent, utilities, equipment)
• Variable Costs of making sandwiches (e.g., ingredients for each sandwich type, shipping charges)

Promotion considerations

• Conditions of promotion (e.g., length of promotion, types of sandwiches it applies to)
• Incremental marketing expense (e.g., new signage, portion covered by national office)
• Long term impacts (e.g., past campaign performance on revenue or customer behavior)

External considerations

• Brand (e.g., current brand around pricing and quality, risks to brand)
• Competitors (e.g., number and type of competitors, their brand & pricing, their previous promotions)
• Customers (e.g., demographic, price sensitivity, opportunity to grow base)

TIPS: Factors should be provided in buckets to create a Mutually Exclusive & Collectively Exhaustive (MECE) framework. This means that none of your categories overlap, but together they are a full set of potential factors. Case prep material can help you understand different MECE frameworks, but your answer should be specific and customized to the problem

Question 2:

Question 2: Our next step is to understand the economics of the business. What is the average profit per sandwich today?

Background info:

You only sell Turkey and Roast Beef Sandwiches

• Turkey sandwiches sell for $6
• Roast beef $7.50

Sandwiches can come on white or honey wheat bread

• 20% of sandwiches sold are turkey white
• 40% are turkey HW, 20% are roast beef white
• 20% are RB HW.

Costs are as follows

• White bread - $3
• Honey Wheat Bread - $2
• Turkey - $1
• RB - $3

Question 2: Our next step is to understand the economics of the business. What is the average profit per sandwich today?

Solution:

TIP: When walking through a math problem, it is helpful to first set up the problem and verbally explain your approach to your interviewer. Then proceed with doing the calculations. It helps your interviewer understand your approach and allows you to double check that your approach is correct

Question 3:

Q3 : What is the average profit per sandwich if we do the $5 promo? How many more sandwiches do we need to sell to make equal profit (breakeven to today)?

Solution

Question 4:

Q4 : What else should you consider before launching the promo?

There is no one right answer. Candidates should list out a few potential considerations and explain them.

• New customers created & value of a new customer (Will the increase come from new customers or existing customers coming more often? Can we lose money on the promotion & make it back in the long term if behaviors change?)
• Change in sandwich mix (Will customers switch to lower margin sandwiches with a flat fee? Will they switch to higher margin sandwiches that will sustain after the promotion is over?)
• Ability to adjust promotion (Can we limit the promotion to only certain types of sandwiches? Can we require addition of other higher-margin items to access the promotion?)
• Upsell opportunities (Can we sell other items to customers to increase the total value of their order? What will uptake look like?)
• Competition from other sandwich shops (Could we be creating a “race to the bottom” if other shops lower their prices in response?)
• Change in brand perception / expectations (Will customers expect this price from us always now? Will they come less often when we’re not running a promotion?)

TIP: When asked to list considerations or factors, it is helpful to ask for a brief moment to write out your ideas. This provides you the opportunity to communicate as clearly as possible and make sure the considerations you’re providing are distinct from each other.

Question 5:

Q5: Should we launch the promotion?

There is no one right answer. Strong answers will include the following components:

• A clear stance with justification based on quantitative analysis
  E.g., I do not believe we should pursue the promotion as it seems unreasonable for us to expect to sell three times as many sandwiches to break even given the new average profit margin
• A list of risks/concerns with potential solutions
  E.g., If the promotion leads increases the ratio of roast beef sandwiches sold, we may be at risk of a loss. To mitigate this, we could potentially limit the promotion to turkey sandwiches. Another break even analysis would help to further verify if this is a better solution.

TIP: When providing a recommendation or summary statement, you should review decisions and analysis that you made earlier in the case to support your final decision. You should feel free to be “answer first” in recommending the best path, then support your answer with evidence. We encourage going beyond previous considerations and add further considerations, potential risks and next steps