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A rather complicated market sizing: New branch size planning for a educational institution

Went for an interview and felt I did terribly for this case...Anyone could give me some clue?

Case:

The Company provide ESL (English as a Second Language) tuition for kids (age: 3-6) in China. Classes are in small size of 10 students per class, held twice per week, two hours per session. Full year course are 20000 RMB (~3000 USD). The Company wish to open a new branch at a large shopping mall in one central district of Beijing. How should the company estimate the size of the branch that they should plan for?

Known facts:

No data on market share;

No data on competitors;

The Company has 40 branches all over China, and 10 branches in Beijing;

For data not given or unknown, make assumptions or discuss based on various scenarios.

---------

Felt it's a very complicated question, with little data.

I thought of starting from top down, using total no. of kids aged 3-6 in Beijing, then % of them in need of ELS education, % of them being able to afford a rather expensive small-class tuition, % of them interested in our company.

But I encounter a few obstacles:

1. the number I got still seems too large for a branch (perhaps due to point 2)

2. % interested in our company is hard to estimate without competitor/market share data

3. How do I take the self-cannibalisation into consideration? Seems hard to give a number although I know there's 10 branches already in the same city

4. Distance should matter - How do I quantify? Do I only count kids living within a certain radius of the shopping mall instead of all kids in Beijing? But it's not uncommon for people do travel for hours to go tuition.

5. How do I make use of the class length, class size and frequency data?

Thank you!

---

Some thoughts: From what I understand, tuition centers are not entirely same as retail stores where most of their target audience comes from mall visitors. It is not uncommon for them to advertise online/elsewhere and people will just purposely travel to visit the branch. Hence I didn't use mall traffic as a calculation basis

Went for an interview and felt I did terribly for this case...Anyone could give me some clue?

Case:

The Company provide ESL (English as a Second Language) tuition for kids (age: 3-6) in China. Classes are in small size of 10 students per class, held twice per week, two hours per session. Full year course are 20000 RMB (~3000 USD). The Company wish to open a new branch at a large shopping mall in one central district of Beijing. How should the company estimate the size of the branch that they should plan for?

Known facts:

No data on market share;

No data on competitors;

The Company has 40 branches all over China, and 10 branches in Beijing;

For data not given or unknown, make assumptions or discuss based on various scenarios.

---------

Felt it's a very complicated question, with little data.

I thought of starting from top down, using total no. of kids aged 3-6 in Beijing, then % of them in need of ELS education, % of them being able to afford a rather expensive small-class tuition, % of them interested in our company.

But I encounter a few obstacles:

1. the number I got still seems too large for a branch (perhaps due to point 2)

2. % interested in our company is hard to estimate without competitor/market share data

3. How do I take the self-cannibalisation into consideration? Seems hard to give a number although I know there's 10 branches already in the same city

4. Distance should matter - How do I quantify? Do I only count kids living within a certain radius of the shopping mall instead of all kids in Beijing? But it's not uncommon for people do travel for hours to go tuition.

5. How do I make use of the class length, class size and frequency data?

Thank you!

---

Some thoughts: From what I understand, tuition centers are not entirely same as retail stores where most of their target audience comes from mall visitors. It is not uncommon for them to advertise online/elsewhere and people will just purposely travel to visit the branch. Hence I didn't use mall traffic as a calculation basis

(edited)

3 answers

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Hi there,

When you say "Felt it's a very complicated question, with little data" that's exactly what these interviews are testing!

Now, I think it's crazy to start with population.

For this approach, you need to start with expected foot traffic in this mall and THEN think about what % of that foot traffic would be likely to use the centre.

The other approach is how big this branch could be (as in physical size)...then estimate capacity based off of that.

Hi there,

When you say "Felt it's a very complicated question, with little data" that's exactly what these interviews are testing!

Now, I think it's crazy to start with population.

For this approach, you need to start with expected foot traffic in this mall and THEN think about what % of that foot traffic would be likely to use the centre.

The other approach is how big this branch could be (as in physical size)...then estimate capacity based off of that.

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Hi,

  1. I would make an assumption that your target audience is similar to the mall audience
  2. Calculate mall traffic (Households) and calculate kids
  3. Make an assumption on what % can afford (salary distribution) and would willing to take the classes (use a proxy, e.g. % of the general population who know Eng or personal example of your friends)

Best

Hi,

  1. I would make an assumption that your target audience is similar to the mall audience
  2. Calculate mall traffic (Households) and calculate kids
  3. Make an assumption on what % can afford (salary distribution) and would willing to take the classes (use a proxy, e.g. % of the general population who know Eng or personal example of your friends)

Best

Hi! Thanks for answering. My thought process is tuition centers are not entirely same as retail stores where most of their target audience comes from mall visitors. It is entirely possible for them to advertise online/elsewhere and people will just purposely visit the branch, even if they travel from afar. That's why I didn't estimate from a mall traffic basis. — Ann on Jan 13, 2021 (edited)

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Hi A,

According to me the tuition class's location in shopping mall in central part of Beijing only can be used to assume that it is a central and convenient location where parents can drive their kids without having to worry about things like parking problems, how to kill spare time etc. It will only add to the convenience factor or will reduce the chance of parents saying NO due to inconvenient location. Parents will normally receive/and will respond to marketing about the tuition from typical kids activity marketing source e.g. print/non-print media, parents group, schools etc.

For Sizing I will take 2 pronged approach of demand and supply:

On the demand side:

1. Given the very young age of the kids and hence travel issues, I will assume that parents from same or surrounding pin codes (locations) will only be the target

2. Out of no. of kids from those areas, I will keep on deriving focused numbers by applying the filters of a. need of ESL b.access/convenient of mall/batches c. affordability of parents etc.

3. One kind also triangulate this number using data from other tuition class branches that talks about a. number of enquiries/number of kids targeted by marketing b.typical inquiry to conversion ratio etc.

Supply side:

1. 2hr*2 = every batch takes 4hours. Given the kids age, batches cannot be earlier than 10am or later than 8pm. So we have 10hrs every day, which is 10h*6=60hrs every week (considering one weekly holiday). In a nutshell, if I consider 1 batch as a unit. At a time classroom that fits one batch can 60/4=15 batches or 150 students.

2. The number range arriving from Demand side now can be divided by 150 to arrive at size of the tuition class.

If the interviewer does not give you any data, probably he means to see your ability to make sensible assumptions. Otherwise the way this question is setup, if the company has 10 branches already, they would have fair idea about approximate numbers for most of these parameters and interviewer should evaluate you on your ability to structure the answer (instead of the ability to make assumptions).

Hope this helps.

Do like the answer if it helps you and feel free to message me in case you need any clarifications/further help!

Cheers,GB

Hi A,

According to me the tuition class's location in shopping mall in central part of Beijing only can be used to assume that it is a central and convenient location where parents can drive their kids without having to worry about things like parking problems, how to kill spare time etc. It will only add to the convenience factor or will reduce the chance of parents saying NO due to inconvenient location. Parents will normally receive/and will respond to marketing about the tuition from typical kids activity marketing source e.g. print/non-print media, parents group, schools etc.

For Sizing I will take 2 pronged approach of demand and supply:

On the demand side:

1. Given the very young age of the kids and hence travel issues, I will assume that parents from same or surrounding pin codes (locations) will only be the target

2. Out of no. of kids from those areas, I will keep on deriving focused numbers by applying the filters of a. need of ESL b.access/convenient of mall/batches c. affordability of parents etc.

3. One kind also triangulate this number using data from other tuition class branches that talks about a. number of enquiries/number of kids targeted by marketing b.typical inquiry to conversion ratio etc.

Supply side:

1. 2hr*2 = every batch takes 4hours. Given the kids age, batches cannot be earlier than 10am or later than 8pm. So we have 10hrs every day, which is 10h*6=60hrs every week (considering one weekly holiday). In a nutshell, if I consider 1 batch as a unit. At a time classroom that fits one batch can 60/4=15 batches or 150 students.

2. The number range arriving from Demand side now can be divided by 150 to arrive at size of the tuition class.

If the interviewer does not give you any data, probably he means to see your ability to make sensible assumptions. Otherwise the way this question is setup, if the company has 10 branches already, they would have fair idea about approximate numbers for most of these parameters and interviewer should evaluate you on your ability to structure the answer (instead of the ability to make assumptions).

Hope this helps.

Do like the answer if it helps you and feel free to message me in case you need any clarifications/further help!

Cheers,GB

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It's essential to know some key figures regarding geographies, population, economies for your case interviews. We summarized them for you here.

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