The Only 3 Market Sizing Techniques You Need For Case Interviews
Summary
TLDRThis video provides an in-depth guide to market sizing questions, a crucial aspect of consulting interviews. It explains the three main types of questions: top-down, bottom-up, and hybrid, with examples for each, such as estimating the maternity clothing market in London or the number of gas stations in the US. The video walks through the theory and practical steps for solving these questions, offering helpful tips for mastering them. Additionally, viewers are encouraged to subscribe for more insights and access detailed case studies via the creator's course.
Takeaways
- đŒ Consulting market sizing questions are crucial in interviews, with three main types: top-down, bottom-up, and hybrid approaches.
- đ Top-down market sizing estimates large markets like the fast food industry or market leaders like McDonald's, starting with demographic drivers.
- âŹïž Bottom-up market sizing focuses on estimating specific units like revenue or traffic at individual locations, by identifying bottlenecks.
- đ Hybrid market sizing combines both approaches, like estimating the number of McDonald's restaurants in a town based on supply and demand.
- đ€° An example of top-down sizing involves estimating the maternity clothing market in London by calculating the number of pregnant women and their average spend.
- đïžââïž For bottom-up, the video walks through estimating a gym's daily revenue by calculating membership numbers, food and drink sales, and merchandise sales.
- ✠Hybrid market sizing example covers estimating the number of gas stations in the U.S. by analyzing demand and daily station capacity.
- đĄ Two approaches to estimate pregnant women in London: based on population demographics or the number of babies born annually.
- đ Retail-specific KPIs, such as rent expenses not exceeding 10% of total revenues, are useful for checking estimates.
- đ The video offers a comprehensive guide on solving market sizing questions, with access to 10 walkthroughs through their course on the website.
Q & A
What are the three main types of market sizing questions discussed in the video?
-The three main types of market sizing questions are: Top-down, Bottom-up, and Hybrid.
What is a top-down market sizing question, and how is it approached?
-A top-down market sizing question involves estimating industry sizes, such as the US fast food market or a market leader's revenue. It starts from the demand side, using demographic drivers to calculate the market size.
What is the difference between top-down and bottom-up market sizing?
-Top-down focuses on estimating industry sizes by looking at the demand side, while bottom-up focuses on specific units, such as a business's revenue or traffic, by identifying bottlenecks rather than looking at the total population.
What is an example of a hybrid market sizing question?
-An example of a hybrid market sizing question is estimating the number of McDonald's restaurants in a town by considering both supply and demand, using a mix of top-down and bottom-up approaches.
How can you estimate the number of pregnant women in London using the top-down approach?
-To estimate the number of pregnant women in London, you can determine the total number of women in the city, find the percentage of women of childbearing age (20-40), and then estimate the percentage of those pregnant in a given year.
How can the second approach estimate the number of pregnant women in London?
-The second approach estimates the number of pregnant women by using the number of babies born in a year, the average number of babies per pregnancy, and the ratio of successful pregnancies.
What is the estimated number of pregnant women in London per year?
-The estimated number of pregnant women in London per year is approximately 75,000 based on the assumptions provided in the video.
How is the daily revenue of a gym in a town estimated using a bottom-up approach?
-To estimate the daily revenue of a gym, you need to analyze membership fees, food and drink purchases, and merchandise sales. The number of visitors during peak and off-peak times is calculated, along with the average time spent and frequency of visits.
How is the total number of cars in the US estimated in a hybrid question about gas stations?
-The total number of cars in the US is estimated by dividing households into income categories and assigning an average number of cars per household. This is combined with commercial vehicle estimates to reach a total of 275 million cars.
What is the final estimated number of gas stations in the US?
-The estimated number of gas stations in the US is approximately 78,600 based on daily demand and the capacity of one gas station to serve cars.
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