Market Sizing: Volume Versus Value

Depends on pricing structure:

• If there's only one price, then it's just multiplying the volume by the price. Done. 
• If there are multiple prices, then you have to find a way to multiply those prices by their respective volumes. In most cases, it will be a price that corresponds to a segment, and therefore it is quite direct. But it may be different.

Let's say you have to estimate the movie theater's revenue. You may consider an average ticket price… or you may consider different prices for kids / seniors vs. adults. So you have to estimate the number of tickets for kids vs. adults, and then apply the different prices. 

If you think about cars volume, it's not difficult to estimate how many cars are sold every year. But if it is by value then you need to segment according to price (compact, mid-size, full-size) and estimate the number of cars sold, and then multiply by the respective price.

In short: if it is a “commodity” with a single price (or it is sensible to use an “average” price), just multiply by price; if there is price differentiation, (in general) you need to estimate volumes according to respective prices. 

Hi, thanks for the question!

The difference is: 

Volume = # Units

Value = # Units multiplied by Price/Unit

Example (I'm making up those numbers): market for cars

Market size in terms of volume: 1 Million cars sold per year 

Price per car: EUR50.000

Market size in terms of value: 1 Million * 50.000 = 50.000.000.000 EUR

Hope this helps!

Would you mind providing an example?

It might be easier to help you this way. 

Also, if you're now practising for interviews, you might find this resource helpful:

• Cheatsheet: The Must-Know Consulting Terms for Interviews

Best,
Cristian