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Market sizing case

Anonymous A

Friends, hi.

could, please, someone elaborate on how to tackle the case with market sizing. I was asked this question by the partner from BCG and I think I failed since I was not able to ask 'smart' questions on how I will deal with this case. I think the case was devised by the partner based on his project experience: he asked about the market size of potatoes in country X.

(edited)

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Nuno replied on 08/10/2017

Hi there,

Interesting case, let me give you my 2cents:

Preliminary questions:

- By market sizing are we focusing on volume or $?

- How big is the Pop. in Country X?

- Is there any special consumer behavior in this country or can I assume regular consumption (i.e. my own Country)

- Is it ok to assume the market will just be regarding for human consumption?

--

Approach:

I'm going to estimate the average consumption per person and then multiply by #Pop. X. There are several ways to estimate it but this sounds the fastest one.

There are 2 big meals per day (Lunch/Dinner);

I'm going to assume I have one meal containing potatoes for every 3 meals (I'm saying this because people eat more rice and pasta in my country when compared to potatoes, however, this can change for this particular country);

I'm going to assume 200g of potato consumption per potato meal. This will equate to a mid size portion of potatoes;

Meals per year = 365x2=730 meals which 1/3 is with potatoes = 240 meals; each with 200g of potatoes = 48 kilos of potatoes per person

(Quick Sanity check: In my family of 4 I usually bring a new 40-50kg bag of potatoes every 3-4 months so 48kg per person surely seems reasonable)

I'm going to assume Population of Country X is 10M for simplicity if we don't have any data.

Market Size = 10M x 48 kg = 480,000 tons

--

I actually after doing the math went to check statistics and all these numbers make perfect sense.

--

Overall:

numbers here are not important, what is important is:

Ask necessary questions to reduce scope and to cancel any misinterpretations;

Take time and draw a framework that can solve problem;

Add numbers to the framework using reasoning and your own experiences;

When obtaining numbers always check if said numbers make sense;

Present final value and add some final conclusions if pertinent.

(edited)

Hemant
Expert
replied on 08/13/2017
Ex-Mckinsey, current strategy guy at Google.

Every market sizing has a different approach, so what you need to focus on is how to find the right variables to fit into a generic formula. Over the years, I have developed the following trick to frame my market-sizing thesis:

Market Size of product/service [x] (in USDs/yr) = Number of total $user_units in Market * %age qualified for product[x] * $frequency of use / yr * $units_used per use * price per use.

You can use this formula to solve almost all market sizing questions. You need to focus on what the $user_unit is, what is an appropriate %age is, and what is the $frequency $units and $price per use is.

E.g. (1): potato

Assuming market is USA. Start with total $user_units. Here users may be households. So 400M people / 4people per house == 100M household == $user_units.

Next, %age qualified == assume 100% of houses eat potatoes (something that may change for meat etc)

Next frequency of use == assume daily for meals (we can add 10-20% on top for stuff like potato chips etc)

Next units per use == 4 potatoes per day

Price = 1$ per potato.. I am just making stuff up here.

== 100M * 100% * 365 times per day * 4 potatoes per day * 0.25$ per potato == $36.5B/yr market

If this seems too big, too small etc then consult the interviewer for a "smell test" -- maybe re-eval your "4 potatoes a day" to 2.. that'll bring market to 18.25B/yr..

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