Otter Payments: Can We Raise Prices 9%?
Consulting
hard50 min0 submissionsGoldman Sachs
Scenario
Otter Payments (fintech, Southeast Asia) has not changed prices in three years while input costs have risen steadily. The CFO wants a 9% price increase across the board.
Current position.
- Average selling price: $2055
- Gross margin: 45%
- Estimated price elasticity of demand: -1.9
- Nearest competitor prices at $2404
Customer mix. Roughly 30% of revenue comes from large enterprise accounts on annual contracts with procurement teams; the remainder comes from smaller customers who buy on shorter cycles and switch more readily.
The Head of Sales is opposed, warning of "customer revolt". The CFO points out that margins have fallen every year since the last increase.
Supporting data
mix
- smb revenue share pct
- 70
- enterprise revenue share pct
- 30
market
- price gap pct
- -14.5
- competitor price
- 2404
economics
- gross margin pct
- 45
- price elasticity
- -1.9
- average selling price
- 2055
- proposed increase pct
- 9
derived hints
- break even volume loss pct
- 16.7
Your task
Advise on pricing. Provide:
- Analysis — can the business sustain a 9% increase? Work through the volume the increase can afford to lose.
- Risks — competitive response, churn concentration, contract timing.
- Recommendation — a specific pricing structure and rollout plan.
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How you'll be graded
100 points, 60% to pass.
- recommendation30
- pricing analysis30
- competitive dynamics20
- customer segmentation20
Hint
Reveal suggested structure
- Break-even volume loss — the volume a price rise can lose before profit falls: Δvolume = Δprice ÷ (gross margin + Δprice)
- Predicted volume loss from elasticity: -1.9 × 9% = -17.1%.
- Compare the two. If predicted loss is below break-even, the increase is profitable.
- Segment — elasticity is an average across very different buyers.
- Competitive response — what happens if the competitor holds price.
- Design the architecture, then the rollout.