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Interpreting a market size

Hi all,

I had a question that came up during a case. I was asked to calculate a market size. Once I got to the number, I was asked what I thought of the number. I'm wondering what's the best approach for this assuming no knowledge of this market. What makes a market size good or bad and what could be things to emphasize?

Thanks you!

Hi all,

I had a question that came up during a case. I was asked to calculate a market size. Once I got to the number, I was asked what I thought of the number. I'm wondering what's the best approach for this assuming no knowledge of this market. What makes a market size good or bad and what could be things to emphasize?

Thanks you!

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Hello Anonymous,
Thanks for reaching out - what an interesting question!
When you come up with a market sizing calculation result, you have to:
1. Make "sanity checks" and see whether it makes sense by:
- Comparing the size of the market to a comparable market or figure (for example if you find that the mobile phone market size is one billion, you are probably wrong just by checking the number of phones x market price of apple )
- Capacity based sanity check: for example if we ask you to estimate the number of interviews held on a yearly basis at McKinsey in an office of 500 people. You might end up comparing your final number with the number of available interviewers in this office. If you end up with 100 interviews per week per interviewer, your result is probably wrong
2. Test your hypothesis
- Always take a step back on the hypothesis you made and tell the interviewer where you under/overestimated your hypothesis
I hope that helps.

Do not hesitate to DM me if you have any questions
Cheers
N

Hello Anonymous,
Thanks for reaching out - what an interesting question!
When you come up with a market sizing calculation result, you have to:
1. Make "sanity checks" and see whether it makes sense by:
- Comparing the size of the market to a comparable market or figure (for example if you find that the mobile phone market size is one billion, you are probably wrong just by checking the number of phones x market price of apple )
- Capacity based sanity check: for example if we ask you to estimate the number of interviews held on a yearly basis at McKinsey in an office of 500 people. You might end up comparing your final number with the number of available interviewers in this office. If you end up with 100 interviews per week per interviewer, your result is probably wrong
2. Test your hypothesis
- Always take a step back on the hypothesis you made and tell the interviewer where you under/overestimated your hypothesis
I hope that helps.

Do not hesitate to DM me if you have any questions
Cheers
N

Thanks that's super helpful indeed! — Anonymous B on Mar 26, 2020

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Hello!

It is the most normal thing to be asked this. What is indeed wonderful is indeed when you can anticipate it, and conclude the exercise not only giving the number, but "challenging" it.

Some techniques you could leverage:

  • Ask is the client has any benchmarks on similar situations, towards which you can compare
  • Use your personal judgement, recalling a situation in your past that is similar and comparing the number to it.

Hope it helps!

Cheers,

Clara

Hello!

It is the most normal thing to be asked this. What is indeed wonderful is indeed when you can anticipate it, and conclude the exercise not only giving the number, but "challenging" it.

Some techniques you could leverage:

  • Ask is the client has any benchmarks on similar situations, towards which you can compare
  • Use your personal judgement, recalling a situation in your past that is similar and comparing the number to it.

Hope it helps!

Cheers,

Clara

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Hi!

It's really case-specific. But what you could do is to try to double check it from another perspetive, example – how many people visit Eifel tower annually?

You could calculate this in 2 ways:

  1. Estimating number of tourists
  2. Estimating the capacity of the tower

So, if you went with option 1 you could suggest to your interviewer to doublecheck your numbers with calculating the option 2, and vice versa. This will of course require time – so the interviewer might just say "no, it's ok" – but it's good to show that you are able to check your results.

Best,
Daniel

Hi!

It's really case-specific. But what you could do is to try to double check it from another perspetive, example – how many people visit Eifel tower annually?

You could calculate this in 2 ways:

  1. Estimating number of tourists
  2. Estimating the capacity of the tower

So, if you went with option 1 you could suggest to your interviewer to doublecheck your numbers with calculating the option 2, and vice versa. This will of course require time – so the interviewer might just say "no, it's ok" – but it's good to show that you are able to check your results.

Best,
Daniel

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Hi there,

Even if you have no idea of a certain market, try to see if you can use data from a comparable market/industry, and clearly tell your interviewer how your thinking process work. This way even if the final answer is not right, at least he/she knows you can be resourceful and logical. E.g. I was asked during an interview to estimate football stadium seats which I have no clue. But I have been to concerts in a sports stadium, so I estimated by using tickets sold for the concert and % of seat occupancy rate (rough guage), and I told my interviewer I am using that logic to get a proxy. It worked. :)

Best

Emily

Hi there,

Even if you have no idea of a certain market, try to see if you can use data from a comparable market/industry, and clearly tell your interviewer how your thinking process work. This way even if the final answer is not right, at least he/she knows you can be resourceful and logical. E.g. I was asked during an interview to estimate football stadium seats which I have no clue. But I have been to concerts in a sports stadium, so I estimated by using tickets sold for the concert and % of seat occupancy rate (rough guage), and I told my interviewer I am using that logic to get a proxy. It worked. :)

Best

Emily

(edited)

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It's classical to be asked about the magnitude of the result. You can use common sense or knowledge of the industry but remember that the important aspects are the approach and the order of magnitude of the result.

Best,
Antonello

It's classical to be asked about the magnitude of the result. You can use common sense or knowledge of the industry but remember that the important aspects are the approach and the order of magnitude of the result.

Best,
Antonello

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Hi,

What makes a market size good is as follows

1. It doesn't feel wrong - for example, if you estimate the number of consumer laptops sold in a year in the US and you get a number like 100,000 or 10Bn those both instinctively should set off alarm bells

2. You can book-end it in some way - for example you can say I know that there are 320M ppl in the US and say 150M households. It is fair to say 80% of households have at least 1 laptop so I can anchor to this number as some type of limit for my final answer

3. You followed logical assumptions to get there - example you did not assume that people on average have 5 laptops, or that 1 laptop lasts 10 years

All the best,

Udayan

Hi,

What makes a market size good is as follows

1. It doesn't feel wrong - for example, if you estimate the number of consumer laptops sold in a year in the US and you get a number like 100,000 or 10Bn those both instinctively should set off alarm bells

2. You can book-end it in some way - for example you can say I know that there are 320M ppl in the US and say 150M households. It is fair to say 80% of households have at least 1 laptop so I can anchor to this number as some type of limit for my final answer

3. You followed logical assumptions to get there - example you did not assume that people on average have 5 laptops, or that 1 laptop lasts 10 years

All the best,

Udayan

(edited)

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