Case 046Commercial and market casesCore
A direct-to-consumer cosmetics brand has 20 lakh monthly visitors, 2.5% conversion, an average order of Rs 900 and 35% of buyers coming back within a year. Build annual revenue and say which lever the sponsor should push first.
1The situation
Alankrita Beauty sells lipsticks, kajal and skincare through its own website and app. It gets 20 lakh visitors a month, of whom 2.5% place a first order, at an average of Rs 900. Of those first-time buyers, 35% come back within the year, and those who return place 2 more orders on average through email and app reminders. Count each year's buyers and their repeat orders within that year.
Gross margin is 65%. Paid marketing brings in visitors at about Rs 7.5 a visitor, and each repeat order costs about Rs 50 in reminders and offers. A sponsor is considering an investment and asks where growth should come from first.
2Your task
Build annual revenue from the funnel, then compare a 10% push on each lever, net of what it costs, and say which the sponsor should push first.
Quick check
All four levers raise revenue. Which is likely to add most to profit for a 10% push?
Worked solution
Try it on paper, then open one step at a time.
30-second answerThe answer to give first
Revenue is about Rs 91.8 crore: Rs 54 crore from 6 lakh first orders and Rs 37.8 crore from 4.2 lakh repeat orders. Push conversion first. A 10% lift in conversion adds as much revenue as 10% more visitors without paying for the traffic, about Rs 4.8 crore of contribution after the site work. More visitors come next; order value and repeat rate add less for the same push.
Step 1How do you build revenue from the funnel?
Follow a customer through the shop, the way you would count a sweet shop's takings: people who walk past, the share who come in and buy, what they spend, and how many come back. 20 lakh visitors a month is 2.4 crore a year; at 2.5% that is 6 lakh first orders, and at Rs 900 each, Rs 54 crore. Then the repeat branch: 35% of 6 lakh buyers return, 2.1 lakh people, and place 2 orders each, 4.2 lakh orders, another Rs 37.8 crore. Total revenue is Rs 91.8 crore, and 41% of it comes from customers the brand did not have to pay to find again.
Step 2What does a 10% push on each lever add, after its cost?
Compare like with like: push each lever 10% and count contribution, gross profit less marketing, not revenue. Base contribution is Rs 59.67 crore of gross profit less Rs 20.1 crore of marketing, Rs 39.57 crore. Visitors, conversion and order value each add Rs 9.18 crore of revenue, but only visitors bring more media spend, and only order value needs a delivery subsidy; repeat rate adds just Rs 3.78 crore because it moves only the repeat branch. After each lever's own cost, conversion adds Rs 4.76 crore, visitors Rs 3.96 crore, order value Rs 2.91 crore and repeat rate Rs 2.25 crore.
| Lever, pushed 10% | Revenue change | Gross profit change, net of reminders | Cost of pulling it | Net gain | How it is pulled |
|---|---|---|---|---|---|
| Visitors +10% | +9.18 | +5.76 | 1.80 | +3.96 | more paid media at Rs 7.5 a visitor |
| Conversion +10% | +9.18 | +5.76 | 1.00 | +4.76 | one-off checkout and site work |
| Order value +10% | +9.18 | +5.97 | 3.06 | +2.91 | free-delivery threshold subsidy |
| Repeat rate +10% | +3.78 | +2.25 | 0.00 | +2.25 | reminders, already at Rs 50 an order |
Step 3Which lever goes first, and what else should a makeup company think about on revenue?
Conversion first: it has the largest net effect, a one-off cost rather than a running one, and it makes every rupee of future media spend work harder. In practice that means a faster checkout, cash on delivery where returns allow, shade-matching tools that cut the fear of buying the wrong colour, and reviews on every product page. Visitors come second, because they scale but cost money every month. Repeat rate is the lever with the longest tail: its 10% push adds little in one year, but returning customers cost Rs 50 an order instead of a fresh acquisition, so it compounds.
Then the revenue questions a sponsor asks of any cosmetics brand. Returns and damaged goods, which can take several points off gross revenue. The channel mix, because marketplaces bring volume but take a commission and own the customer. Seasonality around festivals and weddings, which makes one quarter carry the year. And shade range and expiry, because a wide range drives conversion but leaves unsold stock that must be written off. The limit of this funnel is that it treats conversion and order value as independent; in practice a free-delivery threshold can lift order value and lower conversion at the same time, so test levers one at a time.
Where candidates lose it
The usual loss is comparing levers on revenue alone and calling them equal, because visitors, conversion and order value all add the same Rs 9.2 crore. The interviewer wants the cost of pulling each lever, which is where they differ.
The second miss is double counting repeat buyers as fresh visitors. Repeat orders come from existing customers through reminders, so they sit on their own branch of the tree.
What the interviewer asks next
- Paid media costs rise to Rs 10 a visitor. Which lever moves up the list?
- How would you check that the 35% repeat rate is not flattered by a few heavy buyers?
- Would you move part of the range onto marketplaces, and what does that do to contribution?
Asked at Bain Capital, Generalist, Boston, 2023 (Wall Street Oasis): What are some things a makeup company should think about in regards to revenue?
Company names and figures are illustrative.