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# Market Sizing

estimate estimation estimation market sizing estimations Market sizing
New answer on Apr 04, 2024
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Hi,

In market sizing questions, is how much milk is consumed in Norway each year the same as estimate the size of the Norway milk market? How to solve this question?

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Nope! Exactly why you need clarifying questions :)

Amount consumed = liters

\$ consumed = \$ amount of all liters consumed

Market = consumed AND exported MINUS imported…i.e. produced

Be careful :)

Answer: Population broken down into household (how people shop for milk) broken down into income brackets split into frequency of purchase times purchase value (higher income has higher frequency + purchase value)

PLUS hotels/companies (B2B)…a factor (percent) of the above B2C consumption

Market Sizing Analysis: Approaches, Techniques, and Exercises

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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.

Take a look here for additional practice! https://www.preplounge.com/en/management-consulting-cases/brain-teaser/intermediate/taxis-in-manhattan-market-sizing-229

That's a great question.

It's exactly what you should be asking the interviewer.

The first step in solving a market sizing question is clarifying the question itself and figuring out the metrics in which the final answer should be presented.

Once you have that clarity you can take some time and develop the approach.

Typically, yes, market size refers to the yearly ‘amount’.

Best,
Cristian

Size may be in volume or in value (usually for market size we would consider value).

Just beware that scoping questions are good questions to ask the interviewer (is it milk consumed in its final form only? E.g. are we considering milk going into dairy products as well?)

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