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A European software company: spend more on marketing?

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.

A German software company sells a subscription to small businesses across Europe. The board wants to double marketing spend to grow faster. Should it?

Format note: Candidate-led: you ask for the data and drive; the interviewer answers what you ask.

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: What does a customer pay, and what is the gross margin?
Answer: EUR 100 a month, with an 80 percent gross margin after hosting and support.
If asked: How many customers leave each month?
Answer: About 2 percent.
If asked: What do we spend to win customers?
Answer: About EUR 1.2 million a month on marketing and sales, winning about 400 new customers a month.

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.

Software margins are high, so my hypothesis is that the problem, if any, is churn or acquisition cost, and that raising marketing spend only makes sense if a customer is worth several times what it costs to win.

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.

Is a customer worth more than it costs to win?
- Monthly contribution per customer
- Lifetime value from churn
- Acquisition cost (CAC)
- Key: LTV/CAC and payback

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: Monthly contribution
What a strong candidate does: Candidate: "At EUR 100 a month and an 80 percent margin, each customer contributes:"
Contribution (EUR a month): 100 × 0.8 = 80
Step 2: Lifetime value
What a strong candidate does: Candidate: "With 2 percent monthly churn, an average customer stays about 50 months, so LTV is contribution divided by churn."
LTV (EUR): 80 ÷ 0.02 = 4,000
Step 3: Acquisition cost
What a strong candidate does: EUR 1.2 million a month for 400 new customers.
CAC (EUR): 1,200,000 ÷ 400 = 3,000
Step 4: LTV/CAC
What a strong candidate does: Candidate: "That is far below the 3 that investors often look for." Interviewer: "The board says revenue is growing fast." Candidate: "It is, but each customer barely earns back its cost."
LTV/CAC: 4,000 ÷ 3,000 = 1.33
Step 5: CAC payback
What a strong candidate does: Months of contribution to earn back CAC: over three years.
CAC payback (months): 3,000 ÷ 80 = 37.5
Step 6: Fix first, then grow
What a strong candidate does: Candidate: "Can churn and CAC be improved?" Interviewer: "Better onboarding could halve churn to 1 percent, and shifting spend to partner channels could cut CAC to EUR 2,500."
LTV/CAC after fixes: (80 ÷ 0.01) ÷ 2,500 = 3.2

The recommendation to listen for

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

Do not double marketing spend yet. First, a customer is worth about EUR 4,000 but costs EUR 3,000 to win, an LTV/CAC of about 1.3, so more spending buys growth that barely pays back. Second, CAC payback is about 37.5 months, which ties up a lot of cash. Third, halving churn to 1 percent and cutting CAC to EUR 2,500 would lift LTV/CAC to about 3.2. Fix onboarding and channels first, measure churn by monthly cohort, and raise spend once new cohorts show the lower churn.

Risks a strong answer names: Churn improvements may take several cohorts to prove; Partner channels may not scale at the lower CAC.

Next steps: Build a cohort table of retention by month of joining; Redesign onboarding for the first 60 days; Test partner channels with 20 percent of the budget.

Strong versus weak

A strong answer

Asked for margin, churn, and spend, computed LTV from contribution, compared it with CAC, and showed which fixes would justify more spend.

A weak answer

Agreed to double spend because revenue growth looked strong, without checking what a customer is worth.

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.