MOCK INTERVIEW 1

1. Introduction to the Case

"You have just been appointed the manager of the Cross Sells team at Capital One, which
evaluates opportunities to market non-credit card products to our credit card customers. One
potential cross-sell opportunity on your desk right now is the Prepaid Phone Card. Your
responsibility is to market this product to maximize profit for Capital One."

2. Key Questions to Consider

Costs and Constraints

 "How much does each Phone Card cost Capital One?"

 "Are there any other costs involved, such as a set-up fee?"

 "Are there any constraints on how many minutes each Phone Card has?"

 "Are there any constraints on how much we can sell the cards for?"

 "How much do competitors charge for the Phone Cards?"

 "How much do our cross-sell products usually sell for?"

Marketing and Customer Considerations

 "How many customers usually buy our cross-sell products?"

 "What distribution channels are available for marketing the Phone Cards to our
customers?"

 "How much would this marketing cost?"

Additional Business Factors

 "Does offering a Phone Card to a credit card customer have any impact on their
profitability as a credit card customer?"

 "If a customer purchases a Phone Card, might that indicate something about the
customer's credit risk that we wouldn't otherwise have known?"
3. Profit Calculation

 "Let's assume Capital One sells the 60-minute Phone Cards for £30 each. How much
profit would Capital One make on each card sold? Consider the cost of £0.20 per minute
sold and the £2.00 setup fee."

4. Marketing Costs and Distribution Channels

 "Think about the distribution channels available for marketing the Phone Cards. Which
factors would you consider most important when deciding which distribution channel to
use?"

5. Break-Even Point Calculation

 "Assume that each statement insert will cost £0.04, which includes the design, printing,
and the cost of stuffing them in envelopes. Given that Capital One is selling the 60-
minute Phone Cards for £30, what response rate would be required to break even on the
insert?"

6. Final Decision

 "After analyzing all the factors, do you think the Phone Card cross-sell opportunity is
worth pursuing? Why or why not?"

Answers (For You to Review After the Mock Interview)

Profit per Card Calculation:

 Revenue per card = £30

 Expense per card:

o £0.20 per minute * 60 minutes = £12

o £2.00 setup fee

 Total expense per card = £12 + £2 = £14

 Profit per card = £30 - £14 = £16

 For a break-even scenario, the equation becomes:

o Revenue per card = £30

o Total expense per card = £12 + £2 + (£0.04 * 100 inserts)

o £30 * R - [(£0.20 * 60) * R + £2.00 * R + (100 * £0.04)] = 0

o Solving for R (Response Rate):

o R = 0.25% (or 0.25 people per 100 inserts)

MOCK INTERVIEW 2

Introduction to the Case

"You are a manager at a marketing and publishing company that is looking to diversify, and
you’ve received information indicating that magazine publishing might be a good option. You're
considering developing a new magazine, but you’re unsure how profitable it might be. Let’s go
through the process to evaluate the magazine industry and make an informed decision."

Key Questions to Consider

Market and Business Considerations

 "What are some of the issues you must consider when evaluating the magazine
industry?"

 "How would customer demographics and desire for magazines influence this decision?"

 "What is the level of competition in the magazine publishing industry? Are there many
competitors, or is it more fragmented?"

 "Does the new magazine align with the existing strengths of the company?"

 "Are there any significant barriers to entry in this market?"

 "How does the broader economic cycle and the business cycle stage impact the success
of a new magazine?"

 "How effective would advertising be in generating revenue for this magazine?"

 "What are the potential costs and supply chain considerations in producing a
magazine?"

Profitability Components

"Let's dive into the economics of running a magazine. What do you think are the primary
components that contribute to profits for a magazine?"

Revenue and Costs

You have been provided with the following information:

 "You can charge £25 for an annual subscription, which includes 50 issues."

 "You can generate £1 in advertising revenue for each physical copy printed."

 "Printing and distribution costs are £1 per physical copy."

 "Content development costs are £1 million per year."

 "We’ll ignore newsstand sales and other revenue sources for now."

 "We’ll also ignore marketing expenses and other costs for now."

"Which of these factors do you think are the largest profit drivers for the magazine?"

Break-Even Calculation

 "Now, let’s calculate how many subscriptions we would need to sell to break even on
this venture."

o "Incremental subscription profit is £25."

o "The content development cost is £1 million per year."

"What’s the break-even point? How many subscriptions would we need to sell?"

Marketing Costs
  "Your company has expertise in direct mail solicitation, and you decide to use this
method to market the magazine."

 "Each piece of mail costs £0.50, and you’re able to achieve a 2% response rate."

"How much does it cost to sign up one subscriber using this direct mail method?"

Impact of Marketing Costs on Break-Even

 "How will this new marketing cost affect your break-even calculation?"

New Break-Even Calculation

 "With the inclusion of the marketing cost (£25 per subscriber), the new incremental
profit is £25 - £25 = £0."

"What can be done to improve the profitability of this venture?"

Considerations to Improve Profitability

 "What are some ways you could improve profitability?"

o "Would raising subscription prices help?"

o "Should advertising rates be increased?"

o "Could production costs be reduced?"

o "How can you increase the response rate?"

o "Should you consider lifetime subscriptions or multi-year renewals to boost

Renewals and Long-Term Strategy

 "You want to encourage subscribers to renew their subscriptions. What strategies could
help with that?"

o "Do you think price promotions, competitions, marketing, or free gifts could
help?"

"You are given two options for subscriber renewals based on preliminary research:
 1. Do nothing: 50% of existing subscribers will renew each year.

2. Offer a second-year subscription: 75% of existing subscribers will renew each year."

"Which option do you think is the best? Why?"

Profit Modeling for Each Strategy

 Option 1:

o Assume 40,000 customers in year 1.

o £25 net revenue per customer per year (excluding fixed costs).

o 50% renewal rate per year.

"How would you model the profits for Option 1?"

 Option 2:

o Assume 40,000 customers in year 1.

o £25 net revenue per customer per year (excluding fixed costs).

o 75% renewal rate per year.

"How would you model the profits for Option 2?"

Final Decision

 "Which option would you choose? Option 1 or Option 2?"

 "What other information would you consider in making this decision?"

 "How would investors react to the volatility in revenues from Option 2?"

 "Is the £750k investment better used elsewhere, perhaps in attracting new customers
instead of focusing on renewals?"

Wrap-Up

 "What next steps would you recommend the team take to explore the magazine
business further?"
Answers (For You to Review After the Mock Interview)

Break-Even Calculation

 "You need to sell 40,000 subscriptions to break even."

Marketing Cost per Subscriber

 "£25 per subscriber."

New Break-Even Calculation

 "With marketing costs included, the incremental profit becomes £0, so improvements
are necessary."

Option 1 vs. Option 2

 "After analyzing the data, Option 2 seems like the better choice because it provides a
higher long-term profit."

Sample Case
Background Information:

• You are a manager at a company that markets various products and services and that is
looking to diversify.

• You receive some information that indicates magazine publishing may be interesting.

• You are considering developing a new magazine but are not sure how profitable it might be.

What are some of the issues you must consider when evaluating the business?

The next step is to understand the economics of the business. What are the profit drivers in the
magazine publishing business?

Through some initial research, you have been able to determine the following:

• You can charge $25 for an annual subscription of 50 issues

• Let’s ignore newsstand sales for now

• You can generate $1 in advertising revenue per issue for each subscription

• Printing and distribution costs are $1 per copy per issue

• Content development costs run $1 million per year

• Let’s ignore marketing expenses for now

How much profit will you generate a year from one incremental subscription?

How many subscriptions do we need to sell to break even?

What about marketing costs?

• Your company has expertise in direct mail solicitation so you decide to use that marketing
method.

• Each piece of mail costs $0.50

• You are able to achieve a 2% response rate

How will this marketing cost affect your breakeven calculation?

What can we do to make this venture better?