Case Study Question: Market Size

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Recent activity on May 14, 2017
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Sudipto asked on May 14, 2017

our client is a Major Magazine Publisher. Currently, they own a Women’s magazine (similar to Cosmopolitan) and a Personal Finance magazine (similar to Fortune). They are considering launching a new magazine about Fine Living, targeted to Wealthy Males (similar to GQ). What is the market size?

Information to be given if asked:


300M people in the U.S.


50% Male


Age demos split evenly (Age 0-20, 21-40,41-60, 61-80)


Market research shows that 10% of Age 21-40 demographic is Wealthy, that 10% of Age 41-60 is Wealthy and that 5% of Age 61-80 is Wealthy


People under 20 are too young for the magazine.

Find market size.

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Best answer
Guido
Expert
replied on May 14, 2017
MBB consultant with 100+ cases done

Hello Sudipto,

the first part of this case would be only about crunching the numbers, then you will need to add some hypothesis and finally make some considerations.

----> Crunch the numbers to estimate the number of Wealthy people in each bucket

  • 300/2 = 150 Million of male people
  • 150/4 = 37,5 Million of male people in each bucket
  • 21-40 & 41-60
    • 37,5*10% = 3,75 Million of Wealthy ppl in each bucket
  • 61-80
    • 37,5*5%= 1,875 Million of Wealthy ppl

----> Add some hypothesis to estimate the addressable market of the magazine

  • Assumptions on magazines' penetration:
    • 10% of the Wealthy people in the 21-60 range are interested in buying magazines: they are active people and they do not have a lot of free time to read magazines
      • (3,75+3,75)*10%= 750 K
    • 20% of the Wealthy people in the 61-80 range are interested in buying magazines: they have more free time
      • 1,875*20% = 375 K people that will buy the magazine
    • ---> Therefore 1,125 M of Wealthy people are interested in magazines
  • Assumptions on features of the magazine:
    • The magazine is monthly
      • 1,125*12 = 13,5 M of magazines sold per year --> Market size in Volumes
    • The magazine has a price of 5$
      • 13,5*5 = 67,5 M$ of revenues from magazine per year --> Market size in $

----> Sanity checks and other considerations

  • Remember that this is an estimation of the addressable market not the potential revenues of the company - you will need to assume a market share for those
  • Remember to make sanity checks of the results - compare the results with the volumes of the other magazines
  • Remember to consider the company as a whole - do not forget the other magazines (eg. cannibalization risks or cross-selling opportunities)

I hope that helps!

Best,

Guido

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Guido

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