Market sizing layers

Hey there,

This depends a bit on the nature of the question. I would not overcomplicate things and as a matter of fact, your answer will not be more precise with 6 levels rather than 4. Although it might create the impression it is more precise...

For instance, if you are talking about the revenue of something, let's say taxi revenue in a city in a given year, look at it the following way:

How many people use it (total population * certain % of the population that uses taxis) * how often are they using it p.a. (average a number and justify it well by comparing high and low user groups) * how much do they pay for it (average a number and justify it well, again by comparing high mileage vs. low mileage groups).

With that approach, you can size the market within 3-4 minutes and will not be less precise than if you were to add age segments or other more granular measures that would just create spurious accuracy. 

Focus on your assumptions and justify them well by comparing your own experience and you should do well.

Cheers,

Florian

The deeper you go the harder it could become to analyse and calculate as you will have to make more and more estimates and assumptions. While there isnt a magic number for how many layers, to keep things manageable and avoid analysis paralysis, 3-4 down seems reasonable. But be ready to adapt this based on the case prompt and based on common sense.

You should go as far as your estimates become more reasonable but not further.

We only break things down because they take us futher away from complete guessing and closer to guesstimating. Focus on this aspect and you will be good.

3-6 is generally the range.