Granular market sizing

Bain marketsizing
New answer on Dec 31, 2021
2 Answers
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Anonymous A asked on Oct 17, 2018

Hello! I'm thinking of how one would do the market sizing for the following two questions:

1. Annual revenue of an average bike shop in London

2. Annual revenue of an optician (think Specsavers if UK, and Vision Express if US) in a busy area (think Oxford Circus for London, Fifth Avenue for NYC)

For both i have segmented as spend * number of customers annually. For spend I think I have a firm understanding how how I would segment and weight revenue streams, but for customers annually I would like to hear how others would approach such a question!

Thank you!

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Vlad
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replied on Oct 17, 2018
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

1) From the demand side: every time you come to this store you see x ppl. You can assume how much time on average they spend at the store and calculate daily traffic. Then multiply it by the conversion rate (use an assumption based on personal experience)

2) You can also do it from the supply side:

Assume the size of the shop + warehouse room-> avg inventory (How many bikes it can fit) -> avg turnover (assume the inventory changing every season) -> sales

Best!

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Princess on Oct 17, 2018

I see! So a more bottom-up approach?

Ian
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replied on Dec 31, 2021
MBB | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

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:

  1. Just like in a case, make sure you understand the question - what are you really being asked to calculate
  2. Decide whether a top-down or bottom-up approach is best
  3. 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
  4. 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
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Vlad gave the best answer

Vlad

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McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School
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