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Where the money goes on a USD 60 serum, and what 5 more points of retailer margin cost the brand

You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.

Case timer

00:00

Target length:

1. Read the prompt aloud

Read it slowly, then pause. Let the candidate ask questions before they structure.

Lumora (a fictional skincare brand in the United States) sells a serum at a shelf price of USD 60 through a specialty beauty retailer that keeps 45 percent of the shelf price. Lumora's costs per unit, as a share of what it receives, follow a typical large beauty company: cost of goods 26 percent, advertising and promotion 32 percent, selling and admin 19 percent, research 3 percent. What does Lumora earn per serum? The retailer now asks for a 50 percent margin. If Lumora keeps its spend per unit the same, what happens to its profit per serum?

2. Answers to clarifying questions

This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.

3. A model structure

Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.

Brand profit per unit = shelf price minus retailer margin minus the brand's costs per unit
- Brand net price = shelf price x (1 minus retailer margin)
- Gross profit = net price minus cost of goods
- Operating profit = gross profit minus advertising, selling and research
- Test the change: lower net price, same costs per unit

4. The working, step by step

Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.

Step 1: Brand net price
What a strong candidate does: The retailer keeps 45 percent of USD 60.
Net price to Lumora (USD): 60 × (1 - 0.45) = 33
Step 2: Cost of goods
What a strong candidate does: 26 percent of USD 33.
Cost of goods (USD): 33 × 0.26 = 8.58
Step 3: Gross profit
What a strong candidate does: Net price minus cost of goods.
Gross profit (USD): 33 - 8.58 = 24.42
Step 4: Spend below gross profit
What a strong candidate does: Advertising 32 percent, selling and admin 19 percent, research 3 percent of USD 33.
Advertising, selling and research (USD): 33 × (0.32 + 0.19 + 0.03) = 17.82
Step 5: Operating profit per serum
What a strong candidate does: Gross profit minus that spend.
Operating profit (USD): 24.42 - 17.82 = 6.6
Step 6: Net price at a 50 percent retailer margin
What a strong candidate does: The retailer now keeps half of USD 60.
New net price (USD): 60 × (1 - 0.5) = 30
Step 7: Operating profit with the same costs per unit
What a strong candidate does: USD 30 minus USD 8.58 of goods, USD 10.56 of advertising, USD 6.27 of selling and admin, and USD 0.99 of research.
New operating profit (USD): 30 - 8.58 - 10.56 - 6.27 - 0.99 = 3.6
Step 8: Fall in profit
What a strong candidate does: The drop as a share of the starting profit.
Fall in operating profit (fraction): (6.6 - 3.6) ÷ 6.6 = 0.4545

The recommendation to listen for

At the end, say: "The CEO walks in. What is your recommendation?"

Lumora should not accept a 50 percent margin as it stands, because 5 more points for the retailer cut its profit per serum by about 45 percent, from USD 6.60 to USD 3.60. First, the USD 3 lost comes straight off profit, since the cost of goods and the spend per unit do not change. Second, a 20 percent operating margin leaves little room: every point of the shelf price given to the retailer (USD 0.60) is about 9 percent of the profit per serum. The risk of refusing is losing shelf space at a retailer that brings many new shoppers. As a next step, offer the extra margin only in return for more space, better placement or retailer-funded promotions, and check what share of new customers this retailer brings.

Risks a strong answer names: The retailer may give the shelf space to a rival brand; Cutting advertising to protect margin can slow sales a year later.

Score the candidate

Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.

This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?

Structuring

1: No clear structure, or a memorized framework that does not fit the problem.
3: A sensible structure, but with some overlap, a gap, or no clear priority.
5: A structure built for this problem, with no overlap and no gaps, a stated hypothesis, and a clear first step.

Math

1: Frequent errors, no units, or needed heavy help to finish.
3: Right answers but slow or messy working, or one error caught late.
5: Accurate and clearly narrated, with units, a sense check, and what the number means.

Exhibit reading

1: Read the chart aloud without finding the number that matters.
3: Found the key number but gave only part of the so-what.
5: Pulled the right number quickly and said what it means for the case.

Synthesis

1: Summarized what was done, with no clear answer.
3: Gave an answer, but with weak reasons or no next step.
5: Answer first, then two or three reasons with numbers, the main risk, and next steps.

Communication

1: Hard to follow: long silences, no signposting.
3: Clear most of the time, with some rambling.
5: Calm and concise, signposted each step, and checked in with the interviewer.

Total

0 out of 25

Score all five criteria to see the band and the feedback template.