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Regarding the replacement concept I wonder when to use average number of households & when to use a view per person?

Market sizing
New answer on Jul 02, 2021
2 Answers
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Catrina asked on Jul 02, 2021

1) E.g. Average number of household seems accurate to estimate number of cars sold in the US in one year or for number of light bulbs because you look at it from a household perspective. What about number of laptop or smartphones? In my opinion, I would use a view per person here and say for example that every person has a smartphone except childern and maybe elderly people (depending also on the country).

2) In the two videos about the replacement concept (cars and light bulbs): are we accurate when estimation the total number of existing light bulbs/cars by only considering households. There is also rental cars, business cars, taxis etc. which we don't include? Same for light bulbs: what about restaurants, hotels, offices etc.

Thanks for your help. Really appreciated

(edited)

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Ian
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replied on Jul 02, 2021
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

Hi Catrina,

Great questions!

1) Yes, some items are bought at a household level (cars, beds, lightbulbs, etc.) and some items are bought at an individual level. Use your judgement here, and segment accordingly. Laptops/phones are indeed individual purchases!

2) You are right here as well. Where there are multiple "markets" for a market sizing, you have 1 of 2 options. First, you can estimate the other market as some % of the one you just measures (I think businesses have about 10% as many lightbulbs as individual consumers). You can do this is there is a reasonable corrollary and you can make a reasonable assumption. Your second option is to market size that market seperately. You need to do this is it's quite sizeable and/or it's hard to says it's x % of the other market.

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Catrina on Jul 03, 2021

Hi Ian, Many thanks for your helpful answer! In particular, the second comment clarifies a lot for me. Really appreciated.

Anonymous replied on Jul 02, 2021

1.) I agree with your conclusion. Whatever makes it easier for you to get to a mental benchmark is the preferred way. If a household is the way to think about cars or lightbulbs, than it makes sense to break those down on a household level.

2.) You're right: To calculate the full market size you'd need to take commercial applications as well.

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Ian

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