How to Ace Market Sizing Questions in Your Consulting Interviews
- Last Updated March, 2023
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20,091 Views
Former McKinsey Engagement Manager
Contents
Contents
You might have heard of the infamous questions that consulting firms such as McKinsey ask during their interview such as:
“How many golf balls can fit into a Boeing 747?” or
“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.
These questions appear tricky because they’re structured to have a single correct numerical answer—but one that you’re very unlikely to know off the top of your head.
No worries.
There are 2 approaches you can use to safely and accurately estimate an answer any market sizing question you might be asked in a consulting interview.
In this post, we’ll show you what these 2 approaches are, as well as covering:
If this is your first visit to MyConsultingOffer.com – you may want to head to Case Interview Prep to find out what a case study is and why consulting firms use them, or to Case Interview Examples to see examples of case interview questions.
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.
They’re often asked early in the consulting interview process or in interviews of undergraduate students who may not have a deep business background.
They can also be one component of complicated, multi-step cases in later-round interviews.
They focus on making logical estimates, showing creativity, and doing basic math.
You’re not expected to know the answers, but instead to show a logical way to deduce it.
Check out this video to hear Davis Nguyen, Founder of MyConsultingOffer.org, talk about how to ace your market size case questions.
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.
Because of this, your approach to answering market size question is more important than the answer itself. Your approach needs to be reasonable, include key factors that would affect the size of the market, and your assumptions need to show good business judgment.
Interviewers are also judging your ability to communicate your thinking clearly.
Nail the case & fit interview with strategies from former MBB Interviewers that have helped 89.6% of our clients pass the case interview.
Sample Question: How many laptop computers are sold in North America annually?
Top-down approach: Start with the population of North America and work your way down to the group of people who need and can afford laptop computers, and how often they would buy them given the average useful life of the equipment.
Sample Question: What is the market size for IT support services for retail customers in the U.S.?
Bottom-up approach: Estimate of the needs of a single user getting support one time, then roll that up to the total support needs of all retail computer users over a 12 month period.
Most questions can be solved with either approach, but one is usually easier than the other.
For large markets with multiple customer segments, the top-down approach usually works best.
For local markets with a homogeneous customer base, the bottom-up approach generally works best.
This table will help you learn the right magnitude for markets of different sizes. Knowing the sizes of these markets will ensure that when you’re answering market size questions, you are in the right ballpark with your estimates.
While you do not need to know the exact size of every possible market, it shows good business judgement to at least have the right order of magnitude for your answer.
Case prompt:
The New York City Medical Department has reached out to you to solve the problem of unhealthy working hours for the Primary Care Providers (PCPs) in the city’s largest hospital. They want to know how they could cater to patients and maintain a healthy work-life for the PCPs.
Though this case prompt doesn’t say “how many?” or “what size?” it’s a market sizing question. The reason PCPs are overworked is because their are too few of them relative to the number of patients. Confirm this with your interviewer, then dig in!
As you read earlier, there are two ways to approach a market sizing question – top-down or bottom-up. In this case, a bottom-up approach would work better as the number of PCPs catering to the patients are limited creating a supply constraint on patient care.
We need to determine the number of additional PCPs we should hire to reduce the working hours and improve work-life balance.
To calculate the number of additional PCPs required, I first need to know:
I ask my interviewer and find out::
Next, I want to find out how many patients there are per day. With that, I can calculate hour many PCPs the hospital would need to treat all it’s patients with PCPs working 10 hours/day.
Number of PCPs required to get to ideal working hours
= Number of patients in a day / (Number of patients treated per hour * Ideal working hours)
To calculate the number of patients treated per hour, I need to do an additional calculation:
Number of patients treated per hour
= Number of patients in a day / (Number of PCPs * Current working hours)
I find out the hospital treats 8,000 patients per day.
With the data from the interviewer, we can calculate the number of PCPs required to get to the ideal working hours.
Number of patients treated per hour
= Number of patients in a day / (Number of PCPs * Current working hours)
= 8,000 patients per day / (250 PCPs * 16 hours per day)
= 2 patients per hour per PCP
Number of PCPs required to get to ideal working hours
= Number of patients in a day / (Number of patients treated per hour * Ideal working hours)
= 8,000 patients per day / (2 patients per PCP per hour * 10 hours per day)
= 400 PCPs
Number of additional PCPs required = 400 PCPs – 250 PCPs = 150 PCPs.
Sanity check – This is a 67% increase in the number of PCPs. Does that make sense? Yes, because we are trying to cut their hours from 16/day to 10/day which is a big cut!
To improve the work-life balance of the PCPs, the management will need to hire 150 more PCPs.
A great caser would add that by reducing the PCPs working hours and improving their quality of life would make it easier to hire doctors at the hospital.
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.
One night, a good friend challenged him to estimate the number of eligible bachelors for her (her boyfriend had broken up with her the previous summer so dating was a topic constantly on her mind that month.)
This was his approach to that estimation. (To see the actual math calculations on eligible bachelors for Davis’s friend, see Case Interview Math.)
“My friend attended Yale with me. She was an international student and I knew that her personal preference at the time was to marry someone who could give her American citizenship, so I started with the total US population.”
(This was specific to my friend and her intentions at the time, not meant to generalize about international students. She was open about why she only dated Americans. Luckily, after graduation, she changed her mind and end up dating someone who wasn’t American, and they are happily married today.)
“Then I cut the total population in half to focus on men since she was interested in only men.”
“I cut the population of men into age groups so I could rule out men who were too old or too young for her.”
“I considered focusing on the segment of the male population that’s taller than her, but actually, my friend is pretty short. Almost all men in the right age range are taller than her so there was no need to factor that into my calculation.”
“Next, I considered attractiveness: both the portion of the target male population that might be attractive to her and what percentage of those guys would find her attractive.”
“My friend is pretty picky. She was only interested in guys who were 9’s or 10’s on a scale of 1 to 10, so about 20% of the total population if I assume an equal distribution of attractiveness.”
“In considering what percent of that population would consider her attractive, I decided to be conservative and assume only 10% of the population she thought was attractive would also find her attractive.”
“I also knew my friend was only interested in guys that had a good income, so I decided to focus on people who were attending or who had graduated from college. In fact, she was really picky, so I decided to focus on top colleges like the Ivy League schools or Stanford.”
“Finally, I made the assumption that some portion of the guys who were in the right age range and who she found attractive and who found her attractive and who went to a top college might already be taken. I cut the number I’d come up with in half, figuring a lot of those highly eligible guys would already be off the market.”
“When I calculated my answer, it turned out that the number of eligible bachelors for my friend wasn’t huge. My ‘so what’ based on this analysis was that she might want to be a little less picky.”
The best way to get great at market sizing is to practice. Turn dinner conversations into opportunities to practice.
You can turn just about any item around you or any business you walk by into an estimation question. Give it a try. Here are a few to start with:
After reading this page, you’re well on your way to preparing for the market sizing case interview questions you’ll be asked in management consulting interviews. Why don’t you try one with your friends and family over dinner?
In the comments below, tell us your favorite market size question.
Don’t forget, we have lots of other resources you can use to prepare for your consulting interviews. People working on their market sizing skills find the following pages helpful:
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