Operation senior interview questions shared by candidates
CASE: Cross-selling Credit Insurance to Cardholders direct mail: .50, 1% response rate, avg balance $1000, 5% claim insurance, etc. Profitable? How make more profitable? What if response rate doubled but claims doubled? Make chart of profit curve, what does it mean if..., etc.
see cross selling case on CO's website
Hi Sir, Can you confirm if below is the correct answer. I believe its always unprofitable. Assume 100 direct mail offers were sent for card insurance, 1% response rate means, 1 person bought credit insurance Revenue = 1% of avg balance = (1/100)*1000 = 10$ Cost = Insurance claim Cost + Mailing Cost = (Response Count* claim rate * Avg Bal) + (No. of mails sent * Cost per mail) (1* (5/100)*1000) + (100 * 0.5) = 50 + 50 = 100 $ Selling credit insurance in this case is unprofitable even without the mkt cost. For other questions if we assume, response rate = x%, claim rate = y% with the assumption, 100 offers were sent for credit insurance Revenue = x*(1/100)*1000 = 10x Insurance Cost = x*(y/100)*1000 = 10xy Mkt Cost = 100 * 0.5 = 50 Profit = 10x-10xy-50 Assumption is that y% claim rate means, of x people who take the offer, y% of those x, file for claim, which means company has to cover their avg bal of 1000 for people who filed the claim, and hence is a loss for the company. At this point its a loss to sell credit insurance. Let me know if i am doing anything incorrectly.
Great the way you laid it out, very thorough and clearly organizing your thoughts. Remember to think out loud/explain your thinking as you write during the case. Yes, something is incorrect, very small but key, changes the whole answer: you are assuming everything is in the same time unit. When you calculate revenue to be $10, you should realize right away that would be a MONTHLY amount, while claims et all would be annual. Helps to know that credit cards in the US regularly try to entice customers to add little $5-10/month services to their bills, whether insurance, credit report monitoring, etc so that $10 couldn't possibly be yearly, ie insurance less than 0.90/month.
CASE: Recovering Written-off Past Due Balances 6 months past due, avg $2000 balance, 15% pay in full, profitable? If introduce settlement option for 60% of balance, 10% pay settlement but 5% of them dont pay in full, better choice? With new model, now 9% pay in full, but with settlement option now 10% take settlement but a third of original payers dont pay in full, better? etc. (poorly worded and confusing case. unhelpful vague interviewer, arggg, cost me the job).
Behavioral (3 q's per 45 minute interview): A time you called on an "expert" to complete a task or problem. A time you faced an obstacle to a project being on-time. A time you needed to learn something new for a project. A time when you persuaded others to see and accept your view. A time when you needed to organize and manage a new assignment while continuing a current assignment. A time when you significantly and quickly adapted plans to the changing goals of a project or team.
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