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Candidate briefing

Online case. During your recruiting process with BCG you will have to go through an online case. The purpose of this exercise is to test your analytical and logic skills as well as your business sense. Sample. This document is a sample of 10 questions put together by IGotAnOffer. Its purpose is to help you prepare for the actual online exercise you will have to complete. We recommend you take no more than 20 minutes to take this test. Each question is divided into 2 parts: •  on the left, you will find the question itself •  on the right, you will find the information you need to answer the question No calculator. We recommend you complete this sample test without using a calculator. Scoring system. You should select one or more answers for each question. During the actual test you will be able to move onwards and backwards and change your prior answers so you should feel free to do the same here. For each right answer you will get +3 points, 0 points for no answer and -1 point for a wrong answer.


IGotAnOffer disclaimer

Process followed. BCG only makes four questions available to candidates preparing for its online test. The free sample test you are reading is inspired by these questions as well as conversations with past BCG candidates and other consulting recruitment tests. Although this free sample test is unlikely to be a perfect representation of the actual test, we believe it should help significantly in your preparation. Remaining uncertainties. There are a few uncertainties regarding the BCG potential test that you should be aware of: •  Number of questions and time: In its four-question sample BCG mentions that the online test includes 23 questions and needs to be completed in 45 minutes. However, past candidates have also reported slightly varying numbers of questions and time limits. •  Maths vs. logic questions: Given the limited number of questions made available by BCG, the balance of maths and logic questions in the actual test is not known at this stage. Future improvements. Despite these uncertainties we believe the materials we put together will enable you to develop the right skills. Your feedback on the actual test would be very valuable to us and would significantly help us further improve these materials. You can contact us at [email protected].


BCG Potential Test – Olympian Airways Question 1 Based on the market research, what is the average ticket price Olympian Airways should charge for a flight from London to Paris? 1.  2.  3.  4. 

€102 €136 €125 €116

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Pricing strategy Case Overview

Market Research

Due to the increasing number of low-cost airlines entering the market, the world’s major carriers are forced to revisit their pricing strategies in order to preserve their market share.

5,000 people were asked how much they would pay for a flight from London to Paris.

Olympian Airways is one of the largest airlines in Europe and is revamping its Question x / for 23international shortpricing strategy haul flights.

Number of respondents and price points:

€200 1,100

In order to do so, it decided to carry out market research to find out how much passengers would be willing to pay for different routes.

€100 1,500

€150


€50 500

BCG Potential Test – Olympian Airways Question 2 What ticket price should Olympian Airways charge to maximise gross profit per day? 1.  2.  3.  4. 

€100 €125 €150 None of the above / we lack sufficient information at this stage

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Maximise gross profit Customer segments After conducting market research in ticket prices the company puts together two different scenarios. Scenario A is a low price high volume strategy and Scenario B is a high price low volume strategy. In addition to ticket revenues, Olympian Airways also sells products (perfumes, Question x / 23 electronics, etc.) to alcoholic beverages, passengers during flights. The company classifies customers into three income bands: C1, C2 and C3. C1 passengers have got the lowest income and C3 the highest. C1 customers are price elastic across ticket prices and likely to spend less on goods purchased on board. Olympian Airways’ aircrafts all have the same number of seats.


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Scenario analysis Scenario

A

B

Flight cost and tickets’ revenue Avg cost per flight

€15,000

€15,000

30

20

Ticket price

€100

€150

# passengers / flight

200

150

# flights / day

Distribution of passengers C1

50%

30%

C2

30%

30%

C3

20%

40%

Avg duty free spending per passenger C1

€5

C2

€10

C3

€15

BCG Potential Test – Olympian Airways Question 3 Which of the factors listed below would not affect the gross profit difference between scenarios A and B? 1.  2.  3.  4. 

Ticket prices Aircrafts’ seat capacity Fuel costs None of the above

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Maximise gross profit Customer segments After conducting market research in ticket prices the company puts together two different scenarios. Scenario A is a low price high volume strategy and Scenario B is a high price low volume strategy. In addition to ticket revenues, Olympian Airways also sells products (perfumes, Question x / 23 electronics, etc.) to alcoholic beverages, passengers during flights. The company classifies customers into three income bands: C1, C2 and C3. C1 passengers have got the lowest income and C3 the highest. C1 customers are price elastic across ticket prices and likely to spend less on goods purchased on board. Olympian Airways’ aircrafts all have the same number of seats.


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Scenario analysis Scenario

A

B

Flight cost and tickets’ revenue Avg cost per flight

€15,000

€15,000

30

20

Ticket price

€100

€150

# passengers / flight

200

150

# flights / day

Distribution of passengers C1

50%

30%

C2

30%

30%

C3

20%

40%

Avg duty free spending per passenger C1

€5

C2

€10

C3

€15

BCG Potential Test – Olympian Airways Question 4 Given the data you are provided with, what is the maximum number of points one can earn by buying a single ticket? 1.  2.  3.  4. 

59,700 62,300 5,970 6,230

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New customer loyalty programme Miles & Bonus In addition to reviewing its pricing strategy, Olympian Airways has also decided to launch a new loyalty programme called Miles & Bonus. In this programme customers are awarded points based on the distance they travel with either the airline or one of Question its partners.x / 23 The points earned vary depending on the travel class (i.e. first, business or economy), the destination and the season. For instance, peak season business tickets in non-popular destinations are awarded the most points.


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Data There are 60 different types of tickets (10 destinations, 3 travel classes and 2 seasons) with an average of 2,000 points awarded per ticket. None of these tickets earns less than 500 points and exactly 15 of them earn less than 1,200 points.

BCG Potential Test – Olympian Airways Question 5 Assuming only 5% of economy customers use Wi-Fi all the time, what are the expected revenues from a flight to a popular destination using a new aircraft at its full capacity? 1.  2.  3.  4. 

€56,048 €56,016 €56,480 €56,160

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Upgraded fleet of aircrafts New aircrafts

Data

Olympian Airways is considering upgrading its fleet. The new aircrafts will use technologies such as touch screens and Wi-Fi on board.

The ratio of first class, business and economy seats in the new aircrafts will be 1 to 3 to 8 and the total number of seats will be 240.

The company has decided that the new aircrafts will have three different types of seats: first, business and economy.

Average ticket prices for popular destinations are expected to be €700 for first class, €300 for business and €150 for economy. The average duration of these flights is 3 hours.

Question x / 23

First class seats will have leather heated chair beds, business seats will have leather seats with extra leg space and economy seats will have standard seats.


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First and business customers get free WiFi on board but economy customers need to pay €2 / hour for using it.

BCG Potential Test – PayCo Question 6 What is the current cost per sale for PayCo assuming all lead sources have the same conversion rate? 1.  2.  3.  4. 

$39 / sale $44 / sale $49 / sale $54 / sale

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Cost per sale Case overview PayCo is a payments company that processes debit card and credit card transactions in the United States.

Current situation PayCo purchases lists of leads at different prices from Alma Bank, Bingo Bank and Com Bank.

PayCo’s clients are shops such as restaurants, bars, apparel shops, supermarkets, petrol stations, etc.

Share of total mix of leads (%)

Question x rents / 23 debit and credit card The company

Alma Bank

$5

30%

machines to its clients. It earns a rental fee for the card machines as well as a small fee for each card transaction processed by their client.

Bingo Bank

$3

60%

Com Bank

$6

10%

The company works with banks to acquire new clients. It purchases lists of businesses from them and calls them to sell card machines and services.


Cost per lead ($)

It then calls the leads to try and sell them card machines and services. The average conversion rate from lead to actual customer is about 10%.

BCG Potential Test – PayCo Question 7 What is the maximum conversion rate that can be achieved by PayCo using the the three banks as a lead source?

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Maximise conversion rate Bank by bank analysis

1.  2.  3.  4. 

10.5% 11.2% 11.8% 12.3%

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Alma Bank is a large commercial bank from the East Coast of the US. Its clients are mainly restaurants and shops. Com Bank has got a similar list of clients to Alma Bank but is established on the West Coast of the US.

Conversion rate results After carrying out some research, your team finds out that the conversion rate between the three banks is actually different. PayCo needs to achieve its sales target by using 300,000 leads per year.

Question 23 Bingo Bank x is /established in the Midwest

Conversion rate

# of leads available per year

Alma Bank

12%

100,000

Bingo Bank

8%

600,000

Com Bank

15%

80,000

and primarily serves Mom and Pop businesses. The team at PayCo has always assumed a similar conversion rate of 10% across all three banks.


BCG Potential Test – PayCo Question 8 What is the minimum cost per sale PayCo can achieve by using Alma Bank, Bingo Bank and Com Bank as sources of leads?

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Maximise conversion rate Bank by bank analysis

1.  2.  3.  4. 

$35.0 / sale $37.5 / sale $40.0 / sale None of the above / we lack sufficient information at this stage

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Alma Bank is a large commercial bank from the East Coast of the US. Its clients are mainly restaurants and shops. Com Bank has got a similar list of clients to Alma Bank but is established on the West Coast of the US.

Conversion rate results After carrying out some research, your team finds out that the conversion rate between the three banks is actually different. PayCo needs to achieve its sales target by using 300,000 leads per year.

Question 23 Bingo Bank x is /established in the Midwest

Conversion rate

# of leads available per year

Alma Bank

12%

100,000

Bingo Bank

8%

600,000

Com Bank

15%

80,000

and primarily serves Mom and Pop businesses. The team at PayCo has always assumed a similar conversion rate of 10% across all three banks.


BCG Potential Test – PayCo Question 9 Which of the following statements would NOT increase the motivation of sellers handling leads from Bingo Bank?

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Sellers incentives Day to day

1. 

2. 

3.  4. 

Work with Bingo Bank to increase the quality of the leads purchased from them by PayCo Group sellers handling different banks in a single team and randomise the distribution of leads between them Keep sellers in different teams but rotate lead sources between them Increase bonuses to $200 per sale for all sellers

PayCo’s sellers work from 9am to 5pm from Monday to Friday 47 weeks a year. Sellers are divided into three teams. Each team deals with one of the following lead sources: Alma Bank, Bingo Bank and Com Bank.

Question x / 23receive a list of 85 Every day, sellers

Sellers’ compensation The sellers’ base salary starts at $40k and increases by about 5% per year for each additional year they stay with the company. In addition, sellers can receive $100 for each sale they make.

leads from their respective bank and work through the list during the day.

The Head of Sales has noticed that sellers for Bingo Bank are much less motivated than their peers on average.

The list of leads they get are newly setup businesses which are likely to require debit and credit card payment processing services.

After investigating, his initial conclusion is that they have been consistently making less sales and getting lower bonuses than their peers.

Sellers simply cold-call the leads and try to convince them to sign up for PayCo services.


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BCG Potential Test – PayCo Question 10 Which of the following measures would best help the company to fully prevent sellers from agreeing unprofitable prices with future customers? 1.  2.  3.  4. 

Train sellers to negotiate better prices with leads Fine sellers when they give unprofitable prices Incentivise sellers to sell at higher prices with a different bonus system Set up an audit team that would check prices and validate contracts before they count towards sellers’ total sales

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Incentive structure Current issue

Pricing

Sellers are currently only incentivised based on the number of customers they manage to sell to.

When selling PayCo’s services, sellers negotiate a share of their customers’ future revenue.

The head of finance of the group has noticed that the prices at which sellers agreed to provide PayCo’s services have decreased in the past few months.

For debit cards, they usually agree a price of about 15 cents per future transaction processed for the client. For instance, if PayCo processes a debit card transaction for a sandwich at $5, they will receive 15 cents from the sandwich shop in exchange for their service.

Question x / 23

The head of sales suspects that this might be due to sellers selling at increasingly lower prices to increase their bonus.

For credit cards, the price agreed is a percentage of the transaction instead of a fixed fee. This percentage is usually around 1.5%. Lately, sellers have been found to sell PayCo’s services at increasingly less profitable prices.


Answer key

Question 1

Question 2

Correct answer: 2

Correct answer: 1

The ticket price can be calculated as follows: 1.  Calculate the number of respondents for the €150 price segment: 5,000 - 1,100 - 500 - 1,500 = 1,900 2.  Calculate the weighted average by multiplying the prices by the number of people per price segment and then dividing by 5,000: (500 x 50 + 1,500 x 100 + 1,900 x 150 + 1,100 x 200) / 5,000 = €136

You are asked to determine which of the two scenarios maximises gross profit. The gross profit for each scenario can be calculated as follows:

Answer 2 is therefore the correct answer.

Scenario A: -  Revenues from tickets: €100 x 200 = €20,000 -  Revenues from duty free: (50% x €5 + 30% x €10 + 20% x €15) x 200 = €1,700 -  Gross profit per day: (Total Revenues – Cost per Flight) x Number of Flights per Day = (€20,000 + €1,700 – €15,000) x 30 = €201,000 Scenario B: -  Revenues from tickets: €150 x 150 = €22,500 -  Revenues from duty free: (30% x €5 + 30% x €10 + 40% x €15) x 150 = €1,575 -  Gross profit per day: (Total Revenues – Cost per Flight) x Number of Flights per Day = €22,500 + €1,575 – €15,000) x 20 = €181,500 Scenario A maximises gross profit per day. Therefore, answer 1 (€100) is the correct answer.


Answer key

Question 3

Question 4

Correct answer: 4

Correct answer: 1

Ticket prices will affect revenues for each scenario and will therefore affect the gross profit difference between them.

There are 60 different types of tickets with an average of 2,000 points each. The total number of points from all types of tickets is therefore 60 x 2,000 = 120,000.

Fuel costs will affect the cost of the flight, and since the number of flights is different for each scenario, this will affect the gross profit difference as well.

In order to find the maximum number of points that could be earned with a single type of ticket, the points of all the other types of tickets need to be minimised.

The total number of seats per aircraft could affect the gross profit difference. For example, if it was 300 then the number of passengers per flight and the number of flights per day for scenario A might increase.

None of the tickets have less than 500 points and exactly 15 have less than 1,200 points. At a minimum, we can have 15 tickets with 500 points. This leaves 44 tickets (60-15-1) with more than 1,200 points. In order to maximise the points of one ticket the remaining 44 should carry 1,200 points each.

Therefore, all of the factors listed could affect the difference in gross profit. Notice that you are asked to identify which factors would NOT affect the difference in gross profit, hence answer 4 is correct.

Therefore, out of the 120,000 points, there are 120,000 – (15 x 500) – (44 x 1,200) = 59,700 points for the remaining ticket. The correct answer is therefore answer 1.


Answer key

Question 5

Question 6

Correct answer: 1

Correct answer: 1

The expected revenues can be calculated as follows: 1.  Calculate the number of passengers per category 1y + 3y + 8y = 240 => 12y = 240 => y = 20: First class passengers: 20 Business class passengers: 60 Economy class passengers: 160 2. Calculate the revenues from tickets: 20 x €700 + 60 x €300 + 160 x €150 = €56,000 3. Calculate the revenues from Wi-Fi purchases: 5% x 160 x €2 x 3 = €48

This calculation can be broken down into two steps: 1.  Calculate cost per lead 2.  Calculate cost per sale The cost per lead needs to be calculated across all three banks, taking into account their total share of mix: $5 x 30% + $3 x 60% + $6 x 10% = $3.9 / lead The cost per sale can be calculated by dividing the cost per lead by the conversion rate: $3.9 / 10% = $39.0.

Therefore total revenues are €56,048. The correct answer is therefore answer 1. A faster way to obtain the correct answer is to calculate the revenues from Wi-Fi first (€48). You should then notice that ticket revenues can only contribute towards the tens of the hundreds in the result. The right answer will therefore finish by 8. By doing this, all answers can be eliminated except number 1.


Answer key

Question 7

Question 8

Correct answer: 2

Correct answer: 2

In order to maximise its conversion rate, PayCo needs to rank lead sources from the highest to the lowest conversion rates. It should then use as many leads from the first source before considering the second one: 1.  Com bank 15%; 80,000 leads available 2.  Alma bank 12%; 100,000 leads available 3.  Bingo bank 8%; 600,000 leads available

Sufficient information is provided to calculate the cost of sale for each lead source: 1.  Alma bank: $5 per lead with a 12% conversion 2.  Bingo bank: $3 per lead with a 8% conversion 3.  Com bank: $6 per lead with a 15% conversion

PayCo needs 300,000 leads per year to meet its target sales. To maximise the conversion rate, the lead mix should then be: 1.  Com bank: 80,000 2.  Alma bank: 100,000 3.  Bingo bank: 120,000 The maximum conversion rate achievable is then: (15% x 80,000 + 12% x 100,000 + 8% x 120,000) / 300,000 = 11.2% The correct answer is therefore answer 2.


For each bank, the cost per sale can be calculated by dividing the cost per lead by the conversion rate: 1.  Alma bank: $5 / 12% = $41.7 2.  Bingo bank: $3 / 8% = $37.5 3.  Com bank: $6 / 15% = $40.0 Bingo bank has got the lowest cost per sale. In addition, it can provide 600,000 leads per year which is sufficient to cover PayCo’s needs of 300,000. The correct answer is therefore answer 2.

Answer key

Question 9

Question 10

Correct answer: 4

Correct answer: 4

The head of sales’ initial conclusion is that sellers handling Bingo Bank leads “have been consistently making less sales and getting lower bonuses than their peers”.

Answers 1 to 3 would all help decrease sellers’ tendency to sell at unprofitable prices. However, none of them would completely stop the trend: 1.  Training sellers to give better prices could still result in sellers giving unprofitable prices in practice. 2.  Giving a fine to sellers, while a good incentive, is not guaranteed to fully stop the trend. 3.  Similarly, setting up a better incentives scheme is also not guaranteed to halt the trend.

Indeed, the conversion rate for leads from Bingo Bank is lower than that of other banks. The comment implies that, to increase sellers’ satisfaction, their bonus would need to be similar relative to their peers. However, if bonuses increase to $200 per sale for all sellers, the relative bonus obtained by sellers focused on Bingo Bank will not increase. Answer 4 would therefore not help solve the problem and is the correct answer.


Answer 4 is the correct answer because it fully prevents sellers from selling at unprofitable prices via an external audit team.

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