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Anonymous A
on Dec 09, 2020
Global
I want to receive updates regarding this question via email.

How to deal with B2B/B2C in market sizing - for instance, electric car market

Hey, 

I have this issue frequently when doing market sizing. It is quite straight forward to narrow a problem down in terms of the B2C market (age, demographics, income ... etc.) and then arrive at a first market estimate (let's say for electric cars sold). However, I then struggle how to walk through a second branch, such as B2B. Is there a common rule of thumb of how many business there are per person? I would assume for 20 persons, there is at least one business. Then I would have to segment the businesses by industry which can get quite daunting. 

What is the way to go here?

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Vlad
Coach
on Dec 09, 2020
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

In general, you have two options of including different use cases in your market sizing (b2b. commercial, etc):

  1. Calculate the private use first and then make an assumption re b2c / b2b ratio. E.g. calculate the private real estate in the city and then make an assumption about the commercial real estate as the relative % of private.
  2. You can add the b2b use cases right at the beginning of your calculations. For example, if you need to calculate the tire market for light vehicles, you can assume that every 5th car in the street is commercial, thus the total number of cars = # of private cars / 4 * 5. After that, you can calculate the whole tire market

In your particular case, I would try to clarify what exactly b2b means. Are you talking about the companies that subsidize the rides for the employees? (Then you can use the % of your friends who have their rides subsidized. Although B2b, in this case, is already included in the private consumption). Or you are talking about the Uber drivers who use carsharing because they can't afford car ownership? (Make an assumption re the % of taxis).

Best

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Ian
Coach
on Dec 09, 2020
Top US BCG / MBB Coach - 5,000 sessions |Tech, Platinion, Big 4 | 9/9 personal interviews passed | 95% candidate success

Hi there,

Your question has me slightly confused, and I think it's because you're confusing yourself.

In general, you either do B2C OR to B2B. Likewise, you either do bottom-up OR top-down.

It's bizarre to do both. 

So, in the case of the EV market, I would very much to B2C and break it down by population segments (probably income). Once done, I have the total consumption of EVs. There is not need to do B2B at this point!

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Anonymous A
on Dec 09, 2020
Why? Private person can buy cars but also businesses?
Clara
Coach
on Dec 10, 2020
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

This is one of the key clarifying questions at the beggining, when you are defining your population. 

Should I focus in B2B, B2C, or both? 

Hope it helps!

Cheers,

Clara

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Deleted user
on Dec 09, 2020

Hey there,

Have a look at these threads:

  1. B2C Age Segmentation: https://www.preplounge.com/en/consulting-forum/segmenting-by-age-groups-for-market-sizing-8524
  2. B2B Market Sizing: https://www.preplounge.com/en/consulting-forum/b2b-market-sizing-1950

I think that should answer it for you?!
 

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Antonello
Coach
on Dec 30, 2020
McKinsey | NASA | top 10 FT MBA professor for consulting interviews | 6+ years of coaching

Hi, in addition to the solutions proposed by the other coaches in the discussion, I would like to suggest similar cases in the platform to practice with:

  • 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
  • https://www.preplounge.com/en/consulting-forum/estimate-number-of-traffic-lights-in-a-london-5692

Hope it helps,
Antonello

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Gaurav
Coach
on Dec 10, 2020
#1 MBB Coach(Placed 750+ in MBBs & 1250+ in Tier2)| The Only 360° coach(Ex-McKinsey+Certified Coach+Active recruiter)

Hello there!

Some great answers above.
Have a look at this article on market-sizing, too:
https://www.preplounge.com/en/bootcamp.php/case-cracking-toolbox/identify-your-case-type/market-sizing

Do you need any further help?
GB

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Questions about market size are frequently asked in case interviews in consulting because they require a blend of logic, mathematics, and common sense. They can be asked as standalone questions or as part of a larger case. Applicants who are familiar with market sizing questions can really perform here. What Are Market Sizing Cases?If you're applying to top consulting firms like McKinsey, BCG, or Bain, you're unlikely to escape a market estimation case. Market sizing cases are considered "back-of-the-envelope" calculations because they can be done on the back of an envelope. Despite the name, it's not just about estimating market sizes; other estimations may also be asked for.For example, if you're discussing a British clothing retailer's growth strategy, you could calculate on an envelope how large the online clothing market is and what percentage of the market the retailer already penetrates. If you perform these calculations quickly, the conversation with the client stays fluid, leaving a good impression.You can receive the question about market size as a standalone case (although this is less common) or as part of a more comprehensive problem, such as market entry. The good news: There's no right or wrong answer when it comes to the question of market size. The interviewer is less concerned about the specific number you come up with for the market than the approach you took to arrive at that number. Why Are Market Sizing Cases Commonly Used in Consulting Interviews?Market Sizing Cases are used to test your quantitative and logical abilities. The interviewer wants to ascertain whether you work well with numbers and if you can make informed assumptions and deal with ambiguities. Questions about market size aren't just about the size of markets; they also involve other types of estimations, such as the number of golf balls in a jumbo jet. As you may have noticed, math is crucial in tackling these questions since you don't have a calculator to rely on. Most importantly, you need to be comfortable dealing with large numbers like millions and billions as well as percentages. More on that later. How Do You Best Approach Market Sizing Cases?Now that we understand the theory behind Market Sizing Cases and their relevance to your case interview, let's take a closer look at the process.Segmentation – The Key to Market Sizing CasesIf you've done some reading on case interviews before delving into market sizing questions, you might have come across areas where segmentation is necessary. Segmenting data is a crucial skill you must master as both a candidate in a case interview and in your later career as a consultant. Segmentation generally refers to dividing a larger whole into smaller parts or segments. The principle you need to understand to do this correctly is the MECE principle.MECE stands for "mutually exclusive, collectively exhaustive." Simply put, segmenting a group of data according to the MECE principle means forming subgroups that do not overlap but collectively cover the entirety of the data, meaning no data is missing. An example useful for market sizing questions is dividing a country's population into age groups (as different age groups often behave differently).Below is a breakdown into Group 1 in the age range 0 to 14, Group 2 in the age range 15 to 64, and Group 3 for everyone over 65: Note that none of the groups overlap, so no age is counted twice, but also no age is overlooked. Now that the population is correctly segmented, we can treat each group differently. If we had divided the population of the United Kingdom into the aforementioned groups, we could estimate clothing expenditures per person in these groups in online retail. Common sense suggests that expenditures per person in the 0-14 age group are lower than in the 15-64 age group. We can justify this estimation by noting that the majority of 0-14-year-olds do not purchase their clothing online. 
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