I found this question on the forum and all of the coaches said to calculate it in terms of households (assuming scope was clarified to only be consumers). This threw me off as families and couples are not the only ones who use mattresses. Would it not be better to calculate mattress per person instead as only doing households leaves out all individuals who are single and own one mattress?
McKinsey & Co. | Mentor & Coach for 4+ yrs | 80+ trainees | Columbia MBA
When I have to solve these market sizing problems, I always ask myself the question "Who is the end user?"
For example, pasta consumption is best determined at the individual level. Although very often the shopping is done at the household level, in the end, it is the specific individual who uses it.
In this case, the mattress could be a shared good within a household. Therefore, I would simplify and consider this as a starting point, making assumptions that lead me to determine on average how many households there are in a given region.
From there, the second data point I would try to estimate is the average number of mattresses per household. As you rightly point out, it is not necessarily the case that 1 household = 1 mattress. One can structure and work the problem to find a reasonable average number.
In this way, the final answer is given by Estimated Households in a given region x Average number of mattresses per household.
Hope this helps. Feel free to DM me to discuss this further!
A) It is not the only approach. In fact in a case you can suggest multiple approaches that you are comfortable with and highlight the one you want to take. The interviewer can give you great hints in such instances in terms of what data is available.
B) I have only read through this question you posed. For example per person is a great way, too if you provide great reasoning and assumptions for example so many people of ten people would be interested in matresses or would be matresses and for these reasons. This way you might arrive at a great answer. You can discuss these assumptions with the interviewer and then decide whether to go ahead.
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antwortete am 28. Mai 2023
300+ coached cases | Former McKinsey interviewer + recruiting lead| End-to-end prep in 2 weeks
That's a very insightful question! When sizing markets, the approach can indeed vary depending on the specifics of the product or service in question.
In the case of mattresses, using households as a base is a common approach because it's generally assumed each household will have at least one mattress, regardless of whether it's a single person or a family living there. However, you're correct that this might undercount in situations where multiple people in the same household each have their own mattress (such as in a shared apartment with roommates or families where each child has their own bed).
An alternative approach could be to consider the number of bedrooms rather than households. This would account for situations where multiple people in the same household each have their own bed.
However, if the case scenario doesn't provide enough information, it might be necessary to make assumptions. The purpose of market sizing is to show your logic and knowing when to round/make assumptions, and you definitely save yourself a headache if you use households. In such situations, the key is to clearly state your assumptions and be ready to adjust your approach if additional information becomes available. You can always state at the end, “I believe this size is actually an underestimate because it overlooks households that xyz.”
Your question is a great example of the kind of critical thinking that's valuable in market sizing exercises, and it's exactly this type of nuanced understanding that can make your approach stand out in an interview. Keep questioning and refining your approaches. It's a crucial part of developing strong problem-solving skills!
If you're interested in discussing further or practicing more market sizing questions, I'd be more than happy to help. Keep up the good work!
BCG 1st & Final Round interviewer | Personalized prep with >95% success rate | 7yrs coaching | #1 for Experienced Hires
both approaches - household-based and individual-based estimates can work here, as long as you factor in the sharing factor. I'd personally go for household-based consumption, as such purchase decisions (= demand) usually happen on that level. Also note that, depending on the exact scope of the question, you may have to factor in business customers (e.g. hospitality, hospitals etc).
Remember that sizings are not an exact science but aim to give you a directionally right answer. As long as you are in the right ball park and your assumptions are defensible, different ways will be acceptable.
Bain | EY-Parthenon | Roland Berger |Former Head Recruiter | Market Sizing
The first to thing to do when estimating a market size is to SEGMENT THE MARKET.
None of the approaches really works because none is segmenting the market. So it doesn't really matter if you are doing “mattresses per household” vs “mattresses per individual” as in both cases you are actually using the same logic (to go from one to the other you just multiply of divide by individuals per household, meaning that there is no different in insight between the approaches).
Now if you segment, you will consider the mattresses real usage. And assume a mattress lasts for ~10 years. You can have these segments considering age:
- Single: 0-30 age (1 mattress for ~10 years)
- Couples: 0-80 age: 0.5 mattress every 10 years
This gives you the total mattresses in households, not the market size. Don't forget to divide by 10 years and multiple by the price to get the MARKET SIZE. (by the way, want to make it more complicated… assume for example 20% of the market is premium and will pay 2x for the mattresses)
But wait… this is just the primary households market.
You have 2 more segments: secondary homes; and hospitality. Assume for example that 10% of people will have a secondary home. And then for hospitality assume that on everage everyone spends 1 week out of home (this considers both leisure and business trips). That's basically 2%. (one could argue that mattresses in secondary homes last longer, and in hotels last less, so one could adjust accordingly).
FREE INTRO | Ex-Roland Berger and interviewer for 6+ years
I've come across this question before. Both approaches can be used, but both have their own limitations
Using population would allow you to estimate more easily, since population size is generally known, and you can easily relate to your own experience as proxy to how many mattress you would buy and how often you would change your mattress. However, you would need to supplement this with assumptions on singles vs couples, spare guest rooms, which are not so obvious.
Using households would force you to make an underlying assumption on what “typical” households would look like (e.g couple with 2 kids + 1 guest room), which is not a straightforward assumption. But with this information, you can more directly assume how many mattresses per household and scale that assumption.
As an interviewer, I wouldn't penalize a candidate for approaching it either way. But the ability to structure and proactively highlight the pros / cons of your approach would be an extremely valuable skill to showcase. This is a much more accurate representation of a real life case you would have to deal with as a consultant.
It sounds like there's a confusion around how we define ‘household’. There can also be a household of 1 / single people.
Plus, the whole point of market sizing question is to generalise the solution. So you want an answer that is directionally correct, not fully accurate, so it's ok if you end up excluding some parts of the population.
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· Financial concepts: Balance sheet, Income statement/P&L and Performance ratios (based on sales and based on investment), +1 practice case
· Market structure & pricing: Market types, Perfect competition markets (demand and supply), Willingness to pay, Pricing approaches, Market segmentation and Price elasticity of demand, +1 practice case
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