Capital One Case Interview Example

we're gonna jump into our live case it's time and so the first thing that i will do is give our brave volunteer today the opportunity to say hello and to greet everyone we're excited that you've decided to join us we're asking everyone to please mute and stay on mute during the primary session and the feedback and then we will give you an option to ask questions once the session has completed so ish welcome we're excited to have you and are excited to get to know a little bit more about you personally and also how you do in cases so go ahead and walk us through a little bit of your background while you're here today and then we'll dive in thanks jenny ray hi everyone my name is ish i'm a phd student at the university of michigan um i am very interested in transitioning into consulting after graduating so i've been preparing for the past couple months by doing a lot of practice cases i've done about 30 cases so far and i'm a huge fan of mc nmc's resources so i listened a lot to the live cases that have been done before and i just wanted to sign up and get uh publicly roasted by jenny ray and what other better opportunities there to to get some practice come on i i promise to deliver for you well we're really excited to have you and i'll just walk you through what we're going to do i've prepared a case today that is i think it's an mbb level case but um it is really about a business and a business question that you could also get in a company like capital one or another financial services firm um this is a case that i will look for you to direct me through but it does have enough rich quantitative information that sometimes i might have to kind of take back the rain so don't be surprised by that and finally we have 35 minutes to complete the case i will be tying you and i will provide my explicit feedback on both timing and performance at the end of the case so if you're ready to get started we'll go ahead absolutely ready let's go bring it on our client today is a company called credit card master in the last year covent has driven consumer spending and in a related way consumer credit balance is up the consumer spending was a surprise consumer credit balance is not as much because there was more economic uncertainty our client credit card master which is based on the east coast in the united states has faced strong competition from new credit cards that have entered the market in the last two years that have seen especially strong adoption our client offers own branded cards cards that are not affiliated for example with travel brands like marriott or delta but that run primarily on the visa network and while primarily business travel has been all but wiped out the sign up bonuses for business co-branded cards have gotten even sweeter they're basically throwing points at people to try to get them to sign up so interestingly our competitive cards while we thought they may drop in adoption they have not dropped as it originally predicted while we offer an array of cards we want to grow our company is considering dropping our 95 annual fee on its most popular card which is a basic generic points earning card where you can redeem the points in multiple different places and their focus is on becoming more competitive to enlist more people what should it do and why all right so just getting the last few pieces of information here so uh sounds like a very interesting case of a credit card company i'm very used to this problem because i have myself signed up for a lot of rewards uh credit cards during this pandemic so uh just to make sure i got this case right so our client is a credit card company ccm located in east coast and they faced a new competition from credit cards in the past couple of years and particularly for their they have a number of brands like travel and other brands but they also have this business credit card uh which has seen a decline uh because people aren't participating in business expenses um and they have this credit card which is a 95 annual fee and they would like to cut out this fee in order to make it more attractive to people so the question basically is what should they do and why should they do that is that right yes exactly okay um so a couple of clarifying questions are they only located in the east coast or are they more of a national brand like bank of america or chase um yeah they're headquartered on the east coast but they are absolutely national they issue okay okay and uh i want to learn more about their competitive response what are the competitors doing that is making the competitors attractive i guess we can go into this during the case itself but perhaps maybe the competitors are offering no annual fee credit cards perhaps they're offering more rewards just wanted to understand uh what the competition is doing here yeah i mean i think that you're finding that the competition has multiple options so we'll have to factor in the alternatives being quite diverse inside the case okay so um i'm just gonna take a few moments to create a roadmap of this case and then i'll go back to you so so all right so um in order to help our client solve this uh case of what they should do with their uh credit cards i would like to look at four major buckets of information first i'd like to look at the financial information so for financials i'd like to look at the revenue that they're currently generating from credit cards from the annual fee uh that's number one um and number two i'd like to look at what their quantity of customers are and my hypothesis is that this is primarily a quantity driven or a volume driven business so the number of customers really matter number two i like to look at their costs although this is a this is a my guess is that this is a fixed cost driven business model um and they don't have a particular cost associated with issuing new credit cards and for that reason we can look at perhaps ways to mitigate or cut their costs if needed number so the second major bucket that i'd like to look at is the customer interest in the product and in this i'd like to look at two major things one is to look at the product features so this would be the credit cards what number of rewards are they offering what uh what other features such as number of points uh maybe some special features based on what is being purchased uh things like that and number two i'd like to look at the demand uh and on the demand side uh what do customers actually want in credit cards do they prefer zero apr in the first year do they prefer low um annual uh fees or do they prefer uh sign up bonuses uh things like that uh major bucket number three i'd like to look at the competition so under competition i'd like to look at uh two three things so one is the uh number of different competitors so how fragmented is this uh credit card market um i'm guessing that this is a fragmented market there's a lot of credit cards out there and number two i'd like to look at the uh incentives that are provided by the other uh uh uh competition so instant in the sense of uh price of the credit card in terms of annual fees rewards etc and lastly in the last major bucket i'd like to look at what they can actually do once we have these three pieces of information from the first three buckets so preliminarily there's four things that i can suggest and as we go on the case i'd like to develop more solid um suggestions but the four that pop up to me first is one is based on number of rewards so maybe diversifying the different types of floors not just offering rewards for gas miles but also for air travel and perhaps since during covet people are buying a lot of groceries perhaps offering more groceries related rewards number two is offering more points per transaction so this would be perhaps uh for groceries offered two times the number of points uh number three would be to offer more brands so instead of just a business credit card it would also be a travel credit card uh and maybe other forms maybe based on gas or other niches that we can find and fourth would be to get more um uh custom credit cards based on people's needs so i'm guessing that while people are at home they're signing up for uh they're spending money on other services such as paypal and other financial services such as robinhood or stock trading so perhaps integrating this credit card with that so yeah that's basically my structure i think we can start off with looking at the financials first if you have any information i think looking at the current revenues and the cost would be a good place to start i don't disagree but i do have a question for you yes we're ultimately gonna have to make a call about whether or not to do this or not what's your hypothesis um i think uh my gut feeling is yes we should do this um if we 95 annual fee does not seem like a large enough cut for me in order we can still make back that revenue through other ways perhaps increasing the interest rate by a few percent points on purchases that would be one way and number two would be to increase the credit card transaction fee per transaction would be another way so i think my gut feeling is that this is doable okay cool that's helpful so um i want to dive into you mentioned financials i want to dive into the revenues a little bit more deeply what are the different revenue sources that a credit card company like this one has okay so number one is the transaction fee transaction p per transaction the more the consumers spend the more revenue they get number two is the annual fee that is obtained from per customer uh from the credit cards that is a number two source of revenue number three is the interest rate so based on individuals who do not pay their credit card off on time um you can obtain a certain amount of uh interest uh based on that uh so those are the three major revenue drivers i can think of okay which one do you think is the largest i think credit card transaction uh fee is my gut feeling because uh people uh do a lot of transactions in the regular day people go about and buy a cup of coffee or something else so they get a lot of transaction fees from that that's my gut feeling okay good um so let's let's take a look at some information um what would you want to know next dish yeah i think i'd like to look at uh what uh this um since i think that uh transaction fees are the largest i'd like to look at perhaps a number of variables one would be to look at what the percent rate charge per transaction is and number two would be to look at the average consumer spending on their credit card okay um good so let's take a look at let's take a look at the market first okay um at the volume of credit cards that are out there and then then we'll come back to the transaction information so um i'd like to get a ballpark for the number of active credit cards in the us currently how would you size this market okay so um so what we can do is we can take the u.s population to begin with and i'm going to walk you through the process that i formulate so we can take the u.s population we can divide this up into people who do use credit cards or let me back up one second sorry about that as a u.s population and take people who spend money on um on goods and services so this would be uh individuals who [Music] have finances and then from this we can look at people who prefer using credit cards and that would give us a sizable estimate of the number of active credit cards in the u.s so um um so starting off with the u.s population which would be 300 million people and then of this i'm guessing that people who are involved in finances would be people who are between the ages of uh let's say for simplicity i'm just gonna summarize that as people from the ages of 20 to 80 if we estimate a average um life expectancy of 80 and so that gives us about uh 60 um years divided by 80 so that would give us um let me let me pause you for just a second i actually need more of the clarity on the structure but i have data for you plug in here okay awesome so um so yeah can you just walk me back through the the structure piece yeah absolutely so we have the u.s population from this uh we would segment out the people who are involved in financial transactions and then from that we would size a segment that into people who use credit cards that that's this structure that i have okay um great and so let me just walk you through each one of them and i'll give you the data if i've got it okay yeah uh u.s population 300 million i'm guessing that's just an estimate and then uh people who are involved in financial transactions do we have any data for that so um are you are you talking about like uh are you excluding tell me tell me exactly yeah so we're excluding children from this we are excluding uh teenagers as well who are in primarily rely on their uh parents for credit card transactions i'm guessing that the teenagers don't have their own credit cards um so i'm just rounded it up to 20 and then that's the starting of the range and then the ending of the range is about 80 that's based on the life expectancy okay um and so what so the way that we think about it is a little bit different um so we just think about the removing basically adults with access to credit and then adults that want to use credit right um right and so i think i think you were kind of getting there in the same way so uh so we can we can match up on that so we have about 250 million adults in the united states that have access to credit okay what percentage would you estimate of those want to use credit instead of just being all cash check or debit focused yeah um so like yeah or anti-credit for for any other reason yeah exactly so um i think we are slowly moving into a world that is more reliant on credit although we still have a major uh cash transaction and then we also have uh people who use checks and i don't think there's any exclusive um people are not exclusive on one or the other but if i were to guess that credit is on one segment and then individuals who use cash checks money orders etc is another segment so i would guess about 50 percent of the population is um is uh using credit okay um you're low oh okay much more everybody wants to spend faster yeah um eighty percent is actually about the price okay results um that do use um credit okay awesome so uh if we take uh eighty percent uh i'm just gonna quickly uh size this that would make us 0.8 times 40 so this would be about 200 million people who are using uh credit um in the u.s and are we just assuming that 200 people million people are using uh only credit cards or is does this include let's say bank loans and other payday loans and other forms of credit as well no yeah so that's credit cards specifically okay so they might that it's probably a good proxy for many of those other things but those are specifically credit cards um okay okay so next what i would like to get into is the average uh transaction uh per per year that an individual spends on a credit card i would like to get into it too but i think there's one other thing that i want to think about here so okay so do you think we have the total number of credit cards in the us now or is there something that's missing um oh yeah so good suggestion so 200 million is the number of people so this may not translate into a number of credit cards i know that for myself because i have more than one credit card so uh i think if if i were to guess and i know i'm not the not the average person so uh i have a couple and then uh the average person i think is very wary of credit cards and only keeps one so and then there's also people who are who have one but it's not active since the question asked what are the active number of credit cards if i were to guess there would be two credit cards per person yeah that's about right 2.2 okay so uh that would mean that there is 440 million credit cards in the u.s great okay now you want to talk about transaction balances huh yes good i i've actually got um some more data about uh revenue more broadly so um you told me a couple of the types of revenue that um you kind of you know thought about or recommended early um earlier so let me give you some data so that we can kind of break down revenue components for the business okay um the the one that you've asked um about are the transaction fees so we receive one percent of the transaction fees from retailers we have to share that with other um organizations like visa for example um and interchanges like first data that process the transactions um and so the the the merchant pays more than that but we make about one percent um and on average uh uh consumers in the us spend about ten thousand dollars in purchases per credit card per year okay um sounds great i just want to clarify you you mentioned it's visa what does that actually mean um it means that um that visa is uh i i know a little too much about this so let me make this simple uh visa visa is like a processing rail um that uh that is used so um visa is the one that says like yes this is an authentic card that is a that was issued and then first data is the one that says there's money in okay um and then the bank is the one that says we have the money right so there are kind of three parties simplistically three parties that have to be um a part of every credit card approval transaction and we have to share with them the transaction so that's why the one percent is lower than what the merchant has to pay okay so it sounds good so uh if one one percent is the uh money that we're making and 10k is the average transaction part credit card per year this means we're making 100 per year um and uh if i take the number of credit cards which is 440 million uh times 100 that would mean now we don't have to do that necessarily okay let's think about this what we want to do is we want to actually figure out our revenue so what's the data that we need for that ah okay so then we need uh what we really need is off this 440 million what is the share that we have um often credit cards 10 okay so that would uh make it 44 million uh credit cards that we own and so uh if we take now the 44 million credit cards that we have times the dollars of revenue that we get per credit card this translation is that our only kind of revenue oh yeah so this is transaction fees only um and we can take into consideration other forms of revenue like the percent interest i'm guessing that off ten thousand dollars not everyone incurs interest because a lot of the people are very good about paying off their credit card fees and then there's also people who are not so um do you have data on that definitely okay um yeah so um again this could be a lot more complex so for the purposes of the case i'm going to keep it super simple about 25 of our customers pay off their transactions monthly 70 of our customers keep a balance the average balance of those customers is about 1 000 and they accrue 18 annual interest rates um which that 70 segment will eventually pay there's also an additional five percent of customers that make purchases that they will later default on the payment of um on average um that's about two those are customers that have on average a balance of about 2000 customers so about five percent default on an annual basis um okay so uh just to clarify the numbers just to make sure i got them right so uh 70 of um our 44 million credit cards uh keep a thousand dollars of balance um and then uh 18 is the apr on that fee is that right that's right yeah and it's it's a little more complex than that obviously because there's compounding throughout the year so yeah we're gonna assume just a straight line 18 okay and then i'd like to also clarify that default if i'm understanding this correctly um so five percent of uh our customers uh you said about two thousand customers no about to they their average balance of that segment is about two thousand dollars when they default okay so by default you actually mean this is a cost to the company so we actually lose this money is that right okay so um so what i can do is i we already have our transaction revenue from transaction fees we can calculate our revenue from the interest and then subtract out the cost from default that would give us our uh net profit or before uh accounting for any other expenses is that right what there's one other fee that we haven't talked about yet though and i and by the way i'm ignoring late fees even i'm including those in the annual interest rates they're not usually as significant as the annual interest rates yeah uh so the other one would be the 95 annual fee right so that would be applied across the board for all 44 million customers is that right yep and then one final point of data um just to be clear this we're not looking at dropping that fee for all of our credit cards so let me give you these are the specs for this card that we're looking at the one that has the 95 annual fee and 40 of our cards are that card right now okay so not all 44 million experienced this 95 dollar fee so only 40 some of them have a higher fee actually those were not gonna drop so this is the one that we're looking at potentially dropping okay yeah all right so uh are we going to take those into account for this calculation um or just keeping into account the 95 only um what do you mean are we gonna take what interest oh sorry um the higher transaction fees for the other cards beyond this forty percent yeah let's just look at this portfolio alone okay you don't think you have enough to do hush lots to do so uh let me get started before i get more confused uh so uh let's start off with the transaction fees themselves so transaction fees would be a hundred dollars per year per customer times 44 million uh customers this amounts to 4.4 billion dollars um next i'm going to calculate i think if you're going to do this appropriately do you want to do it on the whole pool um do i want to do this on the whole pool i think we should just include the transaction fees for the cards that we're looking at not for our total population ah okay yeah yeah okay sounds good so that helps narrow down the scope and then we can look at okay what's the what's the revenue that we lose from that 40 only so if we take 40 percent of 44 million that would be about 18 million i'm just gonna round it up a little bit yep so 18 million people and then i'm going to use this as the standard from which we'll calculate the different fees so transaction fees first um 100 per year times 18 million people this results in 1.4 billion dollars oh sorry 1.8 billion dollars okay uh now taking the segment off interest fees uh so this would be uh 70 of this 18 million is that right that's right okay so 70 uh of 18 million okay so that would be about 13 million can i round it up a little bit i'm okay with that yep okay so 13 million and then um they keep a balance of about uh thousand dollars but uh only 18 of that is a uh is the annual interest so that would mean uh 180 dollars of interest uh per person so if we take 13 million times the interest per year one one eighty um so that brings us to that brings us to seven um 7.2 billion dollars is that right okay so um sorry walk that back just a little bit more how'd you get it so that is uh 13 uh million people so 70 is that segment times the interest rate is eighteen percent so eighteen percent times a thousand is uh hundred and eighty okay and hundred and eighty times thirteen million is seven point uh two just check that out am i missing something here or is it 720 million what's um what what's 18 times 100 or 13 times 100 um 13 000. that 1.3 billion and then another 80 on top of that oh okay so that would be about 2.3 yeah that's fine okay 2.3 billion all right uh so that's we're done with interest fees now we're looking at uh customers who default so uh oh actually it might be let me just cover all the revenues first and then we'll go into the cost so uh looking at the transaction sorry this would be the annual fees so now the annual fees would be 95 and this is incurred by all 18 million of these uh people so that would be uh i'm just gonna round it up to a hundred is that fine for this um that for the transaction piece yeah oh sorry the annual annual fee oh the annual fee oh i already thought that you had done that sorry yeah um i thought that that was what you had done before so you did the transaction fees first exactly yeah okay yeah that's fine you can do that for a day okay so that would be also uh 1.8 billion uh and finally looking at the cost of default this would be five percent of customers uh so this would be if i take uh this would be about a million customers is that right five percent of that yeah yeah so uh one million customers uh and then uh two thousand dollars is the cost so that would mean about this is a large number of people so that is about 20 billion is that right so 2 000 times um a million yeah you tell me that's what it sounds like what's 200 times a million uh that is 2 billion 200 times a million i think it's 200 million oh yeah sorry sorry so it is 2 billion yeah uh i have issues with units so that's all showing up now um okay so perfect now what we can do is we can add up all the revenues and we can subtract out the default fees and then we can create a second scenario where we take the only the transaction and the interest fees as the revenue remove annual fees and then see if we can cover the default great how would you cover the default how would we cover the default how are we going to cover the default i mean it's going to be a cut from the profits right so it's it's basically we're going to generate less profit because we are incurring that default fees right okay dive in let's go so um let me just do that calculation so in the first scenario where we keep the annual fees um we're going to do 1.8 plus 2.3 plus 1.8 um 5.9 is the total revenue in that case and then in a second scenario which is without the annual fees the total revenue in this case is 4.1 so in both cases we we do make substantial revenue that is beyond the default um so uh this would basically be taking a cut in uh the the annual fees but we haven't accounted for other costs number one and number two we haven't accounted for increase in customers that would result from removing the annual fees great let's just think about the second one because i do think that while the first is important um this is largely a question of whether we can compensate for that annual fee um so how would we compensate for it how would you model it um so let me ask more specifically what are the options that they have to make back the revenues that they might lose from dropping the fees exactly so uh number one is to increase the number of customers number two is to [Music] make customers spend more money since that now they don't have this annual fees but i don't think that will affect the consumer decision as much so i'm going to stick to number one which is increasing the number of customers okay anything else um we can also look at ways to increase fees from other modalities so increase transaction fees or increase interest fees i think uh the increasing both of those are likely increasing transaction fees since a lot of businesses are strapped uh and will likely pay that fee so we can increase that um or we can also increase it on the consumer side by raising the interest fees either are possible okay great so um i think that what we should think about is on a per unit basis okay um how how many like what right what we're going to lose from the fees and how many customers we are going to need to add to make it back i agree with you that i think more customers is the primary way how many new customers do we have to get to pay back that droppage of the annual fee okay so um so we're we're losing about 1.8 million in revenue so what we can do is we can see ways in which we can basically calculate the number of customers we would need to make back 1.8 if we consider that as the benchmark sounds good um so make 1.8 billion for me i should just do it that's all i need to do easy easy we can do this um so uh that would mean um that we have to uh we can consider the profit per customer uh and so i can calculate the uh profit per customer uh using the uh model of uh if we don't have let's say annual fees let's uh say that is our total revenue of 4.1 billion minus 2 billion which is a cost that means 2.1 billion is the profit that we make from um uh 18 million uh consumers um and so what we can do is we can calculate the profit per consumer and in order to calculate the profit per consumer i can take uh 18 2.1 billion divide by 18 million and this would result in uh okay this would result in 18 [Music] can i am i allowed to round up things so that and round down things so that i can make my life easier so 2.1 billion to 2 billion and 18 million to 20 million um so i um i don't like the rounding i'm just wondering if there's an even easier way to think about it um so oh um i'm trying to think if there is an easier way i think i'm at the road block here okay well you've already figured out some of the numbers you figured them out before so i'm just wondering if we can refer back to those ish if not we can just recap them um but basically we've got you know how much we make on a per person on the interest on average right and then the transaction on average and then the loss on average so i'm just trying to figure it out yeah yeah that's that's perfect thanks for the hint so transaction fees is 100 per person interest fees is 180 per person and then the so those are the two revenues per person yeah and then we'll just have to calculate the cost of default if we spread it out to the the cost over all 18 million customers okay um let's think about it in a different way if five percent of the members the new the new people are gonna default and lose us two thousand dollars a year on average how much would we lose on average yeah um [Music] okay so we in that case i think what we can do is we can [Music] i'll give you a hint what's five percent of two thousand uh it's fifty i think it's close to 50. 500 500. yeah it's not 500. okay what's what's 10 or 2000. 200 sorry and then uh a hundred dollars yeah yeah yeah so i'm so per person we're going to lose 100. okay um one one more factor um we make 180 per year but not on everybody only in 70 so we also have to factor that in okay so we actually only on average make seven percent of the hundred and eighty across at all yes okay so seventy percent of uh people who by 70 you mean the interest rates right um uh for 70 i mean yeah the ones that we're charging interest we don't make 180 for everybody because not everybody pays us interest so you can have to do the same calculation so it's 70 times 180 okay so 70 off so that is 130 approximately so we can take 130 okay so this means that per person the the revenues that we have is hundred dollars from transaction fees 130 from interest and then we can subtract out uh 100 dollars from the default right so that is that results in 130 uh of revenue per person so uh so we basically have to calculate the uh the number of people uh that we need to bring in order to make uh 1.8 million so that would be 1.8 equals to 130 times x and we just need to figure out x um so 1.8 million divided by 130 and this results in another complicated math let's see if we can make it simple times times 10 million how many is that that is 18 million yep it would be it would be 18 million but time times in the 13 130 times 10 million gives us 1.3 billion right yeah so it's somewhere north of 10 million okay but less than 20 million pick the midpoint ish make it easy uh 15 great we just need to know relatively whether it's reasonable or not is it reasonable so that 15 million is a lot so that's my even even even if it's 10 million or 20 million the other ends it's a lot of people and i doubt whether we can make this um uh number of people in a short amount of time so we would have other considerations right so number one is uh can we get these number of people will there be sufficient number of individuals who either don't have credit cards or already have credit cards that would be willing to make the switch um number two is considering the duration so we think of 15 million people within a year within two years uh and number three is this is this looks like a short term um uh we're thinking short term in terms of covet only what happens after covet we we don't necessarily do we keep up the annual fees or not um so given that my instinct is this may not be a great idea but i'd be happy to hear other possibilities or other things that the client is thinking about that we can take into consideration sounds good well we're ready for our final answer what would be your final response and recommendation for this so uh my final recommendation is for the client to not cut out the 95 annual fee uh reasons for this being number one uh we will not be able to make 15 million or obtain 15 million new customers in a short amount of time number two um the the the revenues the profit lost from 95 is getting rid of 95 is about 1.8 billion which is too high for us to compensate and therefore i'd like to look at other options that the that the client has in mind to make to increase customer attraction that's that's basically the point here and that would be to diversify their portfolio of credit cards to uh do more advertising uh to increase the knowledge of uh consumers about their brand increasing brand perception um so yeah that's my final recommendation okay i love it great job relax what do you think how did it go i thought it was good i was a little tripped up by all the math but um i'll need to work on the units especially uh but other than that i thought it was uh personally relatable because i i'm a credit card fan i'm not encouraging others to get credit cards like me but i like credit cards for their bonus points and rewards so i thought it was relatable yeah so um this is kind of an example of why basically a lot of credit cards do the first year free option because um wiping out fees the the annual fee is wiping out you know about a quarter slightly over a quarter of their revenue and about a third of their profit um and it basically pays for the defaults on the card um so it's kind of a powerful exercise to go through to understand the decision making behind why some of the um the orgs do it so let me go back through the case um it took us 45 minutes i let you go longer than i said that i would because i really wanted to finish it um and so i'm going to talk about how you could speed up because there were a few things that you did like really really really well and then other things where i felt like you could have been a lot stronger my number one takeaway was that i thought you were excellent on creative brainstorming um but i thought your structure while very comprehensive should have been more focused on exactly the problem at hand i think have you spent a little bit more time really thinking about how you would have actually modeled this out what this data was that you needed to gather we could have gone deeper into that less wide and therefore been a lot more focused as we went through the math inside the case and so i'll just get you started so at the beginning uh for your recap i found you warm and relatable you can start off though a little bit more aggressively especially for mvb firms so you want to just make it super punchy and very rapid at the beginning so you might just want to increase the pace a little bit at the start i know that you're targeting mvp so i wanted you to know that um for your questions i thought that they were really good questions but they were what i would call level two instead of level three questions so they were like you know tell me about this instead of here's what i'm thinking confirm it or not again the punchier more direct stronger approach is going to work much better for mbb um your uh recap was 45 seconds your questions were a minute and 13 seconds timing really good so i think just strength demonstrating strength in those would start with a stronger impression um for your structure i thought that there were two things that you did well and two things that you need to improve so the things that you did well first of all you completed your structure within a minute and 15 seconds it wasn't over long uh yet it was very comprehensive so i felt like you used your planning time extremely well um however i um on the counter balance to that what you didn't do well four and a half minutes to deliver it way way way too long um and that i think was representative of the fact that what was in there was more than you needed to solve this case and so i felt like all of that extra stuff clouded the clarity that you actually demonstrated in a lot of other places in the case so i would rather have a shorter more deep more numerical um structure what i thought you did really well was numbering so um you actually didn't tell me at the beginning how many categories you had i think you said you had four but you didn't tell me what the names were and so i ended up with five and i have no idea i wasn't actually following what you had on your paper um but you kept drawing me back by saying okay in the customer segment i have two things and then you would tell me like when you went on to number two so um you you used it to keep me with you but you could have done even better if you had said there are four categories here are the names in the kind of in this category there are two things and just kind of kept it like um a little bit more uh simple for me to write down and follow um the final thing is that inside your structure you started off with really good numbers and then it faded into concepts so um if you had done the numbers you could have identified for example one of the costs being the cost of defaults or the cost of marketing which we didn't really cover in the case um but there were you could have gotten more specific about actual costs and therefore driven us more toward the answer of the case and you could have just told me at the end of this like this is going to be a really basic formula we're going to remove fees we need to increase revenue from other areas so that's either going to be volume or it's going to be revenue per customer and this is the way that we're going to do it and then you could have told me directly after that what your hypothesis was whether that was going to be possible or not um and so um i i felt like basically the comprehensiveness of your structure led to a lack of clarity in the answer and that drove time into the case that you should have extracted out instead um your creative was exemplary um your creative brainstorming was really really good each time i gave you a creative question you came up with numbers you elucidated on them but you moved on fairly quickly you prioritized which one you thought was um helpful i i would spend zero time practicing that from here on out because i don't think that you need help with it um when it came to the math yes the large calculations and the factoring i think would be something that would be worth spending time on doing what i did verbally is totally permissible okay ten times that is this and then another uh you know times a hundred or um right you can like what i think you should do is break things down into two steps or three steps instead of trying to do it all at once um and uh when you were thinking about the math i think that um if you can really clearly separate out the structure of your math from the calculations of your math you were very much like webbing those together and it led us to kind of go down a little bit of a pathway and then back up again and then go back again so if you could just be like here's my structure this is how i would do it do you have the data for that no i can make estimates right and then if i had the data then i'd give you the data that i have and then we can kind of very literally walk through it and so there was just a lot of dialogue and back and forth um the the math part of your case was 10 20 and 10 minutes so like almost the entire case was spent on on doing and undoing and doing again those math pieces um what i would do tactically is actually after this case i would go back through exactly what we did i would rewrite your math i would try to keep your notes at one point you're paging across pages i'll try to keep your notes both two pages in front of you so that you can keep track of those and um really keep track of the difference between aggregating on a per unit basis so the more that you can get things on a per unit basis early and then aggregate up rather than starting with really big numbers for each one the easier potential subsequent calculations are going to be inside the case um for your final recommendation i thought it was good um i think that if we had a little bit more time you know i would have wanted you to push in on the math as we were going through it into okay great fees are a really big part of our um of our revenue structure um you know compensating for this with just revenue gains would mean um really reducing defaults uh and or really like you know a a near doubling of interest rates to somewhere around 30 i just can't even see that being politically feasible um to get that done and so you know making some judgment calls like interim judgment calls along the way would have helped you um but i think you need the clarity of your math first before you can push into it what questions do you have for me awesome yeah thanks january for going through that with me um do you think in terms of the um structure itself i could have just stopped it at revenues and costs and not go any further than that and i actually think that there could have been another category but in reality measuring all these other things in the you demonstrated that it would have been really hard to like measure them by the fact that you were like for customers like what are the special features you know and like you were kind of you got like very intangible with that so i would just really um i think you could have kept a you know a competitor bucket a customer buckets one of the other buckets would have been very worthwhile to think about other factors um other than just like can we make more money because that how do we make more money through other channels is something that you could unpack in all those other ways i just think that you lost the numerical nature of that um and and um yes you can take a full two minutes to build your structure you might have had more time um you might have needed less time to deliver it if you would have time to build it more clearly like that sounds good anything else um trying to figure out uh in terms of the math um i i know for getting to a per unit basis is do you have any recommendations on how i should i know i was jumping between papers do you have any recommendations on how to lay it out on my paper itself and just i think tabling is always really good basically this is a classic weighted average situation where we're saying you know that the um the weighting per customer is um you know this percent contributes zero the people that pay off their cards this percent contributes 70 of the 180 this percent contributes five percent of the negative two thousand um and if you can table all that out then you're able to keep all of those numbers um so anytime you have segments or a weighted average like that if you can put it in a table it's optimal okay yeah i think one thing that i've seen repeatedly through my practices i jumble both of them like the calculation and the numbers that i obtain all in one place and i should probably segment out my paper itself to put them in the right position so that i don't confuse myself yeah i mean maybe um you know writing a little bit smaller or using i i try to use two total pages um and uh push it back a little bit further for you know so that i have plenty of real estate room in front of me so i'm not like kind of shuffling uh on the side i think if you if you had more visibility into your notes you might have experienced a little bit less confusion when you're driving toward those two [Music] pieces [Music] you

Channel: Management Consulted

Views: 14,660

Rating: 4.8666668 out of 5

Keywords: advanced case interview, case interview, case study interview, consulting case interview, case interview preparation, case interview questions, case interview prep, case interviews, consulting interview, case interview frameworks, case interview example, case study, case study example, interview, consulting, case questions, case studies, study, interviews, management consulting prep, case study sample, capital one case interview, capital one case interview examples

Id: nlESw7qHr-I

Length: 60min 14sec (3614 seconds)

Published: Mon Feb 15 2021