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Why store staff give away discounts

You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.

Case timer

00:00

Target length:

1. Read the prompt aloud

Read it slowly, then pause. Let the candidate ask questions before they structure.

A fictional electronics retailer in the UAE sells a laptop at a list price of AED 2,000. It costs the retailer AED 1,400. Store staff earn 5 percent of revenue as commission and may give up to 15 percent off. Margins are falling because staff give the full discount on most sales. Show what the discount costs the salesperson and the company, then test a commission of 15 percent of gross margin instead (illustrative numbers).

2. Answers to clarifying questions

This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.

3. A model structure

Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.

Compare the salesperson's gain with the company's gain, with and without the discount
- Gross margin at full price and at 15 percent off
- Commission on revenue: what the salesperson loses by discounting
- What the company loses by discounting
- Key: Commission on margin: does the salesperson now feel the discount?

4. The working, step by step

Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.

Step 1: Margin at full price
What a strong candidate does: AED 2,000 minus AED 1,400.
Gross margin at full price (AED): 2,000 - 1,400 = 600
Step 2: Margin at 15 percent off
What a strong candidate does: The price falls to AED 1,700, but the cost stays AED 1,400.
Gross margin at 15 percent off (AED): 2,000 × 0.85 - 1,400 = 300
Step 3: Salesperson's loss with a revenue commission
What a strong candidate does: 5 percent of 2,000 is AED 100; 5 percent of 1,700 is AED 85.
Commission lost by discounting (AED): 2,000 × 0.05 - 2,000 × 0.85 × 0.05 = 15
Step 4: Company's loss
What a strong candidate does: The company keeps margin minus commission: 600 minus 100 = 500 at full price, 300 minus 85 = 215 with the discount.
Company profit lost by discounting (AED): (600 - 100) - (300 - 85) = 285
Step 5: Salesperson's loss with a margin commission
What a strong candidate does: 15 percent of AED 600 is 90; 15 percent of AED 300 is 45.
Commission lost by discounting, margin scheme (AED): 0.15 × 600 - 0.15 × 300 = 45

The recommendation to listen for

At the end, say: "The CEO walks in. What is your recommendation?"

Pay commission on gross margin, not revenue. Today a discount costs the salesperson AED 15 but costs the company AED 285. So discounting to close a sale is the rational choice for staff. With 15 percent of margin, the same discount costs the salesperson AED 45, three times as much. The commission at full price stays similar (AED 90 against AED 100). Expect fewer discounts. The risk is that some sales are lost; test the scheme in a few stores first and track both margin and sales volume.

Risks a strong answer names: Staff may push the highest-margin products even when they do not suit the customer; A change in pay can upset good staff; explain it and show the maths.

Next steps: Run the new scheme in 10 stores for one quarter and compare margin per store with similar stores.

Score the candidate

Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.

This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?

Structuring

1: No clear structure, or a memorized framework that does not fit the problem.
3: A sensible structure, but with some overlap, a gap, or no clear priority.
5: A structure built for this problem, with no overlap and no gaps, a stated hypothesis, and a clear first step.

Math

1: Frequent errors, no units, or needed heavy help to finish.
3: Right answers but slow or messy working, or one error caught late.
5: Accurate and clearly narrated, with units, a sense check, and what the number means.

Exhibit reading

1: Read the chart aloud without finding the number that matters.
3: Found the key number but gave only part of the so-what.
5: Pulled the right number quickly and said what it means for the case.

Synthesis

1: Summarized what was done, with no clear answer.
3: Gave an answer, but with weak reasons or no next step.
5: Answer first, then two or three reasons with numbers, the main risk, and next steps.

Communication

1: Hard to follow: long silences, no signposting.
3: Clear most of the time, with some rambling.
5: Calm and concise, signposted each step, and checked in with the interviewer.

Total

0 out of 25

Score all five criteria to see the band and the feedback template.

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