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

Hi Piyush,

I would not worry too much about your estimation error, a 50% estimation error would not be a big deal, you just need to get magnitude of a number.

Interviewer don’t want you to get the exact number, they are more worried about your reasoning.

Looking at your estimation process I think you should pay attention to the question: you are asked to estimate the number of houses (including single family houses and condos).

From your calculation seems you estimating the number of homes, (same as estimating the number of households), rather than the number of houses.

A different approach to this question could be the following:

• Hypothesis:
  • Avg. household size: 3 people
  • People leaving in single-family house: 70%
  • People leaving in condos: 30%
  • Avg. number of apartments per condo: Avg. number of floors * Avg. number of apartments per floor
    • Avg. number of floors = 5
    • Avg. number of apartments per floor = 5
• Number of single-family house = Total population * people living in single-family house / household size
• Number of condos: Total population * people living in condos / households / Avg. number of apartments per condo

Please reach me out if you want to discuss it further,

Thanks,

Ale

Hi!

Yes, this is an absolut must! You HAVE to verify the scope of the question. Never just assume something or shoot from the hip before having aligned with the interviewer.

Cheers, Sidi

Hello!

Totally agree with Luca´s post.

Once you get them, market sizing exercises are actually easy, methodology is very very repetitive. However, until you reach that point, they seem scary.

The only way to get comfortable with them is actually to practice as much as possible, both theorical isolated problems -you can find plenty in this forum- and integrated market sizing exersises embebed in cases.

PM me if at a point you want a coach´s help with it, I have material for both types.

Hope it helps!

Cheers,

Clara

Hi Piyush,

I've read carefully all your assumptions, looks very good! In the real estimation within the case probably the second part would be left out (dividing demand by # of rides) because it becomes too cumbersome. You would probably just need to estimate it from the population top town, would arrive at 9.6 M and the interviewer would already stop you there.

Best,

Daniel

Hi!

I would go from the consumer perspective:

• Approximately 300 Mio people in the US
• Out of them: 75% who go to the stores (total population divided into 4 age groups: 0-20; 20-40; 40-60; 60-80 -> those who are 20 to 80 go to the stores) = 225 Mio
• I would divide those 225 Mio into urban (80% = 180 Mio) and rural (20% = 45 Mio) because they have a different frequency of going to the stores and different demand for plastic bags
• We could assume urbanites go to the stores at least several times a week (buying small quantities of food), let’s say 3 times using on average 1 plastic bag per visit = so, 180 Mio * 3 = 540 Mio plastic bags a week for urban population. Multiply it by ~50 weeks in a year and you get = 27 bn plastic bags a year for urban population
• Rural population visits to the store are probably less frequent, like 1 every two weeks, so we could calculate with 0,5 times a week but they probably use more plastic bags, let’s assume 5. So, 45 Mio * 0,5 times * 5 bags = ~ 112 Mio plastic bags a week. Multiply this by 50 weeks and you get = 5,6 bn plastic bags a year for rural population
• Overall yearly demand for plastic bags in the US = ~ 33 bn per year, or around 110 plastic bags per capita per year – which sounds realistic.

Hope this helps! If you want to brainstorm more on this feel free to reach out!

Best,
Daniel

Hello!

I agree with the overall approach, and it´s very detailed.

I agree the numbers end up being a bit high, but this would probably mean that some of the assumptions are overstated.

In any case, what the interviewer looks into here is the methodology, and this one is solid.

Furthemore, this problem is far too complex for an MBB interview.

Well done in any case!

Cheers,

Clara

Hello Piyush, overall agree!

The only challenge that I would make is that the assumptions on video consumption are rather low -particularly in your middle segment. Devopping countries, from my experience, do have better internet access than what you have estated.

However, for the market sizing purpose of the exercise, this does not matter -at most, they would correct on the spot some of this metrics if needed-. What counts is the approch, and this one is solid.

Congrats.

Cheers,

Clara

It was partner round for me - specifically to test analytical capabilities as partners often don't give long structured cases like in the earlier rounds

Hi buddy,

Estimation cases can be solved with 2 approaches:

1. Demand side: as was suggested
2. Supply side: not really feasible in this case as the steel supply is hardly constrained (it is a commodity and can be purchased from other countries)

Hello Viktoria!

I would approach the problem as following:

• Estimate number of t-shirt per man
• Estimate percentage of white t-shirt
• Estimate the "expected life" of a shirt from Zara
• Number of white t-shirt sold per year= # men * # t-shirt per man * % white t-shirt / Expected life
• Estimate the market share of Zara
• # white tshirt sold by zara = Mkt share * # white t-shirt sold per year

Feel free to text me if you want to discuss it further,

Luca

Hello there,

Typically, the brainteasers on interviews on these firms would focus more on market sizing, such as how to calculate rubber needs for a target country, from the perspective of a tire manufacturer.

For this kinf of market sizing, practice how to start estimating - starting point can varid, from total number of citizens or households, then segmenting this number, before going to detailed number of how many cars and bikes each household have or if they have none and travel with public transportation. Also consider export.

A lot of practice is needed for different cases, but the most important thing is to get comfortable with the logical flow and reasonings.

Hope it helps.

Kind regards,
Nathan

Hello,

How many people are drinking in this moment in the world?;)

Best,
Luca

What Vlad said.

Just an additional hint: please clarify at the beginning, what is in scope if you talk about "windows". Is it only windows in builings? Or also other windows (e.g., car windows)? Or is it only a subset (e.g., only windows in residential buildings)? Making clear the scope is critical in any question a consultant adresses - so you should also do this before adressing a case question.

Cheers, Sidi

Hi,

It's less about the quantity, but rather about the tools that you use:

1) First of all, there are 2 ways to structure market sizing:

• Formula - basically a math formula to come up with a solution. The problem with the formula is that it is easy to forget something or get lost.
• Tree - same as with regular cases you build a tree. A very simple example: you need to calculate the number of dogs on manhattan. A number of dogs = share of households having a dog * # of households. # of households = population / average household size. In the end, you'll have a pyramid where you have to fill the numbers on the base of the pyramid. This approach is much easier and help you track all the numbers

2) You should learn the key market sizing techniques:

• Making assumptions based on personal experiences (Use the example of your house where out of 100 apt-s 10 have dogs)
• Adjusting numbers (NY is a busy city thus fewer people have dogs)
• Sanity check - try to apply your calculations to the real environment
• etc.

3) You should learn the key tools:

• Using age even age split (suppose life expectancy is 80 years. Assuming even age split we have 4 mln people in US of each age)
• Using 80/20 split (suppose 20% people earn 80% wealth and the average salary is xx...)
• Using approximations (Length of NY-SF flight and plane speed to calculate US length)
• etc.

4) Learn key numbers: populations, gas price, gas consumption, Boeing speed and nmber of seats, average salary, # of gates in the airport, GDP growth rate, inflation, etc.

5) Practice 10-15 cases and you'll be fine. Almost all casebooks have good market sizing examples and the solutions

Feel free to PM for clarifications

Good Luck!

I like your approach it is consistent and well thought through- also the internet says there are 3.5B Google queries a day so you aren't very far off.

A few things to consider to change your assumptions

1. Search is no longer capitalized by google (e.g., most searches for products start on Amazon)

2. Verticalized search is hurting google (e.g., LinkedIn for jobs)

3. Number of search queries is therefore lower in Developed markets

4. Access to internet in developing markets is not necessarily the same as in the US for example. A lot of 'smart' phones in India are very basic and have limited access in the traditional sense

All the best,

Udayan

• UK population (= 60 Mio)
• # of women (~50% = 30 Mio)
• those in the marriable age (age group 20-60, i.e. 50% of all women if 80 y.o. is assumed as life expectancy = 15 mio)
• Out of those women % getting married while being in the age group (maybe also 50% = 7.5 Mio)

1. Out of those % getting divorced (50% = 3.75 Mio)
2. Out of those who are not getting divorced % who sell their wedding dress (10% = 0.75 Mio)

Total women selling their wedding dresses over their lifetime = 4.5 Mio

Divided by the number of "marrigeable years" we assumed: 4.5 Mio / 40 years = 112.5 k second-hand dresses per year

Start with the types of airports. Civil vs. military. Then civil taking into account population, flights per year (as a function of wealth of the population), capacity of given airports (large, medium, small). Large airports = 4 runways, medium airports = 2 runways, small = 1.

Military would be something like the number of countries with airforces, how many planes per.

Hello Piyush,

I'm not an IT expert ut I think that you should consider also account used by enterprise to send marketing emails to larg mailing lists. They could be included in the bucket "professional" but the amount of email is larger.

Best,
Luca

Hi,

It's less about different types of the problems but rather about the tools that you use:

1) First of all, there are 2 ways to structure market sizing:

• Formula - basically a math formula to come up with a solution. The problem with the formula is that it is easy to forget something or get lost.
• Tree - same as with regular cases you build a tree. A very simple example: you need to calculate the number of dogs on manhattan. A number of dogs = share of households having a dog * # of households. # of households = population / average household size. In the end, you'll have a pyramid where you have to fill the numbers on the base of the pyramid. This approach is much easier and help you track all the numbers

2) You should learn the key market sizing techniques:

• Making assumptions based on personal experiences (Use the example of your house where out of 100 apt-s 10 have dogs)
• Adjusting numbers (NY is a busy city thus fewer people have dogs)
• Sanity check - try to apply your calculations to the real environment
• etc.

3) You should learn the key tools:

• Using age even age split (suppose life expectancy is 80 years. Assuming even age split we have 4 mln people in US of each age)
• Using 80/20 split (suppose 20% people earn 80% wealth and the average salary is xx...)
• Using approximations (Length of NY-SF flight and plane speed to calculate US length)
• etc.

4) Learn key numbers: populations, gas price, gas consumption, Boeing speed and nmber of seats, average salary, # of gates in the airport, GDP growth rate, inflation, etc.

5) Practice 10-15 cases and you'll be fine. Almost all casebooks have good market sizing examples and the solutions

Feel free to PM for clarifications

Good Luck!