Market sizing procedure

Question

Hi all, I have finished an interview but find the market sizing part quite challenging.

Would appreciate hearing some advice on these questions:

1. What to clarify after an interviewer ask you to do market sizing?

For instance, should I ask whether market sizing is a full case or just a quick market sizing quiz? Is it okay to ask for segmentations first?

2. What is the procedure of a market sizing question?

Is it always stating my structure (or function first), then ask whether interviewer has

related data? Or should I do the calculation based on my assumptions?

3. How detailed should the market sizing be? For instance, the market sizing could be

very detailed (ex: different segment according to age). On the other hand, I can just

list down a math function and allocate my assumption of numbers in it. Does it

depend on how much time the interviewer expects you to complete the market

sizing?

Thanks in advance!

Answer 1

Hi,
there is no a gold rule to structure every market sizing. For sure you are going to solve it with a formula, sometimes a logic tree will help to better estimate and explain it.
Here some helpful examples of good market sizing:

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

I have specific sessions to crack it, feel free to text me for more details.

Best,
Antonello

Answer 2

Hi,

1) First of all, there are 2 ways to structure market sizing:

Formula - basically a math formula to come up with a solution. The problem with the formula is that it is easy to forget something or get lost.
Tree - same as with regular cases you build a tree. A very simple example: you need to calculate the number of dogs on manhattan. A number of dogs = share of households having a dog * # of households. # of households = population / average household size. In the end, you'll have a pyramid where you have to fill the numbers on the base of the pyramid. This approach is much easier and help you track all the numbers

2) You should learn the key market sizing techniques:

Making assumptions based on personal experiences (Use the example of your house where out of 100 apt-s 10 have dogs)
Adjusting numbers (NY is a busy city thus fewer people have dogs)
Sanity check - try to apply your calculations to the real environment
etc.

3) You should learn the key tools:

Using age even age split (suppose life expectancy is 80 years. Assuming even age split we have 4 mln people in US of each age)
Using 80/20 split (suppose 20% people earn 80% wealth and the average salary is xx...)
Using approximations (Length of NY-SF flight and plane speed to calculate US length)
etc.

4) Learn key numbers: populations, gas price, gas consumption, Boeing speed and nmber of seats, average salary, # of gates in the airport, GDP growth rate, inflation, etc.

5) Practice 10-15 cases and you'll be fine. Almost all casebooks have good market sizing examples and the solutions

Feel free to PM for clarifications

Good Luck!

Answer 3

Hi,

1) Any uncertainty you have (e.g. b2b/b2c, units, timeframe, geographical scope etc). If it is part of the regular - it'll start as the regular case

2) You take a minute, make a structure and then you fill from the bottom in by asking for data / making assumptions

3) If it's a standalone case - you should be using more segmentations. If it is a part of the bigger case - should be using more 80/20, capacity / occupancy, peak / off-peak approaches

Here is more advice:

t's less about different types of the problems but rather about the tools that you use:

1) First of all, there are 2 ways to structure market sizing:

Formula - basically a math formula to come up with a solution. The problem with the formula is that it is easy to forget something or get lost.
Tree - same as with regular cases you build a tree. A very simple example: you need to calculate the number of dogs on manhattan. A number of dogs = share of households having a dog * # of households. # of households = population / average household size. In the end, you'll have a pyramid where you have to fill the numbers on the base of the pyramid. This approach is much easier and help you track all the numbers

2) You should learn the key market sizing techniques:

Making assumptions based on personal experiences (Use the example of your house where out of 100 apt-s 10 have dogs)
Adjusting numbers (NY is a busy city thus fewer people have dogs)
Sanity check - try to apply your calculations to the real environment
etc.

3) You should learn the key tools:

Using age even age split (suppose life expectancy is 80 years. Assuming even age split we have 4 mln people in US of each age)
Using 80/20 split (suppose 20% people earn 80% wealth and the average salary is xx...)
Using approximations (Length of NY-SF flight and plane speed to calculate US length)
etc.

4) Learn key numbers: populations, gas price, gas consumption, Boeing speed and nmber of seats, average salary, # of gates in the airport, GDP growth rate, inflation, etc.

5) Practice 10-15 cases and you'll be fine. Almost all casebooks have good market sizing examples and the solutions

Feel free to PM for clarifications

Good Luck!

Answer 4

+1 to the overall guidance of Vlad´s post.

More in detail into your questions 2&3, the "trick" for me is to always "walk the interviewer through your toughts" and problem solve with him/her. Make assumptions, but constantly validate them with him/her to ensure you are advancing in the right direction.

As always, best thing is to practice a lot these type of cases, that can be a bit confusing at the beggining but then are all the same.

Good luck with it!

Cheers,

Clara

Answer 5

Hi,
1. Simply understand the objective. If it's only a quiz the interviewer will say to stay in 5-10 minutes
2. State your solving process and ask the interviewer if you can proceed with assumptions. The most important aspect is to align the interviewer on every passage.
3. It depends on the complexity of the question and the time constraint, here some examples of good market sizing resolutions to understand an acceptable level of accuracy:

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 6

Hello,
Market sizing is the most common typology of cases, so it's important to have the process clear in your mind. Answering your points:

No, you shouldn't ask. 90% of the times the market sizing will be your case. Even if you are in the other 10% you have to take time, write down a structure for the solution process, and then the interviewer will stop you if he wants to do another case.
The first thing to do is to write down your solution process so that you know the data that you need and how to handle them. Then, for each data, you can either know it (g.e. US population) or asking the interviewer if we have that data. If not, the interviewer will ask you to estimate the number doing some assuptions. In this phase remember to think out loud and involve the interviewer
You have always to be as much detailed as you can writing down the structure. Then, for each step, the interviewer will tell you if you can do some assumptions to simplify the process.

Feel free to write me if you want to discuss it further,
Luca

Answer 7

Hello!

I agree with the approaches posted below.

Only would add that this is like every other case, only comes better with lots of practicing -not so much with a recipy-.

Good luck!

Clara

Answer 8

Hi Anonymous,

both could be fine, however I usually recommend to use a tree or a table for market sizing questions, simply because they make easier to add numbers and calculate the final result. If you struggle with market sizing please feel free to give an example of what you find challenging.

Best,

Francesco

Answer 9

Hi there,

Providing some market sizing thinking for anyone revisiting this Q&A:

Remember that there's rarely a "best" answer with market sizing. What's important is that you break down the problem the way it makes sense to you. Importantly, break it down so that the assumptions you make are the ones you're most comfortable in.

For example, do you know all the major brands? Great go with that. Do you understand all the segments of that country's population (either age or wealth or job breakdown)? Go with that. Do you know the total market size of the tourism (or hotel) industry? Then break it down that way.

Some tips:

Just like in a case, make sure you understand the question - what are you really being asked to calculate
Decide whether a top-down or bottom-up approach is best
Figure out what you know you know, and what you know you don't know, but could estimate
1. This helps you determine how to split out buckets
Stay flexible - you can start with a "high-level" market sizing, but gauge your interviewers reaction....if it looks like they want you to do more...then go along level deeper in terms of your splits