Interviewer view · keep this screen to yourself
Should we match a price cut?
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
1. Read the prompt aloud
Read it slowly, then pause. Let the candidate ask questions before they structure.
A rival cut its price by 10 percent. We sell 1,000,000 units a year at USD 20, earning a contribution of USD 5 per unit (a 25 percent margin). If we match, contribution falls to USD 3 per unit and we keep all our volume. If we hold our price, we will lose some volume; the table below shows how each customer segment reacted the last time a rival cut price. Which is better, and when should we reconsider?
The prompt refers to Exhibit 1. After reading it, say: "Open Exhibit 1 now."
Format note: Interviewer-led: the interviewer shows the segment table and asks for the expected volume loss, profit under each option, the break-even point, and a recommendation.
2. Answers to clarifying questions
Give these answers only if the candidate asks. If they ask something not listed, give a sensible answer or say it does not matter here.
If asked: Why did the rival cut price?
Answer: It has excess stock after a weak season; there is no sign that its costs have fallen.
If asked: If we match, do we keep all our volume?
Answer: Yes, customers see the two brands as similar at equal prices.
If asked: How did customers react the last time a rival cut price?
Answer: The table shows it by segment, from two years ago. Assume they would react the same way.
3. The hypothesis a strong candidate states
Listen for an early, testable guess like this one. It does not need to match word for word.
A rival clearing stock is unlikely to keep prices low for long, and matching costs us margin on every unit. My hypothesis is that holding our price is better, unless we would lose a very large share of volume.
4. 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.
- Compare profit if we match versus if we hold
- Profit if we match
- Profit if we hold and lose volume
- Key: Break-even volume loss and the trigger
Exhibit 1
The prompt uses this exhibit, so the candidate opens it right after you read the prompt ("Show exhibit 1" on their screen).
| Customer segment | Share of our volume (%) | Volume lost when we held our price (%) |
|---|---|---|
| Loyal regular buyers | 60 | 5 |
| Occasional buyers | 25 | 12 |
| Price-sensitive buyers | 15 | 60 |
So-what
Most of the expected loss comes from a small, price-sensitive segment, so a targeted response can protect it without cutting price for everyone.
5. 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: Profit if we match
What a strong candidate does: All 1,000,000 units, but contribution drops to USD 3 each (a USD 2 price cut on a USD 5 contribution).
Match profit (USD): 1,000,000 × 3 = 3,000,000
Step 2: Read the exhibit: expected volume loss
What a strong candidate does: Weight each segment's loss by its share of our volume. Price-sensitive buyers are only 15 percent of volume but cause 9 of the 15 points.
Expected volume loss if we hold (%): 0.6 × 5 + 0.25 × 12 + 0.15 × 60 = 15
Step 3: Profit if we hold
What a strong candidate does: Contribution stays USD 5, but volume falls 15 percent to 850,000.
Hold profit (USD): 850,000 × 5 = 4,250,000
Step 4: Break-even volume loss
What a strong candidate does: Holding stays better until our remaining volume times USD 5 falls to USD 3 million.
Break-even volume loss (%): (1 - 3,000,000 ÷ 5,000,000) × 100 = 40
Step 5: Targeted defense
What a strong candidate does: Hold the price for loyal and occasional buyers, and give price-sensitive buyers a targeted offer that matches the rival (contribution USD 3), so they stay.
Profit with a targeted offer (USD): 1,000,000 × (0.6 × 0.95 × 5 + 0.25 × 0.88 × 5) + 1,000,000 × 0.15 × 3 = 4,400,000
The recommendation to listen for
At the end, say: "The CEO walks in. What is your recommendation?"
Hold our list price and defend only the price-sensitive segment. First, holding earns about USD 4.25 million against USD 3 million from matching, and it stays better unless we lose more than 40 percent of volume, far above the 15 percent we expect. Second, the table shows that price-sensitive buyers cause 9 of those 15 points, so a targeted offer for them lifts profit to about USD 4.4 million. Third, a general cut would give away USD 2 on every unit to protect a segment that is only 15 percent of volume. Revisit if volume losses pass 25 percent, well before the 40 percent break-even, or if the rival's lower price lasts beyond one season, which would suggest a lasting cost advantage.
Risks a strong answer names: Lost customers may not return even after the rival raises prices again; A rival with lower costs could keep the cut for years.
Next steps: Track weekly volume by customer segment; Prepare targeted offers for the most price-sensitive customers.
Strong versus weak
A strong answer
Compared both options by profit, found the 40 percent break-even, and set a trigger tied to it.
A weak answer
Said "match immediately so we do not lose customers," giving up USD 2 on every unit to avoid a smaller volume loss.
Score the candidate
Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.
Total
0 out of 25
Score all five criteria to see the band and the feedback template.