Market Sizing: How would you set a product revenue goal for Instagrams stories ad?

BCG McKinsey and Bain Market analysis Market sizing marketsize marketsizing
New answer on Jul 21, 2022
3 Answers
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AR
Skilled
asked on Jul 20, 2022

Hello,

I got an interesting case wherein I was asked to calculate the market size for the Instagram stories ad?

I am a bit confused - should I build a top-down or a bottom-up approach for this?

Any answers are appreciated!

Thanks!

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Ian
Expert
Content Creator
replied on Jul 20, 2022
MBB | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

Hi there,

You'll learn a lot more from this by trying it out yourself first! Why don't you post your approach here and we can provide commentary?

Hint: Do you think it's easier to think about your/your peers' usage of IG and extrapolate that out to the wider population, or think of US/FAANG marketing revenues/spend/budget?

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

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Adrian
CoachingPlus Expert
replied on Jul 20, 2022
EY Parthenon Manager | Interviewed >100 candidates | Case Structuring | Frameworks | Fit & Behavioural | Communication

Hi there,

First, you should be clear on the scope of what you actually need to calculate. Only then you can set yourself on the approach. In general, I'd suggest you a bottom up approach however:

As I don't know the exact assignment you get: I imagine you get to calculate (1) the number of individuals who buy giving that they see the and (2) the ad is for a specific type of products (e.g. pet food) (3) in a certain area (e.g. the USA).

Now, I would define who will actually see the ad. In my example, consumers using Instagram living in the USA who are looking at dog related content. We could say all people who have dogs, and some who want to get one, or are heavily interested.

So we need to find: No. of Instagram Users in the USA x % of people looking at dog content

Now we need to deep dive on both factors with assumptions

No. of Instagram users: e.g. 80% of Americans between ages 16-40 (you can differentiate this further by age brackets if you want to)

Share of US Population between 16-40 with a dog: Let's assume 20% of people have a dog (or have one in the family they are in, they don't need to be the actual owners), and another 5% are interested or want one (you can verify this by guessing the number of dogs per person e.g. in your extended family, if you are not an outlier with many or no dogs)

Now you have the number of people seeing the ad. If you want a market size in value (i.e. $), further assume the share of people who buy given that they see the ad and their average shopping basket.

Now plug in the numbers and you are good to go :)

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Clara
Expert
Content Creator
replied on Jul 21, 2022
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

I would always recommend you to give it a shot and then post it here, this would help you the most. 

Given that market sizing cases were the topic of many questions in this Forum, I developped a market sizing case, that you can find for free in PrepL´s library

https://www.preplounge.com/en/management-consulting-cases/candidate-led-usual-style/intermediate/market-sizing-new-startup-launch-baby-strollers-in-the-us-244

Furthermore, you can find a detailed market sizing (a complex one integrated into a case) in my latest case: 

Swiss manufacturer market assessment, profitability and scenarios: https://www.preplounge.com/en/management-consulting-cases/candidate-led-usual-style/advanced/swiss-coffins-the-death-business-245

Let me know if you have any doubts with it, it contains a detailed explanation and methodology about how to solve this specific example, but you can extrapolate to many other market sizings!

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Ian gave the best answer

Ian

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