Should Caribou prioritize expanding its auto loan refinancing options to reach more customers or focus on improving approval rates for existing applicants?

Introduction

The trade-off we're examining today is whether Caribou should prioritize expanding its auto loan refinancing options to reach more customers or focus on improving approval rates for existing applicants. This decision is crucial for Caribou's growth strategy and customer satisfaction. I'll analyze this trade-off by examining the product context, potential impacts, key metrics, and experimental approaches to guide our decision-making process.

Step 1

Clarifying Questions (3 minutes)

• Context: I'm thinking about Caribou's current market position. Could you share our current market share in the auto loan refinancing space and how it compares to our main competitors?

Why it matters: Helps understand the growth potential and competitive landscape Expected answer: Mid-tier player with significant room for growth Impact on approach: Would influence whether to focus on market expansion or customer retention

• Business Context: Based on our revenue model, I assume we earn through origination fees or interest rate spreads. Is this correct, and are there any other significant revenue streams?

Why it matters: Clarifies the financial implications of expanding vs. improving approval rates Expected answer: Primarily origination fees and interest rate spreads Impact on approach: Would help prioritize volume vs. quality of refinancing applications

• User Impact: I'm curious about our current user segments. What percentage of our applicants are prime vs. subprime borrowers?

Why it matters: Identifies which user groups might benefit most from each approach Expected answer: Mix of prime and subprime, with a slight lean towards prime Impact on approach: Could guide whether to focus on expanding options for subprime borrowers or improving approval rates for prime applicants

• Technical: Regarding our current approval process, what are the main bottlenecks? Are they primarily related to data integration, risk assessment algorithms, or manual review processes?

Why it matters: Helps understand the feasibility of improving approval rates Expected answer: Mix of algorithmic limitations and manual review bottlenecks Impact on approach: Would inform the difficulty and potential impact of approval rate improvements

• Resource: Can you give me an idea of our current team structure and capacity? Are we more constrained on the product development side or the operations/underwriting side?

Why it matters: Assesses our ability to execute on either strategy Expected answer: Balanced team, but with some constraints in underwriting capacity Impact on approach: Would influence whether we can effectively handle increased application volume or approval rate improvements