1. -have lots of money, The pre-purchase phase includes identifying the need or want, searching possible solutions, and building a consideration set. Mark's colleague has offered good advice. Calculate the number of light bulbs purchased for NEWLY-BUILT homes every year. d. reduced . Thus the ability to do a quick back of the envelope calculation, perhaps during or just before a client meeting, is of real practical value. Instead, by segmenting the market into 3-4 segments, you can get to a more accurate number and show your ability to simplifybut not over-simplifya complex market. In analyzing perceptual maps, one question always on the marketer's mind is: c. product development history. d. the number of products made. Do we want to calculate the number of cups sold per year? -position charts Depends on your most reliable sources of data. -surveying suppliers. Gathering existing data to estimate your market size is relatively simple, making it the best option to get a quick estimate of the serviceable obtainable market, which you can supplement with primary data later to reach a more accurate forecast. You call it 2%. Rounding numbers will make your calculations easier and decrease your likelihood of making a mistake. Once you know exactly what number you want to calculate, you need to map out the calculation steps to get to that number. One of Mark's colleagues advises him that the positioning statement needs to be clearly understood by the company's employees, shareholders, and customersbut NOT by the general public since this group will not be interacting with the company. 1% of 110m homes is about 1m homes. 32 million t-shirts sold per year in a population of 8 million? False, Airlines use operational excellence strategy to tailor products to customers. By defining what should be included in your market sizing estimation, your company can more accurately determine the market potential and the estimated available share of the market. By generalizing the market too much, you're likely to estimate a market size that's way outside the ballpark. Let's imagine that you live in London. You might calculate that its less than 1 in 100 - lets say 0.5%. A survey shows that the average consumer buys one bottle of wine a week, or 48 bottles a year. It tends to be faster than a bottom-up approach. Defining your target market should always be the first step in estimating market size, and it is critical that you do not stray from your determined market definition through the data collection process. -Skinner What is the market for a coffee shop in Cambridge, England? False -internal and favorable. It's also worth knowing population data for countries that often come up in estimation questions: When you're answering market sizing questions you should always try to make your approach as simple as possible. ibonur. The strategy most likely being employed by Joe's company is product leadership. -False QUESTION 3 Potential profitability is a function of a. current market price. The first error is confirmation bias, which every expert brings to the table. (, How many bars of chocolate are sold in the US each year? Number of box shorts / briefs sold in the US every year? Entertaining and motivating original stories to help move your visions forward. -What are my company's strengths? True Ultimately, you can't capture the total addressable market (TAM) some of those people will choose competitors' products over yours. From there, you can decide if that population size is worth the cost of manufacturing, production, distribution, and more for your product. -False, Marketing research isn't needed if a company listens to its customers. -to get you to notice the packaging of the perfume When making assumptions, it is vital that you pick simple numbers. Develop a solid marketing and business strategy. -in an effort to simplify the brand. During 2017, 1,200,000 new homes were constructed in the United States. False, The Census.gov website cross-classifies businesses by sector and size. Weve created a coaching service where you can do mock interviews 1-on-1 with ex-interviewers from MBB firms. There are a couple of shortcuts that can come in handy in this regard. When youre considering a new venture, one of the first things you should do is determine whether there is a valuable market for it. You may want to consider children differently, because children go through a lot of clothes as they grow, make a mess of them, etc. Step 2: Break the number down into 3-5 small, easy-to-estimate pieces. As a result, your market size is 480 x 16,000 = $8,000,000. True -trying to decide where to eat lunch. Market sizing questions are usually ambiguous. Revenues for an average bicycle repairs shop in New York? Recent flashcard sets . New 80% and upgrade 20% c. Comment on the results. Or the amount spent by US customers on bulbs? By confirming findings, you are able to leverage the value of various information sources and thus increase confidence in thefinal results. Philip Morris recently changed its name to Altria Knowing your market size is the first step in understanding your target market and their needs. -targeting What relationship does the equilibrium price of a product have to the equilibrium quantity, and how can these values be determined? To do so, scroll down directly to the bottom and leave your answer before reading other candidates proposals. (, How many coffins are sold in Los Angeles (USA) each year? That's 110m homes in the US. You can tell the interviewer that here you're using personal experience to make assumptions. Adjust estimates for age group differences. 2. Calculate the number of takeaway cups per week for an average New Yorker. -education E.g: people increasingly own 2 smartphones (let's says 2% growth per year). O b. the market's anticipated growth. Free and premium plans, Customer service software. hbspt.cta._relativeUrls=true;hbspt.cta.load(209482, '64e604e4-4640-432c-b4f6-119669521539', {"useNewLoader":"true","region":"na1"}); This post was written by Priority Metrics Group (PMG), a MarketResearch.com partner in custom research. Then narrow down by geographic scopeUS, North America, Europe, etc. The second and third errors are "sins of. -moving averages. Rounding numbers will make your calculations easier and decrease your likelihood of making a mistake. If you want to start from scratch in determining the right sample size for your market research, let us walk you through the steps. -market segment, The goal of homogeneity in customers' likes or dislikes is more achievable as the segment size gets smaller, but if the segment is too small, it might not be profitable to serve. You might also check whitepapers and product announcements for similar information. But the good news is that if you know how to approach them, they can become fairly easy to answer. If your interviewer spots a mistake in your calculations you most likely won't get an offer. -high price, low quality, exclusive availability, heavy promotions Let's also assume that about 10% of households have a second home in addition to their main one. Here is a step-by-step approach that you could use to get to that number: If you find it difficult to naturally list these steps, a more gradual approach is to start from the number you want to calculate and draw an issue tree from top to bottom, as we have below. Will there still be opportunities to earn revenue from this market in 3, 5, 10 years? This method is generally considered to be more accurate and takes considerably more time to complete. The market could be anything, from soft drinks to ping pong balls, and youll need to give an estimate of its annual worth (e.g 5 billion). True, Which of the following is a psychological factor? -brand names. So you multiply by 10 to get to 5% = 900k. Creating well-designed products is the predominant way of conveying brand imagery through -Where will customers buy our products? So in addition to the 100m smartphones that are replaced, the total number of smartphones would also grow by 2%. (, Whats the market size for residential light bulbs in the US? 50-64 = 20%. -low price, low quality, widely available, heavy promotions, -low price, low quality, widely available, heavy promotions. After your research, you discover there are 50,000 liquor stores in the United States. The idea of targeting is merely one of Marketing can make customers happier, which makes companies. You round it to 1.5m. -high-involvement products Opportunities are -spending. -like to conform a. when prices are reduced b. when brand awareness is increased O c. when the company advertises more often O d. when consumer involvement is high. c. product development history. Or how much money is spent by consumers on takeaway coffee? ", "Does 'shirts purchased' mean just in-store? False, Why do women who work the cosmetic counters in department stores wish to spray you with perfume? True, __________ means that each customer serves as his or her own segment. Often a company or investor will require the market size or Total Available Market for a particular geographic area. The bottom-up methodology builds the TAM by totaling the main variables of the target market. Most of the time they'll say you should make your own assumptions, but it doesn't hurt to double check. 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. Calculation step 4: Estimate cost per wedding by estimating host spend and guest spend and adding them together. Would an online purchase by someone in New York using a provider outside NYC count? This is a mistake. Quarterly and annual reports are typically available on these company websites as well as through the SEC filings. The research methodology used to estimate and forecast this market begins by capturing the revenues of the key players and their shares in the market. When sizing a market errors in estimates are False SWOTs are only useful for clarifying about half of all marketing questions total population proportions For market sizing we start with the _ and break it down into the _ that are relevant internal and unfavorable Weaknesses are 4. For example, look for trends in beef packaging that differ from chicken or pork. Indicator. How many petrol stations are there in the UK? Assumption. -age Great marketing is based on __________ laws of human and organization behavior. True, The best way for a company to assess its corporate strengths is in terms of absolute measures. In your market sizing process, start by determining what products or services should be included as part of your TAM. Market sizing questions are not general knowledge or "lucky guess" tests, and youre not expected to be able to quote all sorts of population demographics and industry stats. The market definition should remain consistent throughout the data collection process and methodology should be based on market knowledgenot just demographics. Secondary Data: Market Research Methods, 10 Global Industries That Will Boom in the Next 5 Years, How to Conduct an Effective Voice of Market Study, Top 10 Reasons Why You Need Market Research. Its hard to have much sense of how many billions weddings should be worth. Calculation step 2: Use % to calculate the number of people estimated to marry in each segment, and add together to find total number of people marrying. We also recommend talking through your calculations out loud. -pride themselves on quality and innovation. Articles about companies or products in the target market will often quote data from these sources. Subscription-based or syndicated research is a great place to start, but there are also free sources that contain valuable information. You could tell the interviewer that from what youve heard in the media, the average wedding in the UK costs the hosts 20k. There's a whole list of examples below, but first let's work though an example together so that you can see how we recommend approaching a market sizing question. The process of managing market risk relies heavily on the use of models. You can't predict how difficult your market sizing question will be, and so you should be prepared for it to be a little bit more complex. The two principal methods of sizing the market are the: Top-Down Approach and the Bottom-Up Approach. False, Collectively, a marketplace of consumers is homogeneous. Estimate cost per wedding by estimating host spend and guest spend and adding them together. or fill technology (hot fill, aseptic, ESL, etc.). -are expensive but expected to pay off in long-term loyalty and enhanced customer lifetime value. Segment population and estimate % of each that will marry in a given year. You consider that they may also buy a lot of clothes for men, but as you've already mentioned, you counted these in the male estimate. Shannon is engaged in what marketing activity? You should then segment your market in a way that makes it easiest to calculate. Shall I make my own assumptions? -For every 80 customers, 20 will be repeat customers. -purchase choices. Alternatively, if you're looking for a long list of market sizing questions with answers, see here. -Is my brand optimally positioned? Calculation step 4. -clean lines -smell. The baby boomer generation is societal minded, so we might expect to see large-scale What is one of the largest factors stressing out marketers these days? And the 30-60s might take a cab twice per week for work. ", "Does this include sportswear, or is it restricted to regular-use t-shirts?. But for most of us, it's tough to find the right connections to make this happen. (, What is the market size for smartphones in Germany? Add 1 and 2 and calculate the value ($) of these light bulbs. Why? -to get you to notice the name of the perfume Calculation step 5:Find average and multiply by population of NYC. -advertising A risk-averse consumer may wish to try the newest product that the market has to offer. Market size can be viewed in terms of Total Available Market (TAM), Served Available Market (SAM), and Share of Market (SOM). You'll find our proposed answer to the question below. ", "If were talking value, do you want to take into account linked expenditure - stag and hen parties, engagement rings, etc - or are we just focusing on the cost of the actual wedding day itself? This is called triangulation. -so it could remove the negative association with its name. -selection. This looks like first identifying the number of units you can expect to sell then considering how many sales you anticipate from each buyer and finally the average price per unit. This is more helpful than the previous two segmentations. True, Niche positioning is a matter of exclusivity and size. Consulting firms tend to ask market sizing questions for two main reasons: Firstly, it gives the interviewer the chance to see whether the candidate's basic mathematical and problem-solving skills are of a good standard, and whether they can use them quickly and logically in a pressure situation. So, total direct costs of the average wedding comes to 22k. There are two types of market sizing questions. Market sizing questions are typically asked at the beginning of consulting case interviews. c. product development history. False Show how the breakeven point in units changes with the following customer mixes: a. Calculate the annual number of cups consumed in NYC. Product leadership refers to companies that 2. Learn how to determine sample size. Market size refers to the total number of potential buyers for a product or service and the potential revenue reach based on that population size. The planned sales mix in units is 60% new customers and 40% upgrade customers. This may sound strange, but it will help you be more methodical and will significantly improve the way you communicate your calculations during an interview. Ideal hours are a estimation technique for waterfall user stories that uses hours as the unit of measurement. A model is a simplified representation of a real world phenomenon. However, you could also factor in that children often wear a lot of passed-on clothing (from siblings, etc). Step 3: Estimate each piece using math and background knowledge. Let's assume an average of 4 per room. Marketers use Maslow's hierarchy of needs by True This type of question (sometimes referred to as "guesstimate questions") can really feel unsettling at first. Calculate the number of light bulbs in EXISTING homes. Use % to calculate the number of people estimated to marry in each segment, and add together to find total number of people marrying. -the five brands are viewed as most interchangeable by consumers. First, you'd want to determine how many liquor stores are in the United States this helps you figure out the total market to which you could theoretically sell your product. Let's say you want to launch a wine company. This is more helpful than the previous two segmentations. -education Our goal is to help you better understand your customer, market, and competition in order to help drive your business growth. Market size is a critical number to know when you're looking for funding. Maslow's hierarchy ranges from satisfaction of basic biological needs to more abstract needs regarding well-being. -attitude, Who created the hierarchy of needs? Still, there are ways to maximize the effectiveness of this exercise: -because of a merger. The lesson? False, Gender, age and income are all qualities of what segmentation base? In general, a top-down approach is typically a quicker, more time efficient approach. d. the number of products made. -are outgoing -demographic -demographic Investors are going to need to know how much money they have the potential to make from a given market. You need to add guest expenditure. Ob.calculated O c. ignored. We also recommend talking through your calculations out loud. This process allows the researcher to quickly consider the value of information by comparing with other information in the same cluster or line. Typology is also useful for creating a story line as the project moves into analysis stage and the development of conclusions. Note: if you are looking for ways to become faster at mental maths calculations we recommend reading our case interview maths guide. We recommend using a 4-step approach to answer market-sizing questions. Your selected approach will dictate the necessary sources to estimate market size. A bottom-up approach is the exact opposite starting small and working your way outward. __________ and __________ are the central players in the marketing exchange. It is easier to identify, obtain information on, and woo customers who are currently using a competitor's brand or who aren't even purchasers in the category. True. Top-down market sizing: the pros. If the sales mix is attained, what is the operating income when 170,000 total units are sold? Calculation step 1: Segment population and estimate % of each that will marry in a given year. -sound. Make sure of the actual number you need to calculate. True True False Or do you have any data that I should use?" -operant conditioning It may also be valuable to look for trends in packaging type (cans, cartons, trays, etc.) -brand associations. Adjust estimates for age group differences. You consider that they may also buy a lot of clothes, How many bottles of wine are sold in the US every year? They require you to perform rough calculations in order to estimate the size of a particular market without having any data available. You estimate 1%. Terms in this set (29) identify the basic appeal of a market. Subscribe to the Marketing Blog below. d. the number of products made. The choice of a target segment involves information about both the size of the market and the fit with corporate goals. True. Results can be measured for a number of marketing activities. A positioning statement should target employees and shareholders. -internal and unfavorable. What type of variable is it usually cross-tabbed with? Weight of the International Space Station? Both approaches are equally acceptable. Market sizing is the process of calculating these numbers to accurately measure your business growth potential. 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). Most commonly, you'll be asked to estimate the value of a market - that is, to calculate its annual revenue. With repetition and elaboration, associations can get into . Determining Your Approach There are two basic methodologies for determining market size: top-down and bottom-up. If you can show that you have a good chance of making money and how much it'll be much easier to secure investment. However, the best approach is to develop market sizing estimations using both methodologies in order to gain a higher confidence in your estimation. Let's go through this approach step-by-step: 1. Once you have market size, you'll also want to consider how saturated the market already is with your competitors' products. Based on this information, Alexis will have a difficult time positioning this new product. -provider False And the 30-60s might take a cab twice per week for work. Your interviewer is interested in what's going on in your head - not the final result. -Who are the competitors we must consider? Number of weddings celebrated in the US every year? -SWOT analysis. 68 terms. -sensual experience Regardless of whether a marketer is working B2B or B2C, the logic in market sizing estimation is always the samestart with the price of the product and multiply it by the size of the target market. You lay out this approach to the interviewer and hopefully theyre on board with it, so you can start calculating. If you can't use the replacement concept, your second best option is usually to try to think about different possible segmentations and to, Taxi types: Uber vs. traditional Black cabs, Journey types: Airport journeys vs. London journeys vs. Inter-city journeys, Customer types: 20-30 yo vs. 30-60 yo vs. 60+. You should assume that the average coffee cup costs $4 instead of $3.50, etc. -sight. You already know that 0.5% is 90k. 60-80 years: Probably not as rare as the first segment, given that all ages are applicable, but still fairly rare. For instance, 20-30s might take a cab once per week when they go out at the weekend. -awareness. In what part of the Fertile Crescent did Sumer emerge? The Global Digital printing Market at a CAGR of 7.5%, and it is expected to reach USD 44.6 billion by 2028, over the forecast period. Market size for disposable baby diapers in the US every year? How to prepare for market sizing questions, Does this include NYC only (8m) or the greater metropolitan area (20m)? O d. reduced -low price, low quality, exclusive availability, heavy promotions Where possible, attempt to verify each significant finding through multiple published source materials or primary research. For a useful comparison, see this different approach to the same question from another LEK employee. True Below are the 5 basic steps in estimating market size. You have your estimated market size now what? -For every 80 people who look at a product, 20 will buy it. What is the size of the sandwich market in India? Is the market growing? If you can't use the replacement concept, your second best option is usually to try to think about different possible segmentations and to use the one that looks easiest to manage. Divide 1.5m / 2 = 750k weddings per year. Published: There are 8 rooms per average home, and 4 bulbs in an average room, so that's a total of 32m light bulbs for NEWLY-BUILT homes in the US every year. Notice that none of the groups overlap so no ages get counted twice but also no ages are missed. If you know anyone who fits that description, fantastic! Capital Financial Corporation will lend 90 percent against account balances that have averaged 30 days or less; 80 percent for account balances between 31 and 40 days; and 70 percent for account balances between 41 and 45 days. It may be enough for them to know that a market falls between the upper and lower estimates of $250m to $350m per annum. (, Are we talking volume (number of weddings) or value (amount spent on weddings)? In our experience this 3-step approach is the most efficient way to calculate market sizes for consumer products that are replaced on a regular basis. -high-quality. In practice, you should check your intermediate results as you progress through the case and arrive at your final result at the end. To find the market value, we calculate the following: 910 hospitals $ 2.5 million = $ 2.275 billion. A daily dose of irreverent and informative takes on business & tech news, Turn marketing strategies into step-by-step processes designed for success, Spotlighting bold Black women entrepreneurs who have scaled from side hustles to profitable businesses, For B2B reps and sales teams who want to turn complete strangers into paying customers, Get productivity tips and business hacks to design your dream career, Free ebooks, tools, and templates to help you grow, Learn the latest business trends from leading experts with HubSpot Academy, All of HubSpot's marketing, sales CRM, customer service, CMS, and operations software on one platform. -different. Many get stuck on establishing boundaries or defining the market before they even get to the data analysis and implications of their research. -ignored. -international This is important because it gives your interviewer a chance to rectify your course of action if they had another plan in mind. True Let's apply our4-step frameworkto aslightly trickier question. What result do companies see from happier customers due to marketing? -to restructure the company. With this in mind, you'll want to remain conservative when estimating how much of the market size you'll win and use this as a starting point. -homogeneous STEP 2: Build the estimation model by breaking the problem into smaller pieces. This number is the TOTAL number of bulbs. Who youre marketing to and what their needs are No business can succeed without marketing. -assessing. -low-involvement products -higher quality. Once you've got the hang of it, you should be able to calculate market size in around 3-6 minutes in a case interview situation. -perceptual maps, Which of the following is one of three basic corporate strategies for creating value and achieving market stature? -capabilities. -cheaper. Once youve learned the framework, we recommend answering lots of questions until the approach starts to come naturally. select a favorable market or site. Free Guide & Templates to Help Your Market Research, We're committed to your privacy. False. Let's imagine that, drawing from personal experience, your perception is that women dont wear t-shirts as often as men, but then again they tend to buy more clothes than men. By defining what should be included in your market sizing estimation, your company can more accurately determine the market potential and the estimated available share of the market. Let's imagine that, drawing from personal experience, your perception is that women dont wear t-shirts as often as men, but then again they tend to buy more clothes than men. Start with the total addressable market (TAM), and then figure out your target market within that total number, which varies depending on geography and other logistical factors. -large In addition, they are also a great way to buy yourself some time. -expensive. -external and unfavorable. The best way to prepare for market sizing questions is to work through lots of them until each step of the approach becomes natural. -pride themselves on quality and innovation. Before calculating your sample size, ensure you have these things in place: This may sound strange, but it will help you be more methodical and will significantly improve the way you communicate your calculations during an interview. True -reduced. False, Marketers ask the most important question: "How likely is it that a segment will be profitable?"