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This case is a retired interview case designed specifically for the verbal coaching of candidates.
Given the large investment required to develop the Firm’s assessment techniques, and the
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American Beauty Company
Introduction: Let’s assume our client is American Beauty Company (AB), which was founded
over a half century ago to make high quality hair color available and affordable for women to
use at home. Over the years, AB expanded its product line into hair care and other related
businesses both in the U.S. and around the world.
Traditionally, consumers have viewed AB as the authority in at-home hair color. AB’s famous
800 hotline dedicated to helping consumers with hair color questions continues to serve both
users of their own products as well as their competition’s. In the U.S., AB sells its products in
drug stores, supermarkets, and mass retail outlets. All of AB’s operations and R&D continue to
be performed in-house.
Despite its strong reputation for quality in the past, AB’s flagship hair color business is now
facing significant challenges. As one of the two primary competitors in the at-home hair color
industry in the U.S., AB previously dominated with over 50% of the market. In recent years,
however, the company has been steadily losing significant share to its primary competitor Belle
International. Retailers are threatening to reduce shelf space for AB’s hair color products in
favor of the competition which would set off a downward spiral of even lower share numbers,
revenues, and profits.
Problem Definition: What should American Beauty do to reclaim its dominant position in
the U.S. at-home hair color market?

Note to Assessor: Before proceeding with the case, ask the candidate if they have any questions
or need the above information repeated or clarified.

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Issue Breakdown
Question 1: What key areas would you want to explore in order to help American Beauty
achieve its market share objectives for its U.S. hair color business?
Optional probing question: If you only had time to look at three things, what would you
do first, second and third? Why?
Note to Assessor: There are many possible answers. What you are looking for is the ability to
do 80/20 problem solving well to help you differentiate a good problem solver from a distinctive
problem solver.
Typical responses:

AB competitive advantages/disadvantages. Analyze to better understand causes of market

share loss:

AB product performance vs. competition. Analyze AB’s product portfolio vs.
competition’s products. What are strengths/weaknesses inherent in the product itself?
How are they positioned relative to AB products? What consumer needs are they
addressing better than AB?

Role of advertising/promotion. Does competition have an advantage here either with
volume (spending more) or more effective message or more effective promotion
(couponing, in-store display, gift with purchase)?

Role of distribution/trade. Is the competition cutting special deals with the trade to
gain shelf space? What could AB do in return?

Pricing of AB product portfolio vs. competition. How sensitive are key consumer
segments to price, and does the competition have an advantage here?
Product. Understand what consumer segments/unmet needs might offer best opportunity
for product improvements, new products, or brand extensions
Salesforce. Are there opportunities to make them more effective e.g. via incentives?
Other potential levers/opportunities for growth:

What other opportunities might AB identify that the competition has not, and
proactively exploit? Are there any under-penetrated channels? (E.g. department store,
internet, 800#) Are there any under-penetrated geographies within the US?

Are there any opportunities to acquire smaller hair color companies?

Could AB deploy its resources more effectively on stronger/new brands by
pruning/disinvesting in weaker brands (portfolio analysis)
Other reasonable answer ___________________

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Issue Streams for Rest of Discussion:
1) Declining market share
2) New product exploration
Issue Analysis: Declining market share
Question 2: Given the information in Exhibit A, do you predict that AB’s overall market
share will go up, down or stay the same?
Note to assessor: This is meant to test whether someone has a quick, intuitive feel for numbers
without having to go through the entire calculation. If candidate starts doing calculations, ask
them to try to give you a directional answer without doing any calculations.
Show candidate Exhibit A. Make sure to get this information back from the candidate.
Segment Segment Size ($M) Segment growth AB sales ($M)
Women 800 5% 400
Men 200 20% 20
Teens 100 10% 30
1,100 450

Answer:
Candidate should be able to tell you, without doing any calculations, that AB’s market share
is likely to decrease next year, since they have proportionally higher share (48%) in the slow-
growing women’s segment and a proportionally low share in the faster-growing men’s (9%) and
teen (33%) segments.

(Calculation: shown here, for assessor’s information)

AB’s sales next year, assuming AB holds share within each segment:
= (400 x 1.05) + (20 x 1.2) + (30 x 1.1)
= 420 + 24 + 33 = 477

Market size next year

= (800 x 1.05) + (200 x 1.2) + (100 x 1.1)
= 840 + 240 + 110 = 1,190

AB’s projected market share = 477/1190 = 40%

AB’s current share = 450/1,100 = 41%

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Optional question. If AB’s market share within the men and teens segments does not
change, what share of the women’s market would AB need to achieve in 2 years to get
back to 50% overall total market share?
Answer:
AB would need 66% share of the Women’s segment in 2 years.

Total market size in 2 years:

Year 1 Year 2
Women 800 x 1.05 = 840 840 x 1.05 = 882
Men 200 x 1.2 = 240 240 x 1.2 = 288
Teen 100 x 1.1 = 110 110 x 1.1 = 121
Total 1,190 1,291

AB’s scale from men and teens in 2 years

Men = 20/200 x 288 ≈ 29 million
Teens = 30/100 x 121 ≈ 36 million

AB sales in women’s segment to get overall 50% share (.5 x 1291) – (29 +36) = $580m, or
66% of the Women’s segment (up from 50% this year)

Optional probing question: What are the implications of this for AB?
Answer:

It will be tough for AB to meet its market share objectives by only targeting the women’s
market – they will likely have to target men and possibly teens

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Question 3: Your team has been able to gather the following current information about
AB and its primary competitor Belle International. What can you conclude about AB’s
declining market share from this data? Remember you should feel free to offer hypotheses
and ask questions to clarify this information.
Note to assessor: Show candidate Exhibit B but make sure to get this information back from the
candidate.
Brand awareness (women ages 18-55)
Aware of Am. Beauty Aware of Belle

Am. Beauty users NA 95%

Belle users 80% NA

Non-users 40% 60%

Perception of quality (women ages 18-55)

Am. Beauty is high quality Belle is high quality

Am. Beauty users 95% 85%

Belle users 70% 95%

Non-users* 55% 85%

*Perception among non-users aware of brand

Note to assessor: Users of other competitive products not included in above consumer survey

Typical responses:

Competition creating greater awareness among all users and non-users (advertising,
promotion, display, packaging, in-store presence). Competition is spending more and/or
doing a more effective job of creating awareness.
Superior perception of competition’s quality among all users and non-users. Product
may be superior and/or competition’s marketing efforts doing a better job of communicating
quality
Both AB and Belle users are happy with the quality of their own brand, but AB users
have a more favorable perception of Belle than Belle users have of AB.
Among users, determining if quality perception is driven by actual experience with the
brand vs. communication of quality (image in advertising, packaging, pricing, etc.) would
require more information about whether most users have tried the competition’s products.

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Low awareness among non-users more likely to be driven by advertising than by
experience in-store as they are not purchasers of hair color
Non-users are less likely to have tried either brand, so quality perception most likely
driven by image communicated through advertising
Competition introducing/updating products that are more appealing to today’s
consumers
Other reasonable answer __________________________________

Issue Analysis: New product exploration

Question 4: Within the women’s segment, what type of new hair color product do you
hypothesize might provide an opportunity for AB to capture share?
Might be able to target a segment of non-user women by developing a product to meet
currently unmet needs, which might include:

Women who color their hair in salons only. Hypothesize a segment of these women
might be attracted to a home color product that was convenient (no mess, does not take
more than 2 hours to color hair so it is comparable to getting hair done in a salon) and
had high quality comparable to a salon (color lasts, has good quality sheen, doesn’t
damage hair). This could be a high margin segment as they would likely be willing to
pay for a premium product.

Women who are not gray and do not currently color hair. Might be a segment of these
who would be interested in altering their hair color ‘for fun’ (would need to understand
what might ‘convert’ this segment to coloring their hair, would likely need to focus on
what shades were most desired by this segment, what price points they’d be willing to
pay, how important convenience is)

Potential segment could be women who don’t color their hair because they don’t mind
being gray – probably less attractive since would have to convert them to wanting to
color their hair (e.g. through advertising that promotes desire to look younger), and this
would not necessarily translate into sales for AB

Might look for segments of current women users who are unsatisfied to steal share from
competition by better meeting their needs. Potential unmet needs might include:
color/shade/sheen of color, time required for process, ease of use/no mess, how long color lasts,
not damaging to hair)
Other reasonable answer ____________________

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Optional probing question. You are very short on time. Given your hypotheses, what 1 or
2 key analyses would you want to conduct/ what information would you want to find out
(beyond what the candidate mentioned in question 1) to determine what kind of hair color
product represents the best opportunity?
Once again, there are many possible answers (some options below). What you are
looking for is the ability to do 80/20 problem solving well to differentiate a good
problem solver from a distinctive problem solver.

Identify most attractive segments to target

Conduct consumer research (e.g. focus groups) to test hypotheses, and determine what
needs-based segments might offer best potential for an AB product to gain share

Conduct research/analyses to determine the size of each of these segments (e.g.
quantitative research and/or estimate by using the characteristics of the segment: such
as number of women who get hair colored in salons, number of times per year they
visit, percent of them who would switch to a home color product if certain needs were
met)

Determine which segments would have greatest profit potential (i.e. potential for
gross/profit margin in addition to volume)
Determine what product attributes would be required
Assess whether this would be best executed by designing a new product in-house, re-
positioning a current product, or looking for an acquisition
Better understand the competition/likely competitive response in each segment
Estimate the market share potential for AB product in each segment (e.g. using consumer
research data, incorporating likely competitive response) and the profit potential (price could
charge, variable costs, investment required)

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Synthesis
Question 5: Let’s say at this point in the study, you run into the President of AB. Let’s
pretend that I am the president – I have a couple of minutes and want a quick summary of
your findings to date. What would you tell me?
Note to assessor: this part should be role played to give you a chance to test candidate’s ability
to deliver a synthesized response under some pressure
Typical responses:

AB’s market share loss appears to stem from weaker marketing relative to Belle
International, and also the fact that AB has not captured its fair share of the fast-growing Men’s
and Teen segments
To reclaim AB’s dominant position in the U.S. at-home hair color market, AB will need to
develop a strategy to re-capture its core women segment, likely via a combination of new
product launches as well as re-vamped marketing. It will also need to aggressively target the
Men and Teen segments.
Within the women’s market, we believe there may be some unserved segments, which we
need to study further with the appropriate market research

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Question 6: After gathering extensive data about the market and consumer needs, the
team believes there is significant share opportunity associated with the introduction of a
super-premium hair color product targeted at baby boomer women who currently use
competitive products. What other considerations and/or analyses concerning the launch
would you recommend AB do before moving forward on this opportunity?
Typical responses:

Product development, R&D. The product must meet the needs of the targeted consumers
and R&D may or may not have a suitable product available and ready or nearly ready to
produce. If not currently available, the timing and costs of development need to be understood
Operations. A product with significant share of the market might strain current capacity. An
evaluation of current capacity needs to be performed. If capacity is an issue then timing and
costs associated with adding capacity and/or outsourcing need to be determined and evaluated
Distribution/shelf space. Retailers would need to provide the shelf space required without
having to give up significantly on other AB brands to fully realize the benefits of a share gain
from a new product
Competitive response. A point of view on the likely response (e.g., pricing strategy,
advertising increases, promotions, new product introductions) and implications of each
Opportunity cost. The money invested in a new product could perhaps buy more share faster
by increasing (or improving) advertising and promotion, lowering prices, improving benefits, or
increasing distribution of current brands
Cannibalization of current brands. Although targeted at competitive users, a new brand is
likely to attract AB’s current users. An analysis of which brands are at risk and the likely share
impact on those brands is required
Other reasonable answer ___________________

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Question 7:
Note to assessor: Skip the following description if you asked the candidate question 6
After gathering extensive data about the market and consumer needs, the team believes
there is significant share opportunity associated with the introduction of a super-premium
hair color product targeted at baby boomer women who currently use competitive
products.
PART A.Given budget constraints at AB, the president would like to know how many
boxes of hair color would need to sell year 1 to break even. What share of the market does
the breakeven number represent in terms of revenue? Assume the following:
Unit production cost $2/box
Provide only if requested:
-Fixed costs: advertising and promotion $40mm; SG&A $8mm; product development $2mm
-Revenue/box $5
PARTB. Given that this is a premium product, there may be an opportunity to raise the unit
price. How much would AB need to raise the price for a breakeven quantity of 15mm units?

Typical responses:

Part A
1.BE= FC/(unit revenue – unit cost) = ($40+$8+$2)mm/($5-$2)= 16.7mm units
2. Breakeven market share = New product revenue/Total market revenue
[From Q.2; for simplicity assume market does not grow as a result of new product intro]
(16.7mm x $5/box)/$1.1B = $83.5mm/$1.1B = 7.6% share
Part B
15mm = $50mm/(X-$2)
15mm X – $30mm = $50mm
15mmX = $80mm
X= $5.33 AB would need to raise the unit price by $0.33 or 6.6%

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Exhibit A
Segment Segment Size ($M) Segment growth AB sales ($M)
Women 800 5% 400
Men 200 20% 20
Teens 100 10% 30
1,100 450

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Exhibit B
Brand awareness (women ages 18-55)
Aware of Am. Beauty Aware of Belle
Am. Beauty users NA 95%
Belle users 80% NA
Non-users 40% 60%

Perception of quality (women ages 18-55)

Am. Beauty is high Belle is high quality
quality
Am. Beauty users 95% 85%
Belle users 70% 95%
Non-users* 55% 85%

*Perception among non-users aware of brand

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