How to Ace Market Sizing Questions in Your Consulting Interviews
- Last Updated February, 2024
Rebecca Smith-Allen
Former McKinsey Engagement Manager
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 case 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.
In this post, we’ll show you 2 approaches to answering these questions, as well as covering:
- What Is Market Sizing?
- Why Do Consulting Firms Ask Market Sizing Questions?
- 2 Approaches to Answering Market Sizing Questions You Need to Know
- 7 Steps to Answering Market Size Case Questions
- Tips for Mastering Estimation Questions
- 2 Market Sizing Examples
Let’s get started!
Contents
Contents
Market Sizing Questions (also called dinner conversation cases)
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.
Market sizing questions 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.
Sample Market Sizing Question:
- What is the market size for cell phone services in New York City?
- How many piano tuners are in Chicago?
You’re not expected to know the answers, but instead to show a logical way to deduce it.
Why Do Consulting Firms Use Market Size Cases?
As with any type of consulting case interview question, your interviewer is interested in assessing whether you have good structured problem solving skills. 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 market size, and your assumptions need to show good business judgment.
Interviewers are also judging your ability to communicate your thinking clearly.
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The 2 Approaches to Answering Market Sizing Questions You Need to Know
Top down – Start from the total population and divide your way down to the relevant market.
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 target market of people who need and can afford laptop computers, and how often they would buy them given the average useful life of the equipment.
Bottom up – Start with a single base unit (a typical customer or sale or business outlet) and multiply your up to the entire relevant market.
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 to calculate the market size.
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 to market sizing usually works best.
For local markets with a homogeneous customer base, the bottom-up approach generally works best.
7 Steps to Answering a Market Sizing Case Question
- Ask clarifying questions. Is the interviewer looking for revenues? Units sold? For what time period? And what geographic region?
- Create a structured process for finding the answer. Don’t just leap into the math. As with any case, take a moment to plan your approach to the market sizing question. Start the math only after you’re confident about your approach and have walked your interviewer through it step-by-step.
- Estimate using round numbers. 10%, 25%, and 50% are easier to calculate than 12.7%.
- Ground your estimations with facts. Don’t just pick a number or percentage out of thin air. You can’t do market research in the middle of an interview, but you can base your answers on experience or facts that you know.
- Get the math right. It’s hard to calculate math problems correctly under the pressure of an interview. Practice will help.
- Sanity-check your answer. Once you get to your final answer, check whether your numbers make sense. If not, go back and check your assumptions and math calculations.
- Explain the “So what?” Remember, part of this exercise is about communication. Explain the significance of the market size you’ve arrived at. Is it a big opportunity for your client? Or not worthwhile?
Market Sizing Cheat Sheet: Key Numbers to Know
This market sizing cheat sheet 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.
Tips and Strategies for Mastering Estimation Questions
- Keep your assumptions simple. While you don’t want to make things overly simplistic, you don’t want to overcomplicate them either. A good rule of thumb is to use 3 different market segments or types of customers.
- Use round numbers to keep the math easy to calculate.
- Walk the interviewer through your approach before calculating any numbers. This ensures that the logic of your market sizing approach makes sense before you get into the math.
- Remember that people could have more than 1 of something. In our example above on estimating the size of the laptop market in North America, remember that 1 individual might have a work laptop and a personal one. Or they might use one at school or the library.
- Take replacement cycles into account. Laptops have a useful life of more than a year, so you need to account for how many people are actually replacing their laptop in any single year to calculate an accurate market size. For example, if you assume that laptops get replaced every 3 years or so, then whatever number you come up with for the size of the laptop market needs to be cut by 3. Another way to think about this is to assume that if laptops are replaced every 3 years, then each person will replace their laptop by ⅓ each year.
Market Sizing Question 1: Burnt-out Docs
Market sizing 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.
Market Sizing Approach: Top-down or Bottom-up?
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.
Create a Structure and Set Up the Equation
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:
- How many PCPs are on staff at the hospital today?
- How many hours do they work?
- What is the idea number of work hours?
I ask my interviewer and got these data points:
- 250 PCPs work in the hospital
- They work 16 hours/day
- They’d ideally like to work 10 hours/day, which would still be a lot, but not so out-of-control
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.
Do the Calculation
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!
What is the Insight?
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.
Market Sizing Question 2: Breakup Math
When My Consulting Offer founder, Davis Nguyen, was preparing for interviews, he frequently brought up market sizing questions at dinner and used them to practice. These market sizing drills 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.
How to Get Better At Market Sizing
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 market sizing question. Give it a try. Here are a few to start with:
Practice Market Sizing Questions
- How many cups of coffee does your local coffee shop serve each day?
- How many people sat in the same chair in the cafeteria as you are sitting in now over the past year?
- How many lawn mowers are sold in the U.S. every year?
- What is the market size for frozen hamburger patties during the summer months?
- How many hot dogs are sold at a Red Sox game?
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:
Help with Case Study Interview Preparation
Thanks for turning to My Consulting Offer for advice on market sizing. My Consulting Offer has helped almost 89.6% of the people we’ve worked with get a job in management consulting. For example, here is how Brenda was able to get a BCG offer when she only had 1 week to prepare…
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