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Raj

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How would you estimate the market size for video games in the USA?

Hello everyone!

I would like to estimate the market size for video games in the USA. Howerver I don't know which approach is better, let me start:

1st Approach:. I would start estimating # Customers x Average spend per customer.

- To estimate the # customers I would estimate USA population x % that buys video games.

- To estimate Average spend per customer I would estimate # video games per customer x Average price per game.

2nd Approach. I would start calculating # videogames sold x Price per game.

- To estimate the # of videogames sold each year I would estimate # of videogames in the market x growth rate. To estimate # of videogames in the market I would estimate # people who buys games x # games per person. To estimate the # of people who buys games I would estimate USA population x % that buys games.

What do you think? I don't know if multiplying it by a growth rate is a good approach. My though process says multiplying it by the grow rate would tell me the # of games people buy each year which is different than the existing games in the market which is the first approach.

Thank you very much.

Hello everyone!

I would like to estimate the market size for video games in the USA. Howerver I don't know which approach is better, let me start:

1st Approach:. I would start estimating # Customers x Average spend per customer.

- To estimate the # customers I would estimate USA population x % that buys video games.

- To estimate Average spend per customer I would estimate # video games per customer x Average price per game.

2nd Approach. I would start calculating # videogames sold x Price per game.

- To estimate the # of videogames sold each year I would estimate # of videogames in the market x growth rate. To estimate # of videogames in the market I would estimate # people who buys games x # games per person. To estimate the # of people who buys games I would estimate USA population x % that buys games.

What do you think? I don't know if multiplying it by a growth rate is a good approach. My though process says multiplying it by the grow rate would tell me the # of games people buy each year which is different than the existing games in the market which is the first approach.

Thank you very much.

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Hi there,

Sorry but neither are right.

You need to segment the problem further.

"# video games per customer x Average price per game" is far too simplistic an approach!

You need to segment the population by the factor that you think most directly correlates with video game spend. In this case, it would clearly be age.

So, segment into 3-5 groups by age, estimate the % of each pop that would buy games THEN the avg spend those gorups would have. Then multiply it out.

Make sense?

Hi there,

Sorry but neither are right.

You need to segment the problem further.

"# video games per customer x Average price per game" is far too simplistic an approach!

You need to segment the population by the factor that you think most directly correlates with video game spend. In this case, it would clearly be age.

So, segment into 3-5 groups by age, estimate the % of each pop that would buy games THEN the avg spend those gorups would have. Then multiply it out.

Make sense?

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Hello!

I would go with approach #1, not only because it´s much simpler to "follow", but also because you will then have to make the calculations, and they are much easier in the 2nd case.

At the end, this is a very typical market sizing case, where the key steps are:

  • Calculate the total population
  • Calculate the % of population that could be interested in this product (this could be done by clustering -the classical ones are age groups, purchaching power, etc.-)

Hope it helps!

Cheers,

Clara

Hello!

I would go with approach #1, not only because it´s much simpler to "follow", but also because you will then have to make the calculations, and they are much easier in the 2nd case.

At the end, this is a very typical market sizing case, where the key steps are:

  • Calculate the total population
  • Calculate the % of population that could be interested in this product (this could be done by clustering -the classical ones are age groups, purchaching power, etc.-)

Hope it helps!

Cheers,

Clara

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