What do you understand by a bottleneck on market sizing questions?

Question

Hello everyone!

I'm currently studying Market Sizing type of cases and I have seen some websites recommend to segment using the bottlenecks, however I don't understand well what do they mean by this?

For example: When market sizing the revenues of your closest starbucks, you can segment it on # customers and average spend per customer. On the # customers side, they segment it by # of cashiers and # customers per cashier, they say this is the bottleneck, however I don't understand well what are they and how to find them.

I would appreciate if you could clarify it for me.

Thank you very much.

Answer 1

Hi,

it's about identifying the variable that caps the maximum potential revenue of a business. Very common examples are cashiers, tables, seats, ... In your example the bottleneck is the number of cashiers, because since each cashier can serve a max of 20 customers per hour (assuming you need 3 minutes to serve a single customer), you set the maximum revenue of the activity

I would like to suggest also cases in the platform to practice with:

https://www.preplounge.com/en/consulting-forum/how-much-would-you-charge-to-clean-all-the-windows-in-seattle-4965
https://www.preplounge.com/en/consulting-forum/market-sizing-milk-consumption-5087
https://www.preplounge.com/en/consulting-forum/how-would-you-calculate-the-value-of-a-cow-4982
https://www.preplounge.com/en/consulting-forum/estimate-number-of-traffic-lights-in-a-london-5692

Hope it helps,
Antonello

Answer 2

Hi there,

The bottleneck is the point at which we can no longer "produce" more. This is a good way of conducting some market sizings because it can lead to a more efficient answer.

For example, can you picture in your head how many people walk in and out of a starbucks store in a given hour?

Of course not! However, you can definitely picture how many cashiers there are, what times of the day they're at "max" capacity, and what their churn rate is. You can take this to estimate maximum flow, then apply a % multiplier to any non-peak hours.

In terms of how to find them, it's pretty hard to explain how. You just have to look...where can you visualize the process and see a key point in the production chain?