How would you estimate the market size for car rentals in the US?

Market sizing
New answer on Jun 18, 2022
3 Answers
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Anonymous A asked on Jun 15, 2022

It would be total dollar amount per year. I am unsure how to approach this. 

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Ian
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replied on Jun 15, 2022
MBB | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

Hi there,

Why don't you take a look at the myriad resources already out there on market sizing? Perhaps the hundreds of Q&As with examples?

Or, one of the practice market sizings that have been created: https://www.preplounge.com/en/management-consulting-cases/brain-teaser/intermediate/taxis-in-manhattan-market-sizing-229

You'll learn a lot more from this by trying it out yourself first! Why don't you post your approach here and we can provide commentary?

How to approach market sizing

It's very simple: Do the approach the is the easiest for you given the question.

Are they asking you to estimate something where you don't even know where to begin from the top (maybe you have 0 clue as to the market size of the industry, the GDP of that country, etc. etc.)? Then do bottom-up!

Alternatively, does it seem impossible to do a realistic from-the-ground-up estimation of something (perhaps it requires just far too many steps and assumptions)? Then do top-down!

Fundamentally, you need to take the approach that just makes the most sense in that circumstance. Quickly think about the key assumptions / numbers required and whether you 1) Know them or 2) Can reasonably estimate them. If you can, go ahead!

An Example

He's a Q&A for a great market sizing question here asking to estimate # of electric charging stations in a city in 10 years:

https://www.preplounge.com/en/consulting-forum/how-would-you-solve-this-market-sizing-question-from-roland-berger-7631

This one could be answered top-down (as I did) by estimating population of the city, # of drivers/ cars, etc. etc.

OR, it could be answered bottom-up by estimating # of stations you see per block (or # of gas/petrol tanks), % increase this might be over time (or # of EV stations that would be needed per gas tank given EV stations take 10 times as long), and # of blocks you'd estimate the city to have.

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Udayan
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replied on Jun 15, 2022
Top rated McKinsey Case & PEI coach/Multiple real offers/McKinsey EM in New York /6 years McKinsey recruiting experience

Here is one way to think about it

Identify the needs for car rental

  • Leisure travel
  • Business travel
  • Rental for Uber etc.

Estimate the demand for each

E.g., - Leisure

  • Number of tourists annually - e.g., 50M
  • Length of trip on avg - e.g, 5 days
  • And % that need a car - e.g., 75%

 

Repeat for each type of demand and you will have an answer.

 

Best,

Udayan

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Clara
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replied on Jun 18, 2022
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

I would always recommend you to give it a shot and then post it here, this would help you the most. 

Given that market sizing cases were the topic of many questions in this Forum, I developped a market sizing case, that you can find for free in PrepL´s library

https://www.preplounge.com/en/management-consulting-cases/candidate-led-usual-style/intermediate/market-sizing-new-startup-launch-baby-strollers-in-the-us-244

Let me know if you have any doubts with it, it contains a detailed explanation and methodology about how to solve this specific example, but you can extrapolate to many other market sizings!

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Ian gave the best answer

Ian

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