Hi there,

How to Practice

Here's one to practice: https://www.preplounge.com/en/management-consulting-cases/brain-teaser/intermediate/taxis-in-manhattan-market-sizing-229

Use resources that coaches provide you (I have 7 videos with answers).

Use online resources

Use casebooks

“Invent” market sizing

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.

Hi there, 

In short, it would be great if you could expose yourself to different types of market sizing questions, first attempt them on your own and then check with the suggested answer. Most case books have market sizing questions that you could review so you understand the general methodology. There are also examples that you can find here on PrepLounge. 

The long answer is that I can attempt here to provide a primer on how to approach market sizing questions. Needless to say, this is high-level and it's worth diving deeper into explaining these steps as part of a longer discussion. Still, you can think of market sizing along the following steps:

1. Clarify the data 
   • Play back the data to the interviewer to make sure you understood it correctly in terms of scope and core questions that needs answering
   • Clarify the core parameters - e.g., whether the final number should be expressed in litres or km or square meters
2. Decide which approach to use (top-down vs bottom-up)
   • Start with the macro level and then work down (e.g., starting from the US population and going down to your relevant segment)
   • Start with the micro level and the scale up (e.g., starting with your own consumption of orange juice and then scaling up to the US population)
   • You need to check which approach makes most sense, but it's worth also trying both at the same time as a means of sanity checking your answer
3. Segment 
   • As you apply different filters on your approach to get to the target answer, segment the market into several areas. This will help increase the accuracy of the number. 
4. Come up with assumptions
   • Whenever you're missing a number, first check with the interviewer whether they have it. 
   • If not, then feel free to make an assumption. Communicate the assumptions to the interviewer, explaining the logic that goes behind them
   • It's crucial that you provide a rationale for your assumption
5. Sanity check your number
   • Check whether you final number makes by comparing with other numbers that you might know
   • Also, estimating from the other direction (e.g., bottom-up instead of top-down) is another way to confirm your number is directionally correct
   • If there are mistakes, go back and check your logic and assumptions. Walk the interviewer through your thinking. 
6. Interpret the result
   • Always interpret the result within the context of the case. Explain what this number means for the client (if there is one in that specific exercise) and how this finding impacts the hypothesis that you have. 

I run sessions with candidates that specifically focus on mastering market sizing. Feel free to reach out and we can find some time. 

Best,

Cristian

Hi there,

You can create an unlimited amount of market sizing cases for yourself.

• If you see a business while walking outside, ask yourself how much revenue they are making, how many customers they are serving, etc., or calculate these numbers for the total industry in your country, another country, etc.
• If you see a product, ask yourself how many are sold per year or what the total sales revenue is per year (e.g., a car).
• If you see an item, think about how many there are in your city or country (e.g., a window). This is for more abstract market sizing questions.

How to approach it

1. Think about the outcome variable you want to solve for
2. Think about 3-4 variables that influence it and their relationship
3. Use assumptions for each variable and back it up with solid arguments
4. Plug in the numbers and calculate
5. Interpret the result and think about if it is in the right ballpark or not (+ if it can be increased or decreased due to changes in your assumptions)
6. Finally, google the number and compare it to your outcome (likely a Statista page)

Cheers,

Florian