Problem Definition
Since climbing was introduced as an Olympic discipline, public interest in the sport has surged, and indoor climbing gyms have seen a boom in popularity. Indoor climbing has evolved into a highly social experience, where climbers often gather at the gym's cafe or bar to relax, share stories, and enjoy food together after their training sessions.
Your client is a friend who has created a business case for opening a new indoor rock climbing gym called Big Rock. To secure a bank loan for funding, the client must demonstrate the business's viability and present a detailed implementation plan. Specifically, the bank has asked for the venue's location and layout, a marketing plan, and the price structure of services.
Your client has asked for your help in preparing a response for the bank.
Additional InformationAsk for more dataHide data
- The client has two potential sites in mind (city center and suburban) but has yet to make a choice between them.
Question 1Structuring
How would you structure your approach to this problem?
Hint · Structuring
Build 3–4 branches that are specific to this client and question, not a generic framework. Check they don't overlap and together cover the problem.
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- Location
- Best location to drive demand and revenue (e.g. parking, footfall, competition)
- Cost of location options
- Offering
- Target service offering
- Core service offering (e.g., number of climbing walls)
- Additional services (e.g., shops, bar/restaurant)
- Pricing for proposed offering
- Pricing structure (e.g., membership vs. one-off fees)
- Price point (e.g. benchmarking, customer demand)
- Target service offering
- Marketing plan
- ROI for direct marketing options (e.g. social media advertising, local newspapers, flyering)
- Indirect growth options, e.g. referrals
- Financial projections
What the interviewer is looking forShow guidanceHide guidance
- The structure should address the bank's questions about venue, pricing and marketing, and demonstrate to the bank that the business will be profitable.
Question 2Judgement & Insights
Your client has researched some location options and has identified one potential building in a suburban area and another in the city center. Exhibit 1 summarizes the characteristics of each.
Hint · Judgement & Insights
Read the exhibit title, axes and units first. Lead with the ‘so what’, then back it with one or two numbers.
How would you decide between these two locations, and which would you choose?
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- There is no competitor near either location
- The income levels in both areas are similar
- The suburban location comes with parking space
- Climbing centers typically present 200-500 square meters, and 10-20-meter height
Exhibit 1Location Options
| City Center | Suburbs | |
|---|---|---|
| Average size (ground surface) | 10m x 15m | 15m x 40m |
| Average height | 13 m | 26m |
| Population density | 1,500 inhabitants / km2 | 500 inhabitants / km2 |
| Building style | Gothic | Industrial |
| Monthly rent | $20/m2 | $4/m2 |
Source: Big Rock case file
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- To select a location, we need to understand both its cost and its ability to drive traffic and revenue. Overall, the suburban location seems a superior option, but might require bigger initial investment
- In terms of cost, the suburban location is 20% cheaper ($2,400 vs $3,000 per month). However, it is much bigger, so might require a larger initial investment to equip
- In terms of ability to drive traffic and revenue:
- The city center location seems small in area (150 m2) and medium in height (13 m), which might limit our total capacity as well as affecting our ability to host advanced climbers and offer ancillary services (e.g., restaurants). On the other hand, the suburban location offers a very large space and lots of height
- The city center is likely to have a bigger population of young professionals, who have the disposable income to socialize on-site. However, the suburban location may give access to more families with children -- with the potential to sell more classes and events (e.g., parties)
- The lower population density of the suburbs is somewhat offset by the fact that the venue comes with parking space
- The style of the building is not very relevant, although the suburban location might require some more investment to include an attractive restaurant / bar area
What the interviewer is looking forShow guidanceHide guidance
- Exhibit 1 provides partial information. Candidates need to think beyond the available data, determine the factors to consider to make a recommendation, and make hypotheses or ask for missing information
- The candidate can recommend either location, with a supporting rationale
Question 3Numeracy
Your client has learned from a customer survey that people have a high tendency to start climbing after they've tried it once. To leverage this finding, and attract a bigger audience, your client is considering implementing a marketing campaign. The idea is to rent a portable climbing wall to allow the general public to try wall climbing. The campaign will run on Saturday and Sunday and the details are in Exhibit 2.
Hint · Numeracy
Write the formula before you plug in numbers, keep units and zeros explicit, and sanity-check the order of magnitude at the end.
How would you assess whether this is an effective marketing campaign?
Exhibit 2Portable Wall Campaign Data
| Value | |
|---|---|
| Rent / day ($) | 250$ |
| Operating hours | 10AM -- 6PM |
| Duration of try-out | 10min |
| # Operators | 2 |
| Operator hourly wage | $30 |
| Conversion to climbing at an indoor gym | 50% |
| Chance to choose your gym | 75% |
Source: Big Rock case file
Additional InformationAsk for more dataHide data
- If the candidate calculates their answer without asking for the information, ask them if there are any implicit assumptions they have made which could impact their answer.
- Only one person can try the wall at a given moment in time
- Assume an average utilization of 75% during the course of the weekend
- Assume a new climber will drive a total of $70 in gross profit on average, spread across multiple visits
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- Return = Additional Profit -- Investment
- Additional Profit = # new climbers * average gross profit per new climber
- # new climbers = # tried * % start climbing * % your gym
- # tried = [operating hours * utilization] / time per try-out
- # tried = [16hrs * 75%] / 10min
- # tried = 72 tries
- # new climbers = 72 tries * 50% * 75% = 27
- Additional Profit = 27 climbers * $70 = $1,890
- Investment = Rent + Wage
- = $500 + [2 operators * 8 hours * 2 days * $30/hr]
- = $500 + $960
- = $1,460
- Return
- = $1,890 - $1,460 = $430 or a return on investment of ~30%
- Additional Profit = # new climbers * average gross profit per new climber
- The return on investment of this marketing campaign is ~30%, suggesting it would be an effective campaign.
- We could consider alternative campaigns, or improve this campaign by decreasing its cost, increasing the rate at which climbing becomes a habit or increasing the likelihood that they choose our gym (e.g., small discount coupon for first session at our gym).
Question 4Creativity
Your client asks how they can improve the return on investment for the climbing wall marketing campaign.
Hint · Creativity
Brainstorm in buckets (e.g. internal vs external, short vs long term) so ideas stay structured and you can see gaps.
What ideas do you have to help increase the return on investment?
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- Decrease cost
- Buy the portable wall
- Change the organization so it can be manned with one person only, or used by two climbers at once
- Increase conversion
- Take a picture of the user and email it for free, feeding the contact details into our CRM
- Provide discount for first Big Rock gym session
- Provide free coaching in the first session, if booked within two weeks
- Provide package discount for signing up/pre-paying for 5 sessions
Question 5Synthesis
What recommendation would you put forward to your client on how best to implement their Big Rock business idea?
Hint · Synthesis
Answer first: the recommendation, two or three reasons with numbers, then risks and next steps.
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- You have asked us to propose a location, price point, and marketing strategy in order to land the bank loan. We believe that we should:
- Choose the suburban location, which offers a lower cost and a more suitable area
- Pilot the portable climbing wall to acquire new clients, as it should generate a 30% ROI, and experiment with ways to increase the conversion rate from the activity
- Before we finalize our response to the bank, we need to look further into the venue layout, pricing of our offering, and develop full financial projections.
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