What are market sizing case questions?
You might have heard of the infamous questions that consulting firms such as McKinsey ask during their interview such as: “How many coffees does Starbucks sell each day?” These are known as market sizing questions. Market sizing case questions are often the first type of case a candidate is asked in consulting interviews.
What is a market sizing question 1A1?
1. What are market sizing questions? Market sizing questions are typically asked at the beginning of consulting case interviews. They require you to perform rough calculations in order to estimate the size of a particular market without having any data available. There are two types of market sizing questions.
What do you need to know about market sizing?
But if you’re ready to learn everything you need to know about market sizing, you’re in the right place. Let’s get started! Market sizing questions are focused on estimating the size of a market in terms of annual revenue or the number of units sold rather than determining how to compete successfully in the market.
What are some good clarification questions for market sizing?
Here are the clarification questions that immediately come to mind for this market sizing example: 1 Do we want to calculate the number of bulbs sold every year? Or the amount spent by US customers on bulbs? 2 Can you confirm we should exclude light bulbs used in offices, factories, government buildings, etc from our estimate? More …
What questions did Davis use to practice?
When Davis was preparing for interviews, he frequently brought up estimation questions at dinner and used them to practice. These questions could be on anything around them and were meant to be entertaining.
Why do we use round numbers?
Use round numbers to keep the math easy to calculate.
What is the interview question for consulting?
As with any type of consulting case interview question, your interviewer is interested in assessing whether you’re good at structured problem-solving. They want to know if your thought process is clear and logical.
How to get great at market sizing?
The best way to get great at market sizing is to practice. Turn dinner conversations into opportunities to practice.
What do math students focus on?
They focus on making logical estimates, showing creativity, and doing basic math.
How to top down a market?
Top down – Start from the total population and divide your way down to the relevant market.
Which is easier, one approach or the other?
Most questions can be solved with either approach, but one is usually easier than the other.
Why is bottom up market sizing called bottom up?
It’s called bottom-up because you are starting with the smallest bits (# of customer, # of units, average price) and building up those blocks from the bottom to form a picture of the market size. Bottom-up market sizing is actually a very simple formula: Let’s apply this bottom-up sizing formula to our coffin example.
What is top down market sizing?
With top down market sizing, you obtain an overall size of a market that includesyour market ( but probably more), then you apply some filters to break it down to more closely estimate the your specific market.
What does SOM mean in a market?
SOM = Share of Market (aka Serviceable and Obtainable Market)
How many people die in a year in the US?
There are 2.8m deaths per year in the US and 39% of those are burials). Let’s assume loved ones are buying a single coffin for these individuals, so 1,097,000 deaths = 1,097,000 total coffins sold in a year.
What is bottom up market size?
Bottom Up Market Sizing is like building up a picture of the market with individual “blocks” of information (e.g. pricing, # of units)
How much of a funeral is burial?
Through some additional research you estimate that approximately half (50%) of all funeral costs are burial costs, and that coffins make up 33% of the cost of a burial. You are pumped to have all the pieces in place to estimate your market now.
How much is the death care industry?
Great news! After a stellar Googling session, you find three sources saying that the “death care” industry in the US is a $14b-$20b/year market[4-6]. You take the average of $17b to be best estimate of the truth. You aren’t in the “death care” industry, though. Well, you are, but caskets only represent a small portion of that larger industry, right?
What is market sizing question?
Market sizing questions, also known as estimation questions or guesstimate questions, are commonly asked in consulting case interviews and tech company interviews. By the end of reading this guide, you’ll be able to confidently and easily solve any market sizing question.
What is an estimation question?
Estimation questions, also known as guesstimate questions, are a broader category of interview questions that ask you to calculate a particular figure. Market sizing is one type of estimation question.
Why is market sizing important?
Developing a market sizing approach or framework will help you avoid making unnecessary calculations and prevent math calculation mistakes.
How many steps are there to solve market sizing?
There are five steps to solve any market sizing or estimation case. We’ll go through these steps while answering the question: What is the market size of toothbrushes?
What is market size?
Market size is most commonly defined as the total amount of sales of a product or service in one year. Market size could also be defined as the number of units of a product or service sold in one year or the total number of customers that would buy the product or service. Market sizing questions are asked in the context of a particular geography.
What percentage of people don’t brush their teeth?
The 10% of people that don’t brush their teeth include babies that don’t have teeth and people that do have teeth, but choose not to brush them. That means 320 million * 90% = 288 million people brush their teeth. Assume that 25% of people use electric toothbrushes, so 75% of people use regular toothbrushes.
How to segment a population?
The most common way to segment a population is by age. You can assume the average life expectancy is 80 years and divide your population into 0-20 year-olds, 21-40 year-olds, 41-60 year-olds, and 61-80 year-olds. A quarter of your population will fall into each category.
Why is segmenting the market important?
By segmenting the market, you’re able to account for different buying behavior and to avoid overgeneralization.
How to do top down?
The top-down approach involves starting with large macro numbers and working down. You might begin with the population of the relevant country, break out some segments based on age, estimate the propensity of each age group to buy the item you’re sizing the market of, and then make assumptions about how frequently these people make purchases.
How many segments can a market be segmented into?
By generalizing the market too much, you’re likely to estimate a market size that’s way outside the ballpark. Instead, by segmenting the market into 3-4 segments, you can get to a more accurate number and show your ability to simplify—but not over-simplify—a complex market.
What is important to clarify in a research paper?
Make sure to clarify important parameters such as whether the answer needs to be in units or currency, what the relevant time frame is, and what type of product is in question (e.g., only new cars, or new and used).
What are some facts you want to know?
There are some key facts you’re definitely going to want to know, such as populations of key countries, average life expectancy, the average number of people per household, median income, GDP growth rate, inflation rate, and the base interest rate. Rounding these figures is perfectly fine.
How many light bulbs do people buy in a year?
Intermediate result: If 732m light bulbs are purchased for the residential market in the US every year, that means the average household buys ~7 light bulbs in a single year (732m / 100m), and the average person buys ~2 light bulbs per year (732m / 300m). That sounds reasonable.
How many smartphones are replaced in a year?
E.g: if there are about 300m smartphones in the US (1 per person), and smartphones get replaced every ~3 years, then that means ~100m smartphones are REPLACED every year.
How to prepare for market sizing questions?
The best way to prepare for market sizing questions is to work through lots of them until each step of the approach becomes natural. Use the list of example questions in Section 2 or in our longer list, and as you get better at it, time yourself to add an extra element of pressure.
What is market size question?
For instance your interviewer might ask: "How many takeaway coffees are sold every day in New York?" This type of question (sometimes referred to as "guesstimate questions") can really feel unsettling at first.
How much does the average household spend on light bulbs?
Final result: Similarly, if $1.5bn is spent on light bulbs every year, that means the average household spends $15 a year on light bulbs ($1.5bn / 100m), and the average person $5 ($1.5bn / 300m). Again, that sounds reasonable.
What is the replacement concept?
First, the replacement concept is extremely useful when estimating the market size for anything that’s replaced on a regular basis. This includes smartphones, cars, jeans, etc or light bulbs like in the example above.
What is the point of knowing market sizing?
Knowing the relevant starting point data for a market sizing question (e.g population of the USA) helps you start on the right foot and makes a good impression on your interviewer.
What is the second follow up question?
The second follow-up question is a common one in market sizings, even if your answer is correct. The interviewer wants to check if you can find to which variables the final result is more sensitive, and which assumptions are less trustworthy.
How long is the case interview course?
Join our FREE 7-day course on case interviews to learn how to answer a market sizing question EXACTLY the way your interviewer expects.
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What is the reality check on slide 5?
The reality check on slide 5 caught the big mistake in the final answer . Two traits make this a great reality check: (a) it compares the final result to outside values; (b) the candidate states how much he would find feasible in comparison to the outside value.
How often do guns need to be replaced?
The purchase of objects to replace old ones is a main driver in the gun market, as well as in many other durable goods markets. Since guns are replaced every 8 years (candidate’s assumption), the replacement rate should multiply the total existing guns from 8 years ago, not current total existing guns.
Is segmenting consumers into tiers a good habit?
Segmenting the consumers into tiers is a great habit, and it’s common for candidates to overcomplicate when they do that (with several different assumptions for each segment). This candidate kept it simple, and you should follow his lead.
Is the growth of total existing items more relevant to total sales than replacement of old ones?
In some situations, the growth of total existing items might be more relevant to total sales than replacement of old ones. Think, for example, refrigerators, in a country where many people suddenly emerge from poverty, or where there’s a sudden increase in available credit.
How long does it take to answer market sizing questions?
But at the same time, don’t oversimplify as well by guessing data randomly. A well-balanced approach should take you between 8-10 minutes.
How long should a market sizing list be?
To lay out a market sizing structure for your interviewer, it’s important to create a simple list. The list should be 3-5 steps long, and should include segmentation ( customer segmentation is the most common).
What is market sizing question?
Market sizing questions are pretty straightforward. The interviewer wants you to measure the existing market of an item in total sales or total units. Market sizing questions might sound something like:
What is top down sizing?
1) Top Down. This type of sizing is done by population segment or by household. When you do top-down sizing, you’ll base your hypothesis on something like a large overall number and then work your way down from there. There are many ways to segment a market, but the most common is by age.
What is the difference between MBB winners and try-agains?
This is one of the main issues that distinguish MBB winners vs. try-agains. The winners have a framework that would work on the job, not just in a classroom. That helps not just get to the answer directly, but get there as fast as possible.
What is case interview framework?
First, a quick recap: Case interview frameworks are used to open a case and to solve a case. It’s very important that you think of both of these, opening and solving the case. The frameworks are meant to be very practical, action-oriented, metrics-driven and clear as you walk through the the case process in your interview.
What is market share of client?
5- Market Share of client – The total value of cars our client sold last year divided by the value of the total market last year
1. What are market sizing questions?
Market sizing questions are typically asked at the beginning of consulting case interviews. They require you to perform rough calculations in order to estimate the size of a particular market without having any data available.
2. 21 market sizing questions and solutions
We’ve researched through the questions and solutions available online, and we’ve listed the best ones here for you, including links to video and written resources.
3. How to prepare for market sizing questions
The questions and calculations we’ve gone through here aren’t rocket science, but they require a calm head and can be tricky to pull off smoothly in a high-pressure situation. And of course, they’re even trickier if you’re not used to answering them!
Any questions about market sizing?
If you have any questions about market sizing, do not hesitate to ask them below and we will be more than happy to answer them. All questions are good questions, so go ahead!
What is market sizing based on survey data?
One of the biggest benefits of market sizing based on survey data is an instant estimate of how many audience members exist in a particular market.
What is Blizzard Entertainment?
Blizzard Entertainment is a leading entertainment software developer and one of the most popular and well-respected makers of computer games.
What to do if you’re not exactly sure who your audience is?
If you’re not exactly sure who your audience are, looking at your competitors is a great place to start.#N#There are plenty of reports and resources you can use to identify and understand your audience. Useful sources to have at your fingertips include:
What is GWI survey data?
Using GWI’s global market survey data means you can accurately segment and profile your audiences by demographics, behaviors, lifestyles, and motivations.
What does it mean to calculate market size?
“Calculating market size” simply means looking at the number of people who might buy your product or service in a particular market, and the total revenue those sales could generate.
What is market size?
Market size is the total number of potential customers within a particular market. Calculating it starts with understanding these customers – the so-called bottom up approach – hence the importance of market research.
Why is knowing the value of your market important?
Knowing the value of your market makes it easy for other organizations to see the value in your business – essential stuff when it comes to partnerships and investment.