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As always, a fantastic overview and guideline for pricing cases! One clarification on your iPhone example at the beginning: You are mentioning that if the company wants to make 20% profit margin (PM) and the cost of the phone is 200$, then the price should be set to 240$. However, I believe it actually should be 250$ (not 240$) in order to achieve 20% PM. PM=(price - cost)/price = (250$ - 200$)/250$=50/250=1/5 which corresponds to 20%. Please, correct me if I am wrong. Anyways, thanks for your content!
@@gursimarsahni8157 The concept of profit margin involves the product final price and the cost. If you consider a final price of $240 it would be composed of $83.33% of costs ($200) and 16.66% of profit ($20). Therefore, the final price should be $250, so that 80% are costs and 20% is the profit margin.
I agree with @TheDimiKid here, @HackingTheCaseInterview. I sent you an email a few min ago, and I noticed the same error while reading the article on your website, plus another typo regarding the conclusion of your princing based on value strategy...
We'll try include more examples in future videos! In the mean time, our website has a detailed article on pricing case interviews with concrete examples. It may be helpful to you to check out!
Why is the consumer surplus flat instead of percentage wise ? 200$ off of 600$ is one third of the product. So I get why the iphone price should be 1000 - 200 = 800$, but why not make it proportional and make it 1000 - 333 = 666 $ ?
From the customer point of view, we usually think of consumer surplus as an absolute figure. For example, a customer would rather have a $200 surplus than a $100 surplus. What percentage of the price each surplus makes up isn't what causes a customer to decide what they want to purchase in theory.
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Want to learn the most effective case interview strategies and save yourself hundreds of hours? Enroll in our comprehensive case interview course today: www.hackingthecaseinterview.com/courses/consulting
As always, a fantastic overview and guideline for pricing cases! One clarification on your iPhone example at the beginning: You are mentioning that if the company wants to make 20% profit margin (PM) and the cost of the phone is 200$, then the price should be set to 240$. However, I believe it actually should be 250$ (not 240$) in order to achieve 20% PM. PM=(price - cost)/price = (250$ - 200$)/250$=50/250=1/5 which corresponds to 20%. Please, correct me if I am wrong.
Anyways, thanks for your content!
You are right! Small typo there
how? the phone should be priced at $240 to achieve a 20% profit margin on the cost of production. since when is 20% profit on 200 = 250 ?
@@gursimarsahni8157 Profit margin is calculated wrt to Revenue and not Cost. In simpler terms, Profit margin = (SP-CP)/CP
@@gursimarsahni8157 The concept of profit margin involves the product final price and the cost.
If you consider a final price of $240 it would be composed of $83.33% of costs ($200) and 16.66% of profit ($20).
Therefore, the final price should be $250, so that 80% are costs and 20% is the profit margin.
I agree with @TheDimiKid here, @HackingTheCaseInterview. I sent you an email a few min ago, and I noticed the same error while reading the article on your website, plus another typo regarding the conclusion of your princing based on value strategy...
Thank you so much for your videos, you are so helpful !!
Glad you like them!
Do you have any examples to show for like you did in the market size?
We'll try include more examples in future videos! In the mean time, our website has a detailed article on pricing case interviews with concrete examples. It may be helpful to you to check out!
Why is the consumer surplus flat instead of percentage wise ?
200$ off of 600$ is one third of the product.
So I get why the iphone price should be 1000 - 200 = 800$, but why not make it proportional and make it 1000 - 333 = 666 $ ?
From the customer point of view, we usually think of consumer surplus as an absolute figure. For example, a customer would rather have a $200 surplus than a $100 surplus. What percentage of the price each surplus makes up isn't what causes a customer to decide what they want to purchase in theory.
Do u have discount for Black Friday ?
We do not have any Black Friday discounts unfortunately.
pulchritudinous