Get Active in Our Amazing Community of Over 455,000 Peers!

Schedule mock interviews on the Meeting Board, join the latest community discussions in our Consulting Q&A and find like-minded Case Partners to connect and practice with!

Market size estimation question: how many vending machines are there in the US?

Case Interview case questions market estimation
Recent activity on Jan 01, 2019
3 Answers
6.7 k Views
Paul asked on Nov 16, 2017

Hi everyone,

I have been practicing cases a lot recently and am recently having some trouble with the best way to approach these problems. For example, "How many vending machines are there in the United States?" I have seen several different approaches to such types of questions and I was wondering what the best one might be.

Thanks in advance everyone.


Overview of answers

  • Upvotes
  • Date ascending
  • Date descending
Best answer
replied on Nov 16, 2017
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School


1) First of all, there are two ways to calculate market size:

  • From supply side (e.g. vending machines spots)
  • From demand side (e.g. vending products consumption)

2) There are 2 ways to structure market sizing:

  • Formula - basically a math formula to come up with a solution. The problem with the formula is that it is easy to forget something or get lost.
  • Tree - same as with regular cases you build a tree. A very simple example: you need to calculate the number of dogs on manhattan. A number of dogs = share of households having a dog * # of households. # of households = population / average household size. In the end, you'll have a pyramid where you have to fill the numbers on the base of the pyramid. This approach is much easier and help you track all the numbers

3) You should learn the key market sizing techniques:

  • Making assumptions based on personal experiences (Use the example of your house where out of 100 apt-s 10 have dogs)
  • Adjusting numbers (NY is a busy city thus fewer people have dogs)
  • Sanity check - try to apply your calculations to real environment
  • etc.

4) You should learn the key tools:

  • Using age even age split (suppose life expectancy is 80 years. Assuming even age split we have 4 mln people in US of each age group)
  • Using 80/20 split (suppose 20% people earn 80% wealth and the average salary is xx...)
  • Using approximations (Length of NY-SF flight and plane speed to calculate US length)
  • etc.

5) Learn key numbers: populations, gas price, gas consumption, Boeing speed and nmber of seats, average salary, # of gates in the airport, GDP growth rate, inflation, etc.

6) Practice 10-15 cases and you'll be fine

Good Luck!

Was this answer helpful?
Paul on Nov 17, 2017

Hi Vlad, Thanks for your response. I am okay with market sizing questions such as "Estimate the market for electric toothbrushes in Germany." But this particular type of question, where it seems to involve something like gas stations or vending machines, give me more trouble.


Odeh replied on Nov 16, 2017

My 2 cents on market sizing questions is the following: it's not the answer but how you approach the question. Interviewers are trying to assess the way you think - how comprehensive are you? How creative are you? Are you MECE?

There is an infinite number of ways of approximating the size of a market - but is the way you approach the questoin logical and practical? Can you support your reasoning as to why you've segmented the market the way you did? What are the assumptions you're making?

Not quite the answer you were hoping for but I hope it's helpful nonetheless.

Was this answer helpful?
Anonymous A replied on Jan 01, 2019

One way to answer this question could be the following:

1) Think about what kind of vending machines exist and clarify which ones are in scope (only for snacks or also cigarettes, ticket machines etc.)

2) Try to analyze for each vending machines where they are usually located (i.e. for snack machines, they are usually placed at airports, train stations, metro stations etc.)

3) Estimate the number of vending machines for each of the given locations - example: XX snack machines per airport - you can come up with this number by estimating the number of gates per airport and multipy it by the number of machines per gate (assume an average size of the locations, e.g. do not overcomplicate it by differentiating too much - different sizes of airports)

4) Estimate the number of locations in the US (i.e. the number of airports, train stations, metro stations) and deduct the number of locations that may have no vending machines (e.g. assumption 80% will have them)

Was this answer helpful?
Vlad gave the best answer


McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School
Q&A Upvotes
186 Reviews
How likely are you to recommend us to a friend or fellow student?
0 = Not likely
10 = Very likely
You are a true consultant! Thank you for consulting us on how to make PrepLounge even better!