All questions tagged Market sizing - Consulting Q&A - PrepLounge.com

What I would do to approach this problem:

1. Start from population, estimate the amount of population with cancer. I would segment by age because I believe that cancer is much more prevalent in mature ages

2. I probably would've missed the diagnosed rate actually.

3. I would calculate % of people treated by immunotherapy, segmenting by income level since people with lower income will less likely be treated

4. Estimate amount of therapy one person require, probably by frequency (once a week?) and $/week (idk, 1k$?)

5. Calculate the final results

Let me know your thoughts

Hi there,

Your approach is from the demand side. You can also use the supply side as a constraint and work from there. So how many people can actually be present in a gym, the percentage utilization for the peak and off peak hours, and peak and off peak seasons. You will get an average that you can work with.

As long as you can show the interviewer the logic and they can follow you, that's key.

Does this help?

Best, Aws

Hi,

HPV vaccines are recommended for boys and girls in the US (https://www.cancer.org/latest-news/who-should-get-the-hpv-vaccination-and-why.html) and before they become sexually active. Majority of vaccines are given ages 11 and 12, and the remaining to older teens and some to adults.

Assuming 320M in the US population, 80 yrs life expectancy and uniform distribution this gets us to 4M for each age.

Assuming all boys and girls should get the vaccine, the market size is as follows :

1. For boys and girls currently aged 11 and 12 that is 8M

2. For ages 13-18 - assume that only 50% got vaccinated before 13. Now obviosuly this is an over-simplification, you can also assume a declining ratio (60% at 13 and going down to 30% at 18 yrs who need to get vaccinated).

Total Population 13-18 = 24M and 50% of that is 12M

3. For women adults up to 40 - assume 80% have been vaccinated and 20% need vaccination (if you want a gold star you can take into account that most women have got the vaccine but almost no men have given that previosuly only girls were required to do so and that number now climbs to 80% of women and 0% of men as having the vaccines so 20% of women and 100% of men in this age group are not vaccinated, but this is something you can check with the interviewer)

Population of women only 19 - 40 = 44M, 20% = 9M

Total market size - ~ 29M

Hope that helps,

Udayan

I believe what you are asking is the % of homes in a country that are vacant/not occupied

One way to approach this question -

Estimate number of houses

1. Look at overall population
2. Divide population into number of households (e.g., 3 or 4 people per household on average)
3. In a perfect world 100% of households have houses
4. Now you can apply discounts as needed - for example, if you are only looking at single family homes then there will be a discount as a lot of people living in cities live in condominiums
5. If you are taking all types of accommodation then you will apply a positive multiplication factor as condos tend to have fewer than 3 or 4 people in them

Now you want to look at vacancy rate

1. Factors that affect vacancy
   1. Oversupply of homes
   2. Declining population
      1. Aging population
      2. Net migration
   3. Urbanization

Look at factors that impact the country in question

1. E.g., if it is oversupply you can look at why (low interest rates leading to building boom and ghost towns, or people owning multiple homes, or new towns being built etc)
2. Either apply a relevant discount factor to the total homes (e.g., 5% homes are vacant because of multiple home ownership - you will have to have some rationale as to why)
3. Or try and calculate what these might be if you have relevant information - (e.g. number of new homes built vs population growth rate)

Hope this helps,

Udayan

1. You can use 5m. With all the assumptions you are going to make, this first approximation is not important. I recommend asking the interviewer something like "Can I use 5m to facilitate the calculation?". 99% of the interviewers will not only let you go with it but also appreciate the simplification.

2. In every market sizing, you should always consider all the possible sources of revenue/ways of using the product. In this case, you should first of all divide in 2 the problem, in order to investigate all the milk consumption:

• liquid milk
• milk-based products: dairy products (cheese, yogurt, butter...), ice cream, chocolate, biscuits...

Now you can start to assess the first bullet. Your solution scheme is pretty good, maybe the numbers are too high. I would have added some details, to transform it in a great answer. E.g. when you mention the segment of people who do not drink milk you can make some customized examples (lactose intolerants, infants, some people on diet, vegans, ...). I think this segment is quite larger than 20% (maybe something like one third?), but here you do not need extreme accuracy, so 20% will be considered fine as well. Use common sense.

Completed the first sizing, you should go with the second bullet. It is more complex since all the market mentioned should be treated separately. You could ask the interviewer whether you can make a top-down estimation (like considering the whole point counting three times the first bullet). This is a very strong assumption and you will certainly lose a lot of accuracy, but at this point, the interviewer will have already assessed your problem-solving skills and common business sense, but at the same time, you do not miss any part of the problem. You can say something like "a further effort should be spent to address all the market, starting from its bigger missing parts, like dairy products and industrial milk-based products".

Best,

Antonello

Hi Kristian,

I usually start from demand side me as well, because I find it more intuitive. Nevertheless, there may be some cases where you have some specific insights about supply and it's easier/most accurate starting from supply side. It really depends on the case. Happy to discuss it further if you have more details.

Hope it helps! :)

Hi Umer,

A simple but structured approach would be:

• Start from the population of Dubai (let’s assume 3 Mln)
• Assuming on average 2.5 people in each household
• Therefore, we have 1.2 Mln of households (i.e. apartments)
• Assuming that on average in Dubai there are 40 apartments for each building
• Therefore, we have 30k residential buildings
• Assuming that on average every 16 buildings there is 1 street intersection
• Therefore, we have a total of 1,900 intersections in Dubai
• Assuming 4 traffic lights for each intersection
• Finally, we can estimate roughly 7,600 traffic lights in Dubai

Naturally, this is just one of several possible approaches.

It is always good to ask preliminary questions to the interviewer and understand if he/she is comfortable with the type of approach we are undertaking; likewise, is always a good practice to share with the interviewer all the assumptions we need to consider along the whole process of market size.

Hope this helps,

Claudio

Hi,

The chances are higher that someone will help you if you provide at least your initial thoughts instead of just throwing 3 different MS cases in the topic. Happy to review your approach

Best

Hi Anonymous,

I love interview questions like these because they're seemingly simple, but we can still be organized and thoughtful in our analysis. There's no single correct way to approach this question, but here's how I might think about it:

First, I'd start by asking the interviewer a few clarifying questions. This demonstrates that you're carefully considering the question and the different possible interpretations. Some of these could have a big effect on the solution:

• What do you mean when you say "New York?" Is that Manhattan? New York City? New York State? It's important that we set the appropriate baseline, as there is a big difference in population.
• Do you want me to estimate how many people are wearing a red t-shirt this very moment, or how many people wore or will wear a red t-shirt any time today? This could change the number significantly depending on the time of day, and if we consider that many people change outfits during the day (e.g., going to the gym, getting home from work, etc.)
• When we say t-shirts, I will assume that we are not counting dress shirts, polos, blouses, and other styles of red tops. Does that sound ok?

For the sake of this example, let's assume the interviewer tells us we're looking at New York City, at this very moment, and t-shirts only.

I might set up this equation to start, with three variables we can analyze separately:

# people currently wearing a red t-shirt in NYC =

Number of people currently in NYC * % of people wearing a t-shirt * % of t-shirts that are red

Let's start with the first one: How many people are in NYC right now?

You might ask the interviewer if they happen to know to population of NYC. I'm going to guess that it's approximately 8 million. It's currently 2 PM on a weekday, and I think many people commute into the city from outlying areas (New Jersey, Long Island, Westchester...). NYC is also a popular tourist destination. I'm going to assume there are an additional 2 million non-residents in the city currently. 10 million people total.

Second, what percentage of people in NYC are currently wearing a t-shirt?

I can think of many factors that affect what a person wears:

• Time of day
• Weather (If it's a warm sunny day, more people will probably wear t-shirts)
• Gender (Maybe we think women have more fashion options than men -- dresses, blouses, etc. -- so we might guess that men wear more t-shirts than women)
• Age (Perhaps we think kids wear t-shirts more than working age adults or the elderly)
• Occasion (Many people would wear a t-shirt on their day off, but fewer would wear one to work)

As the candidate, you'll want to demonstrate some analytical thinking here but also your ability to prioritize and not make things overly complicated. It's 2 PM on a late summer weekday, so let's assume the weather is good and a t-shirt would be appropriate and comfortable. Let's use "occasion" to structure our calculation, as that might be the variable with the clearest differences in t-shirt-wearing.

I'm going to estimate the mix of people currently in NYC as follows. I don't know if these are even remotely correct, but the point is to make educated assumptions and explain them:

• Locals who are working today: 60%
• Locals who are not working today: 30%
• Tourists: 10%

I chose these categories because I think there is a sigificant difference in t-shirt-wearing between them. I'm going to estimate that the percentage of people wearing a t-shirt are: 5% of working locals (not very many jobs in NY are that casual), 40% of non-working locals (t-shirts are probably a popular choice on people's days off), and 70% of tourists (practically every tourist I see is dressed very casually).

0.6 * 0.05 + 0.3 * 0.4 + 0.1 * 0.7 = 0.22

By my estimate, 22% of people currently in NYC are wearing a t-shirt.

Third, what percentage of these t-shirts are red?

There are many ways we could approach this question:

• What are the major color categories of t-shirts? (Red, Blue, Green, Black, White, Orange, Yellow, Purple, Pink, Brown, Gray...) Are any of them more popular than others? What percentage do we think are red?
• If I picture the display of t-shirts at a clothing store, what percentage of them are red?
• If I use my own wardrobe of t-shirts as a benchmark, what percentage of my own t-shirts are red? (Be careful using yourself as a sample for the whole population, but this is another data point we can consider.)
• Is there anything that would affect the color of a t-shirt a person chooses to wear today (e.g., is it Valentine's Day? Heart Walk? Are a bunch of Red Sox fans in town for a baseball game?)

This is a great place to demonstrate that you can triangulate to an answer using multiple data points and approaches. Let's assume it's just an ordinary day. My best guess for each of these questions is around 10%.

Finally, putting it all together:

10M people * 22% in t-shirts * 10% red = 220,000 people currently in NYC wearing a red t-shirt

Once you have your answer, I'd suggest doing a few things:

• "Sanity check" the answer. Based on our calculation, 2.2% of people in NYC are wearing a red t-shirt. Does that seem "in the ballpark?" Seems reasonable to me: If we walked through a busy subway station right now, I could imagine 1 in 50 people would be in a red t-shirt.
• Comment on sensitivities: What are the most impactful estimates we made that could significantly affect our answer? Of course, the baseline population is a big one. I've also assumed that only 5% of the largest group of people (working locals) wear t-shirts. That might be low when you consider that some parts of the retail workforce wear t-shirts or that casual offices are becoming more common.

I hope that's helpful! Of course, there are a million other ways you could approach solving this, but the most important thing is to lay out a logical approach, develop reasonable assumptions, and explain your thinking as you build your answer.

-Matt

Hi,

Step 1: ask to define "good idea". In general it will be some king of IRR / payback period. So you will have to analyse investment, revenue and cost.

Step 2: calculate revenue
Rev= % of FM using mobile printing * 300 *kiosk per FM * # of transaction per kiosk (here you can break down hourly) * revenue per transaction

Step 3: calculating cost
Variable cost = operating cost (maintenance) + fee to the FM

Fixed cost = mainly SG&A here

Step 4: upfront investment

Cost of 1 kiosk * # of kiosk you buy

Step 5: calculate IRR and payback period

Hi Anonym,

there are many different ways to calculate that. Depending on whether the question is used as a whole case or is only part of a case, you can solve it in different levels of detail.

A pragmatic solution could be the following:
Market size of ATMs = Number of ATMs / Lifetime of an ATM * Price of an ATM

Number of ATMs: Number of ATMs in your district * (inhabitants of your country / inhabitants of your district)

Lifetime of an ATM: Make an educated guess and explain it well. For example, you could explain that ATMs should always meet the latest security standards and thus only last 7 years due to rapid technology development.

Price of an ATM: Make an educated guess and explain it well. For example, you could explain that ATMs should always meet the highest technical standards and thus cost as much as a small car.

If you have further questions, do not hesitate to contact me.

Best regards
Marco-Alexander

To add to Deepti's answer -Saudi Araba is a huge tourist destnation so be sure to factor that into your calculations as well

Got a similar case at McKinsey some time ago - I actually asked the same question here : https://www.preplounge.com/en/consulting-forum/atypical-case-4501

Hi Firas,

An interesting question. If I were to receive such a question in an interview, I would start by clarifying a few things:

1. Should I estimate the number of hot dogs sold, or the number of hot dog eaters?
2. How is "hot dog eater in NYC" defined?

Once I have those two questions answer, I would start with the NYC population, and apply (some if not all of) the following filters:

1. Remove people who cannot eat hot dogs (e.g. new-born babies, terminally-ill elderlies, people under specific health conditions, religious reasons, etc.)
2. Filter by age: assumption here is that certain generations are more likely to consume hot dogs.
3. Filter by weight: assumption here is that heavier people are more likely to consume hot dogs.
4. Filter by district/location: assumption here is that people from certain parts of NYC are more likely to consume hot dogs.
5. Filter by nationality: assumption here is that people from certain countries are more likely to consume hot dogs.

Each of these filters apply a certain percentage number to the NYC population, and the result would be my answer to the question. In a real interview, I would probably use only 2-3 of the filters mentioned above, instead of all of them.

A few thoughts on this:

• Price differs by airline: full service carrier vs. low cost airline
• Price differs by flight duration: short flight vs. long-haul flight
• Price differs by booking class: first class, business class, coach
• Price is dependent from available alternatives (trains etc.) and geography
• Price is connected to free disposable income and willingness-to-pay

Calculation scheme:

• Let's assume any European country.
• Price indicated as round-trip tickets.
• European flights:
  • Coach:
    • 50 EUR for low-cost airlines (Ryanair)
    • 150 EUR for full service carriers (Lufthansa, BA)
  • Business:
    • Let's assume low-cost airlines do not have business class.
    • 300 EUR
  • No first class on European flights
• Medium/long-haul flights:
  • Coach:
    • Low-cost airlines: 600 EUR
    • Full service carriers: 1,200 EUR
  • Business:
    • Full service carriers: 5,000 EUR
  • First:
    • Full service carriers: 10,000 EUR
• Let's talk about proportions:
  • Percentages by Coach/business/first:
    • European flights: Assume an average jumbo jet has 40 rows, 5-6 rows are dedicated for business travellers. Which leads to:
      • Economy: 85%
      • Business 15%
      • First 0%
    • Medium flights:
      • same as above
    • Long-haul flights: Consider 777,787,A380: 600 passengeer seat capacity on average per flight. 40-60 passengers in the business class (10%). 5% in the first class. Which leads to:
      • Economy: 85%
      • Business 10%
      • First 5%

• European flights are dominated by low-cost airlines, therefore:
  • Average coach price will slightly above the price for the low-cost airlines, e.g. 80 EUR
  • Low cost carriers provide no business class, therefore the business class ticket will cost on average 300 EUR
  • The average price on European flights will be therefore: 80 * 0.85 + 300 * 0.15 = 68 + 45 = 113 EUR
  • Sanity check: average price on German railways is between 50-200 EUR
• Medium and long-term flights are more dominated by full service carriers
  • Average coach price will be somewhere between 600 and 1,200 EUR. More on the upper bound: 1000 EUR
  • Business class ticket will cost on average 5000 EUR
  • First class: 10000 EUR
  • Which leads to 1000 * 0.85 + 5000 * 0.1 + 10000* 0.05 = 850 + 500 + 500 = 1850 EUR
• Consider now the split between European and medium/long-haul flights. Local flights have significantly higher frequency at the airports, therefore we assume 70% of flights are European flights. Which leads to 113 * 0.7 + 1850 * 0.3 = 79.1 + 555 = 634.1 EUR