Alle Fragen zum Tag Market sizing - Consulting Q&A - PrepLounge.com

Hi,

It's easier to:

1. Segment New York into blocks using the number of streets and avenues.
2. Calculate separately the area of the parks
3. Assume a certain number of trees per block and separately for the parks
4. Multiply and sum up

Best

Hi,

One approach is highlighted below :

Few things to remember when sizing this market

1. It is important to divide umbrella purchases into planned vs impulse buys given the nature of the market
2. For planned purchases - you can take a household approach using standard assumptions and anything from less than to a little over 1 umbrella per member is reasonable
   1. One thing to note here is there are also non-household purchases (hotels, offices etc.). So scale up your household assumption by a reasonable number like10- 25% to account for these (depending on your assumptions)
   2. Replacement rate also matters but I think would be extremely small for non impulse umbrellas (I cant remember the last time I checked an umbrella without going in the rain!)
3. For impulse buys I think the following are the key markets
   1. Domestic buyers caught in the rain
      1. Look at number of rainy days in a year in Italy
      2. Make assumption on number of people there that would need to buy umbrellas because they are outside in the rain and got caught or umbrella didn't work (should be a very small % for each day)
      3. Add up the numbers for all the days
   2. Tourists
      1. Estimate total tourists (maybe by season so you can focus on rainy season if relevant)
      2. Estimate % that would need umbrellas on each rainy day(fair to say a high number of tourists like 50% or so don’t have space to or don’t remember to bring umbrellas on their trips). This number should be quite a bit higher than domestic number because tourists are looking to do things outside all the time.
      3. Add the numbers up
4. Also remember competition from things like ponchos - which should reduce all your numbers (make an assumption on poncho vs umbrella sales depending on factors like price and intensity of rainfall)
5. Accounting for all of the above get rough market size for annual umbrella sales in Italy

Hi,

I recommend the following:

1. Ask the clarifying question first: Are we looking only at the b2c segment or other segments as well. Mentioning this by itself will give you the extra points. In many interviews, the interviewer will allow you to neglect
2. Make a B2B branch in your analysis. But start analyzing with B2C first since it's easier.
3. There are many tricks on how to make a B2B calculation approximation depending on the industry. Here are some of them:

• Personal experience (e.g. when I look on the street, every 10th vehicle is commercial. Thus there are (B2C / 10) commercial vehicles. Now you can calculate commercial gas stations, Tires, etc.)
• Calculating the space. For example, if you need to calculate the commercial real estate, you can 1) calculate how many buildings you have in the city (using the estimation of what % of the land is occupied by them), 2) subtract the apartment buildings 3) multiply by the number of floors and space.
• Calculating the number of businesses: (Working population - % working in public sector) / (SB, Medium, Enterprise split * avg number of employees in each). For each size of the business, you can calculate whatever you want, even light bulbs used.

To give you an example:

Once in the interview, I was Calculating the B2C tire market assuming that the new cars already have tires (sold via B2B channel). E.g. if the avg. lifetime of a car is 10 years, the replacement rate is 1/2 and the replacement rate per car is 4/10, since the first 2 years are covered by the tires from the b2b market.

Calculating b2b market included calculating the tires for the new cars (B2C market of the new cars * (4 tires + 1 extra)) + commercial vehicles * (avg number of tires per commercial vehicle).

Best

Hi Joe,
personal experience and common sense are the 2 main sources for numbers estimation. My advice is to go with easy-to-use number (e.g. instead of 47 use 50) and to check 1 or 2 important and uncertain numbers with interviewer (e.g. "I'm not familiar with this market, can I proceed with this number?" or "does it make sense?").

I share some examples of market sizing with some good number estimation arguments:

• 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

Hope it helps,
Antonello

Hi,

1) Calculate the number of households

2) Calculate the number of vehicles (% households owning the vehicles)

3) Assume the lifetime of a car (let's say 10 yers) and the av. change of ownership rate (2 times in 10 years). Thus the replacement rate will be 1/5 cars per year

P.s. Don't forget about commercial vehicles. You can use personal experience to say that every 10th vehicle is commercial. Apply different replacement rate for them

Best

Hello,

I would propose several ways:

1) You start from the population of the city (12M) and make assumption on a theoritical structure of the demographics : XX% are workers, YY% are students , ZZ% are retired ... Then you take hypothesis on the % share of each part of the population using the subway everyday

2) it is also interesting to think about the capacity of the subway: you can assume that the subway is operated at almost full capacity all day long (which is kind of true) and then you count # of lines (14 subway lines) + number of train operated per line + hypothesis on the capacity for each train + frequencies of the trains

For market sizing, the idea is not to find the right answer but to show how you can break down and structure a problem. You need to find a way to break it down into smaller problems and take hypothesis with your interviewer on each parameter.

Hope this helps

Hi there,

Your approach is from the demand side. You can also use the supply side as a constraint and work from there. So how many people can actually be present in a gym, the percentage utilization for the peak and off peak hours, and peak and off peak seasons. You will get an average that you can work with.

As long as you can show the interviewer the logic and they can follow you, that's key.

Does this help?

Best, Aws

What I would do to approach this problem:

1. Start from population, estimate the amount of population with cancer. I would segment by age because I believe that cancer is much more prevalent in mature ages

2. I probably would've missed the diagnosed rate actually.

3. I would calculate % of people treated by immunotherapy, segmenting by income level since people with lower income will less likely be treated

4. Estimate amount of therapy one person require, probably by frequency (once a week?) and $/week (idk, 1k$?)

5. Calculate the final results

Let me know your thoughts

Hi,

1. Define the time it takes for a single person to pay
2. Define max number of people paying in a singly cashier line per shift
3. Multiply by the average utilization of the cashier line
4. Multiply by the number of lines
5. Multiple by the av check based on your personal experience
6. Multiply by the number of months, adjusting to seasonality

Best

Hi,

HPV vaccines are recommended for boys and girls in the US (https://www.cancer.org/latest-news/who-should-get-the-hpv-vaccination-and-why.html) and before they become sexually active. Majority of vaccines are given ages 11 and 12, and the remaining to older teens and some to adults.

Assuming 320M in the US population, 80 yrs life expectancy and uniform distribution this gets us to 4M for each age.

Assuming all boys and girls should get the vaccine, the market size is as follows :

1. For boys and girls currently aged 11 and 12 that is 8M

2. For ages 13-18 - assume that only 50% got vaccinated before 13. Now obviosuly this is an over-simplification, you can also assume a declining ratio (60% at 13 and going down to 30% at 18 yrs who need to get vaccinated).

Total Population 13-18 = 24M and 50% of that is 12M

3. For women adults up to 40 - assume 80% have been vaccinated and 20% need vaccination (if you want a gold star you can take into account that most women have got the vaccine but almost no men have given that previosuly only girls were required to do so and that number now climbs to 80% of women and 0% of men as having the vaccines so 20% of women and 100% of men in this age group are not vaccinated, but this is something you can check with the interviewer)

Population of women only 19 - 40 = 44M, 20% = 9M

Total market size - ~ 29M

Hope that helps,

Udayan

I believe what you are asking is the % of homes in a country that are vacant/not occupied

One way to approach this question -

Estimate number of houses

1. Look at overall population
2. Divide population into number of households (e.g., 3 or 4 people per household on average)
3. In a perfect world 100% of households have houses
4. Now you can apply discounts as needed - for example, if you are only looking at single family homes then there will be a discount as a lot of people living in cities live in condominiums
5. If you are taking all types of accommodation then you will apply a positive multiplication factor as condos tend to have fewer than 3 or 4 people in them

Now you want to look at vacancy rate

1. Factors that affect vacancy
   1. Oversupply of homes
   2. Declining population
      1. Aging population
      2. Net migration
   3. Urbanization

Look at factors that impact the country in question

1. E.g., if it is oversupply you can look at why (low interest rates leading to building boom and ghost towns, or people owning multiple homes, or new towns being built etc)
2. Either apply a relevant discount factor to the total homes (e.g., 5% homes are vacant because of multiple home ownership - you will have to have some rationale as to why)
3. Or try and calculate what these might be if you have relevant information - (e.g. number of new homes built vs population growth rate)

Hope this helps,

Udayan

1. You can use 5m. With all the assumptions you are going to make, this first approximation is not important. I recommend asking the interviewer something like "Can I use 5m to facilitate the calculation?". 99% of the interviewers will not only let you go with it but also appreciate the simplification.

2. In every market sizing, you should always consider all the possible sources of revenue/ways of using the product. In this case, you should first of all divide in 2 the problem, in order to investigate all the milk consumption:

• liquid milk
• milk-based products: dairy products (cheese, yogurt, butter...), ice cream, chocolate, biscuits...

Now you can start to assess the first bullet. Your solution scheme is pretty good, maybe the numbers are too high. I would have added some details, to transform it in a great answer. E.g. when you mention the segment of people who do not drink milk you can make some customized examples (lactose intolerants, infants, some people on diet, vegans, ...). I think this segment is quite larger than 20% (maybe something like one third?), but here you do not need extreme accuracy, so 20% will be considered fine as well. Use common sense.

Completed the first sizing, you should go with the second bullet. It is more complex since all the market mentioned should be treated separately. You could ask the interviewer whether you can make a top-down estimation (like considering the whole point counting three times the first bullet). This is a very strong assumption and you will certainly lose a lot of accuracy, but at this point, the interviewer will have already assessed your problem-solving skills and common business sense, but at the same time, you do not miss any part of the problem. You can say something like "a further effort should be spent to address all the market, starting from its bigger missing parts, like dairy products and industrial milk-based products".

Best,

Antonello

Hi Kristian,

I usually start from demand side me as well, because I find it more intuitive. Nevertheless, there may be some cases where you have some specific insights about supply and it's easier/most accurate starting from supply side. It really depends on the case. Happy to discuss it further if you have more details.

Hope it helps! :)

Hi Umer,

A simple but structured approach would be:

• Start from the population of Dubai (let’s assume 3 Mln)
• Assuming on average 2.5 people in each household
• Therefore, we have 1.2 Mln of households (i.e. apartments)
• Assuming that on average in Dubai there are 40 apartments for each building
• Therefore, we have 30k residential buildings
• Assuming that on average every 16 buildings there is 1 street intersection
• Therefore, we have a total of 1,900 intersections in Dubai
• Assuming 4 traffic lights for each intersection
• Finally, we can estimate roughly 7,600 traffic lights in Dubai

Naturally, this is just one of several possible approaches.

It is always good to ask preliminary questions to the interviewer and understand if he/she is comfortable with the type of approach we are undertaking; likewise, is always a good practice to share with the interviewer all the assumptions we need to consider along the whole process of market size.

Hope this helps,

Claudio

Hi,

The chances are higher that someone will help you if you provide at least your initial thoughts instead of just throwing 3 different MS cases in the topic. Happy to review your approach

Best