Sometimes, after finishing a market sizing question, the interviewer asks us what assumptions we think could change in our approach or what assumptions could vary.
I am not sure what to answer to these questions. Should we just pick one assumption from our answer and say that it could be different?
I don't know if my answer if clear, but if you could also give me an example that would be great!
When you finish your market sizing you should:
1. Check if the result makes sense. More important than not making calculation mistakes is the ability to sense if a number “feels” right or wrong. It can “feel” wrong either because you did mistakes in your calculations or because or had wrong assumptions (or an overall bad approach, but let's hope that is not the case).
2. If the result doesn't make sense (or the interviewer asks to review assumptions), you should know what are the “weakest links" in your assumptions. Those with the highest impact or least certainty/confidence.
For example, if I was estimating the number of baby diapers, I would probably feel confident on the population size, % of babies, but probably not as much on the number of diapers used per day. That would be the one assumption I would review more carefully.
Hi
There are two parts to this. 1) assumptions that could vary - As you put together an algorithm/equation for your market sizing calculations and start making assumptions for each dimension, the ones where you have absolutely no basis or reasons to back your reasoning behind the assumptions are the ones where you would go back and potentially question them. for e.g - coffee drinkers in a country - you split the population into different age groups and take an average percentage of coffee drinkers across each - this percentage is the one which could potentially vary
2) different assumptions for your approach - this is where interviewer probably expects to lay down a different algorithm for your market sizing calculation using different set of assumptions . For the same example above - you could split the population by income or even take a supply side approach to answer the question
i hope it helps. Happy to have an offline discussion to clarify further if needed. Good luck !
I second everything everyone said! The other piece I would point out is what biases/your POV could be present that could change the answer. For example, one market sizing question I was given was “how many college students are in the USA”. Now, there were a LOT of things I don't know: what % of 18 year olds enroll in college? What % of USA college students are international students? When the interviewer asked me what assumptions could be wrong, I said “I assumed x% of 18-22 year olds are in college, but this of course varies by state, city, socioeconomic status, etc. So while I guessed x% based on my experience/research, this could be a lot lower/higher for the country as a whole.”
I think as consulting firms are looking for people who are well rounded and diverse, take a look at your assumptions and say “did I estimate this because this is MY experience and could be different for others?"
This strategy of course isn't used for every market sizing question (no need to call out biases for number of golf balls that fit on an airplane) but as consulting firms look to be more inclusive, being introspective about assumptions can be good strategy
In addition to what's been mentioned by other coaches, it could also be that your approach is not wrong per se but perhaps not complete.
This means that you might have missed out 1 or 2 more additional drivers and/or further segmentations of a variable that has a material impact on the answer.
i.e. It could be that the sizing only applies to one gender of the population (50% of total population), but you had assumed total population.
From a practical POV, when asked this question by the interviewer:
Hi Emma,
This might be happening if you're not sense-checking your end number (always make sure to verbalize the sense-check of your final number!).
When they ask about your past assumptions, it might be that nothing is wrong and they're just testing your thinking OR you've made a poor assumption.
Remember that we are estimating NOT guessing/assuming.
When they ask you to check assumptions, take a look at which ones are more guesses and/or which ones might be unrealistic.
The entire market estimation problem is built on assumptions. When asked what assumption would you change its good to see what assumptions have the biggest impact on your answer and communicate that to the interviewer, offering to alter it as needed.
You could also highlight that there are multiple approaches to market sizing and you can suggest alternative approaches (top down vs bottom up for example)
My strategy would be to flex the assumption which is the most “behavioural” one, such as the take-up rate. This allows for a much better discussion with your interviewer and is a much more commercially-savvy way of doing so (e.g. that is what normally happens on cases).
As all of a market sizing is based on assumptions they’re probably testing your ability to know which assumptions have the greatest impact on the overall answer. I’d choose the three biggest ones and tell the interviewer what the impact on the answer would be by making them bigger or smaller
