Strategy and launch cases

A strategy or launch case in a PM interview asks whether a company should do something and how you'd bring it to market, usually with no data to lean on. Here is the one we'll carry throughout:

"Should a mid-size outdoor-gear brand run its own resale marketplace for used gear, and if so, how would you launch it?"

The brand is made up. My assumptions, said out loud in the first minute: it sells tents, jackets and packs online and through outdoor retailers, has $200 million a year in sales, keeps a 40% gross margin (what's left of a sale after making and shipping the product), and holds email addresses for 1 million past buyers.

What a PM case grades

The interviewer usually has no answer key. You can say no to the marketplace and pass, or say yes and fail. How you got there tends to count for more. Did you get past the decision, into what ships first and what would make you stop? When you committed on thin evidence, did you say what the commitment rests on?

That first question is where a PM case parts from a consulting case. In a consulting interview you ask for data and often get it. A PM stays and ships the thing, so the case runs on past the yes.

Cracking the PM Interview warns former consultants about carrying the data-request habit over. Asking for market numbers gets you nowhere: your interviewer probably doesn't have them, and the exercise is about what you do without them. Turn each data request into a labeled guess they can correct:

"I don't have resale numbers, so I'll assume 1 in 20 past buyers lists something in a year. Correct me if you know better. Otherwise I'll carry it."

Structuring an estimate covers how to build guesses like that one.

What it does on its own, and what it does for the company

I keep two ledgers for any strategy question. The first asks what this would earn as a small business of its own. The second asks what it changes for the rest of the company. A product can fail the first and still deserve building.

The first ledger, using my assumptions:

• 1,000,000 past buyers × 5% who list an item a year = 50,000 listings.

• 50,000 × 60% that sell = 30,000 sales.

• 30,000 × $60 average used price = $1.8 million in goods sold.

• The brand keeps a 15% commission: $1.8 million × 15% = $270,000. Buyers pay shipping.

• A team of four at $150,000 each costs $600,000.

$600,000 minus $270,000 is a loss of $330,000 a year. On its own, this doesn't pay.

The launch below pays sellers in store credit, which leaves the 15% commission as it is. The credit adds profit only if it goes unspent or buys gear the seller wouldn't otherwise have bought, and I leave that out to stay cautious.

The second ledger has to cover the $330,000 loss, and it has entries on both sides. On the plus side, someone who can't stretch to a $150 new jacket today becomes a known customer who may buy new later. A new jacket also gets easier to justify when you know you can resell it.

On the minus side, some used jackets replace a new one. If 1 in 5 used sales does that, 30,000 × 20% = 6,000 lost new sales. Each loses $150 × 40% = $60 of margin, and 6,000 × $60 = $360,000.

Together that's $330,000 + $360,000 = $690,000 a year to earn back. At a 40% margin it takes $690,000 ÷ 0.40 = $1,725,000 of extra new sales, and $1,725,000 ÷ $200 million is about 0.9%.

Now "should we run a marketplace?" has become "would it lift new-gear sales by a bit under 1%?"

The cases below practice this step. For one of them, list only the questions you'd need answered to fill each ledger, then stop.

Using a strategy framework when you're stuck

You don't need a framework, and reciting one earns nothing. They help when you've run dry, by handing you a question you forgot to ask.

The table turned up two things my ledgers missed. Doing nothing is probably the strongest substitute, so sellers need a reason to bother, and store credit is a candidate. Retailers also need a conversation before launch.

Pick one row for the case below, use only its question, and write down what it surfaced.

What would have to be true

A common failure here is a long list of pros and cons followed by "so it depends." Instead, rewrite the decision as a short list of statements that must all hold for yes to be right, and grade each.

My rule is that any "unlikely" I can't fix means no. Otherwise the answer is yes, and each "unknown" needs a plan. Whether past buyers list can be tested cheaply with a small launch, and the retailers can be asked. The lift can't be measured at this size, so it becomes a bet with a cap. I'd say:

"My answer is yes, as a capped bet. On commission alone it loses about $330,000 a year, and used sales could eat another $360,000 of margin, so it pays only if it lifts new-gear sales by a bit under 1%. I think it can, because used buyers are future new buyers and resale value makes new gear easier to buy. A launch this size can't prove that, so I'd commit one year of the team, then decide, and stop sooner if past buyers don't list their jackets or the jackets don't sell."

Try the device on the cases below: write the statements, grade them, give a one-word verdict and stop.

How to launch it: what this launch must prove

A weak launch answer is a calendar of activity. Start from what a launch can show you. A small one shows two things directly: whether past buyers list their jackets, and whether listed jackets sell.

The lift in new-gear sales stays the real unknown, and a launch this size can't measure it. Break-even needs under 1% more sales, one country's past buyers are far too few to show a gap that small, and with nothing held back there's no group to compare against. Treat it as a bet with a cap: before launch, decide how much you'll spend while that question stays open. Mine is to commit one year of the team, $600,000 before commission, then decide on whatever evidence exists. That's a judgment, not a calculation.

The smallest launch that tests listing and selling

Remove anything the answers don't depend on.

• Jackets only, since they hold value and ship easily.

• One country.

• Sellers are past buyers only, so every item has a purchase record.

• A staff member checks each listing by hand, with no seller ratings and no app.

Assume 65% of the email list lives in that country, and 40% of those bought a jacket on our own site, so there's a purchase record: 1,000,000 × 65% × 40% = 260,000. Say 4% list a jacket a year, below the ledger's 5% for any item: 260,000 × 4% = 10,400 listings, or 10,400 ÷ 52 = 200 a week.

For the case below, write only what the launch must prove and the smallest version that proves it.

Who gets it first, and how it opens up

The gates below are my judgment calls, and the weeks assume listings arrive on plan.

Each stage after the first also needs every stop rule below to be clear. Sellers go first because a listing can wait a few weeks, while a shopper who finds three jackets won't come back.

One sentence of positioning, and how people will hear of it

The sentence has to say why someone would use this over a general resale site:

"Sell the gear you've outgrown for store credit, and buy used from other owners, checked by the people who made it."

Email does nearly all the work in stages 1 and 2. It's free, and it reaches people who already know the brand. I wouldn't buy ads or pitch the press before the public site opens, since they could send people to a half-empty store.

The result that would make you stop

Write the stop rules before launch, while nobody is attached to the project, and put each on the same footing as its plan figure. My plan is 200 listings a week, and the ledger's 60% of listings sold, which I'll read as sold within 8 weeks of going on sale, stricter than the ledger, which set no time limit. Stock listed in stage 1 goes on sale when stage 2 opens. I'd stop if any of these holds:

• Fewer than 800 jackets listed in any 8-week stretch, against a plan of 200 × 8 = 1,600.

• Fewer than 30% of jackets sold within 8 weeks of going on sale, against a plan of 60%.

• More than 5% of sales disputed in any four-week stretch.

Week 52 is the review date, when the $600,000 is spent and I decide on the lift evidence.

The first two lines sit at half of plan, and the disputes line is my judgment. I'd also keep a guardrail, a number that warns of harm elsewhere, on complaints about used items, since those land on the brand.

For the case below, write only the numbers that would make you stop.