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Dorothea

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1

How do you go about market sizing questions and setting up a logic tree?

Hi there,
I was just wondering if you guys have some tips around market sizing questions

--> e.g. How many hotel rooms does city XY have?
OR
--> How many smart phones users are there in Germany?

Many thanks,
julian

Hi there,
I was just wondering if you guys have some tips around market sizing questions

--> e.g. How many hotel rooms does city XY have?
OR
--> How many smart phones users are there in Germany?

Many thanks,
julian

1 answer

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Hi Julian,

unfortunately, there is no single universal approach here than can be applied to all market sizing cases. However, some general advice:

  1. Think about the factors the number to estimated depends on, e.g. for hotel rooms this clearly is
    • Supply: The number of hotels, number of rooms and estimated utilisation or
    • Demand: The number of travellers staying overnight
  2. Once you have defined these factors, think about how to estimate them, e.g. number of hotels in a given city:
    • think about a city you know well and compare it to the one you are dealing with in your case (draw the tree accordingly)
    • think about your last search on Booking.com and think about how many hotels showed up and compare the city to the one at hand
    • think about the number of five star hotels in the city, then estimate the total percentage of five star hotels within the total hotel population (e.g. 5% five star hotels)
  3. Think about how to break down some of the factors and where it makes sense to get to a higher level of detail e.g. for smart phone users it makes sense to break down the number of German citizens into age groups and then estimate the percentage of smart phone users - just do so by thinking about your own personal network
  4. The more detailed the tree, the easier it often is to solve the problem at hand, however, you will also need to make reasonable assumptions.
  5. It is always useful to come up with two different approaches how to solve the problem (see 1 - supply and demand) and make a quick cross-check at the end of the case (does the result feel right, if you approach the problem from a different angle?)
  6. In general, market sizing question sometimes seem to be very abstract, however, once you start digging deeper into the problem, you will see that very often you can break down the problem further, make a few reasonable assumptions and eventually arrive at a number that is very close to the true answer.

Hope this helps

Hi Julian,

unfortunately, there is no single universal approach here than can be applied to all market sizing cases. However, some general advice:

  1. Think about the factors the number to estimated depends on, e.g. for hotel rooms this clearly is
    • Supply: The number of hotels, number of rooms and estimated utilisation or
    • Demand: The number of travellers staying overnight
  2. Once you have defined these factors, think about how to estimate them, e.g. number of hotels in a given city:
    • think about a city you know well and compare it to the one you are dealing with in your case (draw the tree accordingly)
    • think about your last search on Booking.com and think about how many hotels showed up and compare the city to the one at hand
    • think about the number of five star hotels in the city, then estimate the total percentage of five star hotels within the total hotel population (e.g. 5% five star hotels)
  3. Think about how to break down some of the factors and where it makes sense to get to a higher level of detail e.g. for smart phone users it makes sense to break down the number of German citizens into age groups and then estimate the percentage of smart phone users - just do so by thinking about your own personal network
  4. The more detailed the tree, the easier it often is to solve the problem at hand, however, you will also need to make reasonable assumptions.
  5. It is always useful to come up with two different approaches how to solve the problem (see 1 - supply and demand) and make a quick cross-check at the end of the case (does the result feel right, if you approach the problem from a different angle?)
  6. In general, market sizing question sometimes seem to be very abstract, however, once you start digging deeper into the problem, you will see that very often you can break down the problem further, make a few reasonable assumptions and eventually arrive at a number that is very close to the true answer.

Hope this helps

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