Level of detail required in market sizing questions

Market sizing
New answer on Oct 04, 2019
2 Answers
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Anonymous A asked on Oct 03, 2019

Hi There,

Does anyone have a more insightful/detailed/rigourous way to address the market size for the UK cake market, beyond my proposed approach below:

Total Rev = segmented by age demographics as most likely to influence purchasing decisions:

Total Rev = Rev[0-20 years] + Rev[20-40years + Rev[40-60years] + Rev[60+years]

Where Rev(i) = [No. people] x [% eating cake] x [% of those eating who actively buy cake] x [mean no. cakes bought per week] x [no weeks/year when cake is bought] x [mean price per cake]

Perform the above calculation for each age group with appropriate assumptions on above numbers and total.

Is there a more detailed/insightful/rigourous way to approach this (or is the above sufficient detail) - e.g. I could think of revenue segmentations by products within the cake market (e.g. large 'event' cakes + cake slices (e.g. in coffee shops)) or revenue segmentations per day of week (i.e. cake bought on weekend versus weekday etc.), or does this just add unneccessary complications?

And more generally across all market sizings of this type - how detailed should the approach be in terms of revenue segmentation, or is a typical segmentation per age demographic usually sufficient?

Thanks in advance for any inputs!!

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Udayan
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replied on Oct 04, 2019
Top rated Case & PEI coach/Multiple real offers/McKinsey EM in New York /6 years McKinsey recruiting experience

Hi,

Your approach sounds well thought out and would suffice. If youreally wanted a different appproach you could for example do it by occassions. As opposed to people that eat cake you could say occassions that would call for cake eating - birthdays, corporate functions, weddings etc. and estimate those per year (population for birthdays, x% of people between 20 and 40 getting married every year for weddings etc.). You can then supplement this with an additional assumption for those that eat cake outside of occassions.

A better way perhaps is to account for these occassions is to keep your approach and to increase the number of people that might have cake in a year based on these occassions. (e.g., each person has lets say 20 occassions a year that includes celebrations of all kinds that could involve cake eating - then take a % of those that will eat cake in those occassions etc.)

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Anonymous A on Oct 04, 2019

Thanks for the feedback, and just to clarify, for all similar top down market sizings of this type, is a general revenue segmentation via age demographics usually sufficient?

Udayan on Oct 04, 2019

In most cases yes. The easiest way to tell is to see what the interviewer is trying to get you to do. It's also good to check in with them once you've outlined the approach and take any hints they might give you

Vlad
Expert
replied on Oct 04, 2019
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

The level of detail really depends on wether its a standalone MS case or a part of the bigger case:

  • In a standalone case you can have 2-3 segmentations per case with detailed calculations
  • If MS is a part of the bigger case, it's better to use not more than one segmentation (e.g. age groups) andsimplify everything else (e.g. using 80 / 20 rule, or capacity and occupancy / utilization istead of long segmentations)

Best

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Udayan

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Top rated Case & PEI coach/Multiple real offers/McKinsey EM in New York /6 years McKinsey recruiting experience
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