This is incorrect

Old revenue = 50000*250*.005=250*250

New revenue with conversion rate r% = 50000*r*250*.9 = old revenue = 250*250

r = .55%

Business Intelligence Analyst Interview Boston, MA

Wayfair## 50,000 shoppers with a 0.5% conversion rate for a chair

that costs $250. Wayfair makes a 27% profit. Next, 50,000 shoppers will get a 10% discount. What is the conversion rate they must achieve to achieve the same profits as before?

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14 Answers

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18

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This is incorrect

Old revenue = 50000*250*.005=250*250

New revenue with conversion rate r% = 50000*r*250*.9 = old revenue = 250*250

r = .55%

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11

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Scenario 1

Number of sales=50,000*.5/100 = 250. Revenue=250*250 = 62,500. Profit is 27%. Therefore 62,500 = 1.27*cost

Therefore cost = 49,212.598. Profit = 62,500-49212.598 = 13,287.40. Cost of chair = 250/1.27 = 196.85

Scenario 2

Number of sales = 50,000*r/100 = 500*r (r is new converion rate)

Revenue = 500*r*.9*250

Total cost = 500*r*196.85

Profit = 500*r(250*.9-196.85) = 13,287.40

500*r*(28.1496) = 13,287.40. Therefore r = 0.944.

The first answer considers profit as margin (percentage of sales) which seems incorrect or needs to be clarified

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4

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Number 2 is wrong, number 1 is right. Just because revenues equal doesnt mean profits will equal - they sacrifice profits when they decide to give the sale

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1

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Do they expect you to do this in your head, or will they give you pen/paper and a minute?

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5

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July 9th Answer is the correct answer. It is not hard:

Initial profit is = 50000 * 0.005 * 250 * 0.27 (No need for the calculator yet)

After sale profit = 50000 * x * 250 * 0.01 * 0.27 (Still don't need the calc)

The question asks for the conversion rate such that profit are the same before and after the sale, so...

Initial profit = After Sale profit

50000 * 0.005 * 250 * 0.27 = 50000 * x * (250 - (250 * 0.01)) * 0.27 (divide through & cancel)

0.005 * 250 = x * 225

x = (0.005 * 250) / 225

x = 0.0056 or 0.56%

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1

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You don't actually need to calculate anything other than the new conversion rate. Why? Look at the equation below:

(customer sent = 50000) * (customer bought / customer sent = 0.005 conversion rate) * (revenue / customer bought = 250) * 0.27 (profit / revenue) gives (profit / customer sent). this should be equal to the one after discount. only (revenue / customer bought) changed -> it decreased 10%. therefore, conversion rate needs to increase by (1/0.9), which gives 5.56%.

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0

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July 9 is correct. Nov 21 is incorrect.

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0

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July 9 is wrong because the profit margin changes(As sale price changes, but the cost doesn't change)

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0

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$250 is the actual cost of the chair (profit not included) or the price listed？？

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Answer from Nov 21 is correct while July 9 is incorrect. The latter one is just making the revenues equal before and after the sale. It is ignoring the fact that profit % i.e. cost price is also changing after the sale.

Before the sale cost price is 182.5*250. After sale cost price would be 182.5*(no >250), as with new conversion rate more customers will be buying. So even if the revenues are equal, profits won't be equal.

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Total Shoppers 50000

Conversion Rate 0.5

Total Customers 250

Selling Price 250

Profit % 27

Cost price 196.8503937

Profit in $ 53.1496063

Total Sales 12500000

Total Profit 13287.40157

Scenario 2:

Selling price 225

Profit 28.1496063

Customers required 472.027972

Conversion Rate in % 0.944055944

Please note that the $250 selling price is (Cost price + 27% profit) on it. So Nov 21, 2014, assumption of doing .27*250 to get the profit is wrong.

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0

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No of chairs sold = 50000*0.005 = 250

Selling price of chairs sold = 250

Cost price of chairs = 250*(1-0.27) = 182.5

Scenario 1

Total profit = no of chairs sold * selling price - no of chairs sold * cost price

= 250*250 - 250*182.5

= 62500 - 45625

= 16875

Total profit = 16875

Scenario 2

No. of chairs sold = x

Selling price = 250*(1-0.1) = 225

Cost price = 182.5

Total profit = no of chairs sold * selling price - no of chairs sold * cost price

16875 = x*225 - x*182.5

x = 16875/42.5

x = 397.06

397.06 or 398 chairs should be sold to make the same amount of profit

No of chairs sold = 50000*conversion rate

398 = 50000* conversion rate

conversion rate = 398/50000

= 0.00796

Required conversion rate would be 0.8%

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0

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- Number of customers that purchase chair: 50,000 * .5% = 2500 Customers

- Revenue: 250 Customers * $250 = $62,500

- Profit: $62,500 * 27% = $16,875

- Discount Price: $250 * 90% = $225

- Revenue with Discount: ($225*X customers) * 27% = $16,875

- X = 278 Customers

- Conversion Rate: .556%

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Step 1: Calculate profit (250 * 250 * 0.27 = 16875)

Step 2: Calculate discount price (250 * 0.9 = 225)

Step 3: Calculate price of chair (250 * 0.73 = 182.5)

Step 4: Calculate profit margin ( (225 - 182.5)/225 = .19)

Step 5: Calculate new conversion rate (225 * 0.19 * x = 16875)

x = 395

395/50000 = 0.79% the new conversion rate