Market Sizing Questions – Breaking Down Case Interview Frameworks

Welcome back to our case interview frameworks series, giving you a step by step approach to solve any case that’s set before you. If you haven’t read our first article yet, we encourage you to go back and read it before continuing. Think of this as your Market Sizing Cheat Sheet, as well as your guide for market sizing case questions examples.

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.

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.

Download our market sizing cheat sheet below to have a handy reference as you practice taking a real-world, practical approach to market sizing questions that you’ll face.

Download our free Market Sizing Cheat Sheet
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In the last article, we gave you an introduction to case interview frameworks and laid out our 4 core frameworks:

  • Market Sizing
  • Profitability
  • Market Study
  • Mergers and Acquisitions

Your goal should not be to regurgitate these in your interview. Rather, keep these in your back pocket, and draw from them to create your own frameworks inside of the case interview.

In this installment, we’re giving you a market sizing cheat sheet – read on for tips on how to accurately apply this framework to the cases you’re presented with.

1 – Market Sizing Example Questions

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:

1) How many cars are there in California?

In this question, the answer is the total number of units in the market. When they were sold is immaterial at this point.

2) How big is the car market in Mexico?

With this type of question, there are two potential sub-questions that may show up.

– How many cars were sold in Mexico last year?

To figure this one out, you can either calculate the number of cars in Mexico last year and then take into account how many were replaced, or use a methodology that measures just car purchases. Whatever your final answer is, it has to measure in units.

– What is the value of all the cars sold in Mexico last year?

This sub-question requires one further step than the last. After figuring out how many cars were sold in one year, you then have to multiply this number either by prices in different segments or by an average price.

The answer you give will be in the applicable currency amount of sales in a year.

This type of question (the total annual revenue of a market) is the most common and implied definition of market sizing questions.

3) What is the opportunity if your client introduces a hybrid car into the Mexican market?

In this scenario, the answer has to start first with one of the 2 previous options – an annual market size. Then, it reflects a percentage of total sales in units or currency amounts. In this case, you’re figuring out how many exist, how often they get replaced and what percentage of the replaced cars your client will be able to sell.

How to use Market Sizing:

First, you need to ascertain what you’re looking for. The question you’re answering should fall into one of the following categories:

  • 1- Market Total Units – The total number of all cars that are on the road regardless of when they were purchased
  • 2- Market Total Value – The total value of all cars that are on the road regardless of when they were purchased (this definition rarely used)
  • 3- Market Quantity Last Year – The total number of cars sold last year
  • 4- Market Value last year – The total amount spent on cars last year (this definition most frequently used)
  • 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

99% of market sizing questions will ask you to solve for the total value of a market – if unsure, always assume this is what you are solving for. After defining which answer you’re trying to solve for (which gives you the keys to the steps you’ll need to use), next you choose one of two approaches:

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.

2) Bottom Up

With bottom up sizing, you will identify a single micro-element of a larger population and dial the numbers up until you reach the appropriate scale. For example, if you wanted to figure out how many bags are lost at an airport, you’d figure out how many times it happens in one day, before multiplying that number by the number of days the airport is open, making the necessary adjustments for weekends and holidays, etc.

Whether you use the top down or bottom up approach depends mostly on you – you can actually use either one to solve any problem. (Don’t believe me? Try it on the Mexican car market case and post your approaches in the comments below).

Sometimes, however, one will be optimal for the question you’re presented with. For example, clients with physical locations may be more suited to a bottom-up approach (it’s easier to measure volume in one store on one day than perhaps to do the same market-wide). In general, though, most people find the population approach to be more user-friendly.

Simple List

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).

The 3-5 steps will all be data that you will gather, but you don’t need to lay out the data at the start.  First, make the interviewer comfortable with your approach. Then, dive into the specifics of the data assumptions. Finally, complete the calculations.

For both approaches, if price is applicable, it will be always be the last step. Just be aware the two different methods may produce different outcomes – and that’s okay. But in general, they should be close – or used to triangulate what an even more accurate answer could be.

Don’t overcomplicate 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.

When you have your final answer, test it to make sure it’s reasonable and highlight the strategic implications it has for the client.

Market Sizing Case Walkthrough Video

Via this market sizing cheat sheet, we’ve taken you a long way on the road to solving any Market Sizing case that gets put in front of you. For applied practice, join our Black Belt program – you’ll work 1:1 with an MBB coach and get access to 500 practice cases (including market sizing questions), case drills and more digital HW to augment your learning.

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