Analyze Profit Decline: Data Collection and Hypothesis Testing

Q: Analyze Profit Decline: Data Collection and Hypothesis Testing

This question evaluates analytical diagnostics competencies including data collection, KPI decomposition, funnel and cost-component analysis, and hypothesis-driven testing, and is categorized in Analytics & Experimentation.

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Question

Coffee Shop Profit Drop Diagnostics

Scenario

You manage a coffee shop and notice profits have declined over a recent period.

Task

Outline a systematic plan to diagnose the profit drop. Be specific about:

The data you would collect (internal and external).
The metrics and decompositions you would calculate.
The hypotheses you would test and how you would test them.
How you would validate findings and propose next steps.

Minimal Context and Assumptions

Focus on 1–2 stores over the last 8–12 weeks, compared to the prior comparable period and year-over-year (to handle seasonality).
Channels may include in-store, mobile order-ahead, and delivery.
Profit = Revenue − COGS − Labor − Operating Costs (rent, utilities, delivery fees, waste, refunds, discounts).

Note: Consider funnel dynamics (traffic → conversion → ticket size), cost changes, seasonality, competition, and external factors.

Analyze Profit Decline: Data Collection and Hypothesis Testing

Coffee Shop Profit Drop Diagnostics

Scenario

Task

Minimal Context and Assumptions

Solution

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