QUESTION 12 associated with it. -market segments. Typology is the strategy for qualitative data analysis to group findings into distinct categories in order to identify data themes. False Let's assume there are 3 people per household,which means that there are 100m households in the country. So you multiply by 10 to get to 5% = 900k. -compounded. Shannon wants to communicate that Company ABC's brand has the benefits that the target market will value. We reviewed their content and use your feedback to keep the quality high. Leave a comment below with your thoughts and questions, and we will answer them promptly. Here are a few important clarifying questions you would need to ask: These questions are useful to make sure that you calculate exactly what your interviewer wants you to. identify the basic appeal of a market. But if you spot your own mistake you still have a chance. Calculate potential sales. Secondary research or desk research searches for existing data and is the most commonly used form of research in this type of exercise because it is quicker to obtain and therefore usually more cost effective. Risk management is the process of identifying and measuring risk and ensuring that the risks being taken are consistent with the desired risks. During 2017, 1,200,000 new homes were constructed in the United States. In a real interview, you would need to lay out that approach to your interviewer and check that it works for them. You might calculate that its less than 1 in 100 - lets say 0.5%. -surveying customers. Read world-renowned marketing content to help grow your audience, Read best practices and examples of how to sell smarter, Read expert tips on how to build a customer-first organization, Read tips and tutorials on how to build better websites, Get the latest business and tech news in five minutes or less, Learn everything you need to know about HubSpot and our products, Stay on top of the latest marketing trends and tips, Join us as we brainstorm new business ideas based on current market trends. What result do companies see from happier customers due to marketing? (If you're from another country, base it on your own experience and adapt. -True Market sizing is the process of calculating these numbers to accurately measure your business growth potential. 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. We've laid out the prep process in four simple steps: First of all, you need to learn the 4-step approach we covered in Section 1. True. -attitude, Who created the hierarchy of needs? You call it 2%. Use market research to assess interest in your product. Estimate the number of t-shirts the average woman in NYC buys each year. -physical From here, you conduct research and speak with alcohol distributors to determine there's a roughly 40% success rate for wine distribution. The bottom-up methodology builds the TAM by totaling the main variables of the target market. Marketers can create desires in people that they didn't previously have. For instance, you should use 350 days in a year instead of 365. In addition, here are a few more market sizing questions for you to train on. You could tell the interviewer that youre going to make some assumptions based on personal experience of living in the UK. False, A(n) __________ segment is always a tempting one for marketers to target because marketers assume that those customers can afford to 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. t: For this purpose, it is important that the Zestimate is based on information about all homes (e.g., beds, baths, square footage, lot size, tax assessment, prior sale price) and that the algorithm itself is . So let's step through our recommended approach to calculating market size, with an easy-to-use framework, some examples, and even a handy cheat sheet. -low price, high quality, exclusive availability, light promotions They are experts at gathering and processing market information, analyzing data, and translating information into actionable growth initiatives. 9.5 Global Wind Power Bearing Market Size . Step 2: Break the number down into 3-5 small, easy-to-estimate pieces. Market size for t-shirts in the US every year? -Skinner Assumption. 35-49 = 20%. Once you've agreed on an approach, it's time to start calculating. The idea of targeting is merely one of In our experience it's almost impossible to recover from that situation. For example, to determine the TAM for food packaging, you might start with retail sales of packaged food and multiply by an assumed packaging cost (e.g. By generalizing the market too much, you're likely to estimate a market size that's way outside the ballpark. True, Marketers and senior managers like to see graphical depictions of where their brands and their competitors' brands are in their customers' minds. This is valuable for both business owners as well as investors. -calculated. So, 17m /100 = 170k / 2 = 85k. -Is my brand targeted correctly? Market sizing questions are typically asked at the beginning of consulting case interviews. False. A customer would be more price sensitive when buying gum than when buying Weve created a coaching service where you can do mock interviews 1-on-1 with ex-interviewers from MBB firms. Total Available Market refers to the combined revenue or unit volume in a specified market. Calculation step 5: Multiply total spend per wedding by the total number of weddings = market size. Your calculations have been fairly simple, so there shouldnt be any surprises. There are two types of market sizing questions. In our ultimate guide to market sizing, we've put the most important data all together for you in a cheat sheet. Study with Quizlet and memorize flashcards containing terms like According to the annual "CMO Survey" in 2014, how many senior marketers have been able to quantitatively demonstrate the impact of social media on business outcomes?, What are the four stages of consumer decision-making that need to be activated before any purchases can happen?, Would an increase in the number of product reviews . Potential profitability is a function of . It may be enough for them to know that a market falls between the upper and lower estimates of $250m to $350m per annum. -segmenting -surveying. Below are the 5 basic steps in estimating market size. Number of box shorts / briefs sold in the US every year? You can tell the interviewer that here you're using personal experience to make assumptions. Add 1 and 2 and calculate the value ($) of these light bulbs. They clarify that online purchases can be included as long as the buyer is in NYC at the time of purchase, and that sportswear should be excluded. ibonur. Did you find the right answer? Two people marry at each wedding, so well halve the number of people marrying to find the number of weddings. But in both cases you should VALIDATE your approach with your interviewer BEFORE starting to calculate numbers (step 3). When sizing a market, errors in estimates are Estimating 70 guests at each wedding, you estimate an average spend of 30. True. 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. Rounding numbers will make your calculations easier and decrease your likelihood of making a mistake. Adjust estimates for age group differences. As you gather more data, adjust your assumptions and calculate best-case and worst-case scenarios to identify and mitigate potential risks. True, Which of the following is a psychological factor? And of course, theyre even trickier if youre not used to answering them! We recommend using the framework we laid out in the two solutions we walked you through above. -to demonstrate that it's easy to apply can help in this case. -different. At the core of under- or overestimation are a few common errors. If you've memorised yourcheat sheet,you know the UK population is roughly 70m. There are several reasons why every business should spend time sizing its market: It helps you determine if its a worthy investment Say you have a great idea for a product but there are currently only 100 people who would buy it. And it might also be difficult to practice multiple hours with that person unless you know them really well. True Calculate the number of light bulbs purchased for NEWLY-BUILT homes every year. -marketability and strategic fit, Targeting should not use a top-down vision of corporate strategy, but rather, only a bottom-up data-informed approach on segment size and profitability. -consumers will most likely purchase more of the three brands not clustered together. False This is important because it gives your interviewer a chance to rectify your course of action if they had another plan in mind. False True The best way to prepare for market sizing questions is to work through lots of them until each step of the approach becomes natural. We always recommend using a4-step framework. If you have any questions about them or would like feedback on how to answer them, then you can leave a question below, and our team will get back to you. Great marketing is based on __________ laws of human and organization behavior. -Is my brand optimally segmented? Or how much money is spent by consumers on takeaway coffee? 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. Once the trends information has been collected, you can start structuring data by group or theme. -FedEx Following these steps to estimate your market size (value) is by no means an exact science. The most versatile form of primary research is in-depth telephone interviews that can be used to capture more sensitive information. The second and third errors are "sins of. Here's the good news. Use % to calculate number of people estimated to marry in each segment, and add together to find total number of people marrying. When sizing a market, errors in estimates are Students also viewed. Calculation step 3. -the five brands are viewed as most interchangeable by consumers. -to restructure the company. Using this as an example, we'd calculate the market size using the following formula: 1,000 liquor stores x 40% = 400 liquor stores. if you're from the US youll decrease the percentages a little because you know that the UK is less religious than the US and therefore marriage rates should be lower.). -False. If the sales mix is attained, what is the operating income when 170,000 total units are sold? -Verizon, If a brand has an exclusive image and distribution chain, it needs to promote it as much as possible. Develop a solid marketing and business strategy. -quality placement, Apple's reputation as an innovative company demonstrates its use of the product leadership strategy. Eight percent of customers are only interested in 20% of available merchandise. True True, The contrast between mass marketing and one-to-one marketing illustrates that segments become more __________ as they increase in size. 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. Shannon is engaged in what marketing activity? E.g. -targeting True You can download the complete cheat sheet here. Luckily, sample size determination isn't as hard to calculate as you might remember from an old high school statistics class. For a useful comparison, see this different approach to the same question from another LEK employee. For example, multiplying 300 million people by 50% is way easier than multiplying 311 million people by 43%. -three brands are well positioned as being diverse from all other brands. Entertaining and motivating original stories to help move your visions forward. False, Marketers ask the most important question: "How likely is it that a segment will be profitable?" Our goal is to help you better understand your customer, market, and competition in order to help drive your business growth. False In other words, is it even worth our time and energy? 3. A positioning statement should target employees and shareholders. The number of light bulbs in existing homes is therefore: 110m homes x 8 rooms per home x 4 bulbs per room = 110m x 8 x 4 = 3,520m light bulbs. False, Gender, age and income are all qualities of what segmentation base? -capabilities. -brand names. -low-involvement products As a result, your market size is 480 x 16,000 = $8,000,000. False (. , but if you really want the best possible preparation for answering market sizing questions, you'll also want to work with ex-consultants who have experience running interviews at McKinsey, Bain, BCG, etc. 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. -education The 5Cs, STP, and 4Ps operate interdependently. O d. reduced Before taking a look at it, make sure you go to the bottom of the page and answer the question by yourself in the comments section. -ignored. 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. You might say that you think this might be a bit under the NYC average, as youre not interested in fashion and dont have much time for shopping. Priority Metrics Group (PMG) is a professional marketing consulting firm based in Spartanburg, South Carolina. Now, onto the trickier estimates. -are individual This also buys you some thinking time. You consider that they may also buy a lot of clothes, How many bottles of wine are sold in the US every year? -identifying their product with a certain level of needs. This number is the TOTAL number of bulbs. Free and premium plans, Sales CRM software. (, How many coffins are sold in Los Angeles (USA) each year? -False, If you ask the average person, "What is marketing?" -expensive. All methods for estimating market size are based on decomposing the problem into smaller problems and building those results into the market size. Because although people can get married at any adult age, there is a huge difference in marriage rate between age groups. E.g: if there are about 300m smartphones in the US (1 per person), and smartphones get replaced every ~3 years, then that means ~100m smartphones are REPLACED every year. -to appeal to your sense of smell and make you remember the product, to appeal to your sense of smell and make you remember the product, Ivan Pavlov with his salivating dogs is an example of what type of learning process? STEP 2: Build the estimation model by breaking the problem into smaller pieces. In practice, you should check your intermediate results as you progress through the case and arrive at your final result at the end. Spend a little bit of time memorizing the data on the demographics cheat sheet in Section 3. Which of the following questions should Emily ask first when she conducts a situational analysis? -Psychological marketing True Multiply target market by penetration rate to find your market size. ", "Does this include sportswear, or is it restricted to regular-use t-shirts?. That sounds reasonable. It's important to note that both methods ignore the existence of competitors, customer churn rate, and other factors that impact sales. In addition, they are also a great way to buy yourself some time. 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. Joe's company prides itself on efficient production and delivery of products, in addition to offering low prices and convenience to its customers. -For every 80 people who look at a product, 20 will buy it. Right, let's take a look at some more questions. Of that total list, you only want to sell to the New England area including Massachusetts, Maine, and Rhode Island. Variance is a measure of the uncertainty caused by the use of a sample of retail prices, instead of the complete universe of retail prices. Marketing Management 3. Calculation step 2: Estimate the number of t-shirts the average man in NYC buys each year. Census.gov is a good place to get data about the size of age cohorts. -heterogeneous False, Shannon is struggling to communicate who Company ABC is compared to the competition. -psychological Ideal hours are a estimation technique for waterfall user stories that uses hours as the unit of measurement. Weight of the International Space Station? -low price, low quality, widely available, heavy promotions, -low price, low quality, widely available, heavy promotions. Using the same example of food packaging, a researcher might total the food packaging sales of packaging producers all food packaging or by package type or by geography. However, the relative standard errors show they have similar levels of relative precision (Table 1). 300m x 2% = 6m. The questions and calculations weve gone through here arent rocket science, but they require a calm head and can be tricky to pull off smoothly in a high-pressure situation. True. -demographic They assign more client service personnel and extend more relationship management efforts because these customers tend to be Step 4: Consolidate the pieces to arrive at the final result. Again, that sounds reasonable. 1% of 110m homes is about 1m homes. True c. ignored. 2. Additionally, it's vital to recognize whether the potential revenue you can make outweighs your business' costs. So you'll need to determine whether you have a shot at earning enough consumers out of the TAM to make this a worthwhile venture. Calculate the number of light bulbs in EXISTING homes. 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. 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. Naytorrr. QUESTION 3 Potential profitability is a function of a. current market price. O b. the market's anticipated growth. (, Whats the market size for residential light bulbs in the US? -True Market sizing questions are typically asked at the beginning of consulting case interviews. By confirming findings, you are able to leverage the value of various information sources and thus increase confidence in thefinal results. The US population is growing at about 1% per year. But we're interested in the ANNUAL number of bulbs purchased. Calculate the number of takeaway cups per week for an average New Yorker. Take your target market, and determine the penetration potential of your target market. 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( $ ) of these light bulbs bulbs purchased for NEWLY-BUILT homes every year memorizing the on. By confirming findings, you can make outweighs your business growth a. current market price market and. 5 % = 900k research is in-depth telephone interviews that can be used to answering them to marry in segment. A good place to get data about the size of age cohorts eight percent of customers are only interested the! And adapt guide to market sizing is the strategy for qualitative data analysis to findings... /100 = 170k / 2 = 85k them promptly coffins are sold in Los Angeles ( USA ) each.... Typically asked at the beginning of consulting case interviews can be used to more! What segmentation base by consumers a result, your market size leverage the value ( $ ) these! Use % to calculate numbers ( step 3 ) they had another in. Assess interest in your product your final result at the end you are able to leverage the (. South Carolina that segments become more __________ as they increase in size due to marketing? are viewed most... Is roughly 70m people that they did n't previously have data by group or theme placement, Apple 's as. Level of needs can help in this case and use your feedback to keep the high. The data on the demographics cheat sheet in Section 3 and Rhode Island person. 'S vital to recognize whether the potential revenue you can start structuring by... 'Ve agreed on an approach, it 's vital to recognize whether the potential you! Are also a great way to buy yourself some time get to 5 =. The problem into smaller pieces intermediate results as you progress through the and... She conducts a situational analysis including Massachusetts, Maine, and we answer. Than multiplying 311 million people by 50 % is way easier than multiplying 311 million people by 43 % a. In EXISTING homes the complete cheat sheet here sources and thus increase confidence in thefinal results the income... 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America, Europe, etc if a brand has the benefits that the risks taken! Current market price help in this case it on your own experience and adapt 2 and the... Own experience and adapt, in addition, here are a few common errors should... Person, `` Does this include sportswear, or is it that a segment be... As you progress through the case and arrive at your final result at the beginning of consulting interviews... Time memorizing the data on the demographics cheat sheet here important question: `` How likely it... Needs to promote it as much as possible on decomposing the problem into smaller problems building... To keep the quality high result at the end person, `` what is marketing? happier customers due marketing! Out that approach to your interviewer a chance to rectify your course of action they! Builds the TAM by totaling the main variables of the following is a professional marketing consulting based... Or How much money is spent by consumers you 've agreed on an approach it! Should Emily ask first when she conducts a situational analysis false this is because. Customers are only interested in 20 % of available merchandise relative precision ( Table 1 ) here are few. Calculate best-case and worst-case scenarios to identify and mitigate potential risks to market sizing process, start determining! Works for them of available merchandise increase confidence in thefinal results to rectify your course of if... Buys each year precision ( Table 1 ) interviews that can be used to answering them lay out approach. Product leadership strategy to estimate your market sizing process, start by determining what products or services be! Used to answering them desired risks course, theyre even trickier if youre not to! Well halve the number of takeaway cups per week for an average New Yorker who look at some questions. Findings into distinct categories in order to identify and mitigate potential risks people. Will make your when sizing a market, errors in estimates are easier and decrease your likelihood of making a mistake by confirming,... In our ultimate guide to market sizing is the strategy for qualitative data to... For a useful comparison, see this different approach to the same question from another LEK employee tell the that... Value ) is by no means an exact science marketing is based decomposing. Marketplace of consumers is homogeneous all methods for estimating market size for t-shirts the. They are also a great way to buy yourself some time that segments become __________! You some thinking time help drive your business ' costs products, in addition to offering low prices convenience. Recognize whether the potential revenue you can start structuring data by group theme... Few common errors at a product, 20 will buy it you above. Good place to get to 5 % = 900k as much as possible = market size when... Sources and thus increase confidence in thefinal results and Rhode Island laid out in the two we! Capture more sensitive information Angeles ( USA ) each year you only want to sell to the revenue! Marry at each wedding, you should check your intermediate results as progress! See this different approach to your interviewer BEFORE starting to calculate number of people.. % = 900k data themes it on your own experience and adapt volume in a interview! The following questions should Emily ask first when she conducts a situational analysis more information! Their product with a certain level of needs we 're interested in the US every year typology is process! Marry in each segment, and determine the penetration potential of your TAM the problem smaller! Easier than multiplying 311 million people by 50 % is way easier than 311. A situational analysis start calculating the unit of measurement positioned as being diverse from all other brands 've. Answer them promptly a function of a. current market price of your target market are to. Is growing at about 1 % of available merchandise place to get data the. Estimate the number of takeaway cups per week for an average New Yorker 300... Using the framework we laid out in the US ' costs little bit of time the! Numbers will make your calculations easier and decrease your likelihood of making a mistake are positioned!, here are a few common errors and convenience to its customers levels. That uses hours as the unit of measurement start structuring data by group or theme the. Your TAM that they may also buy a lot of clothes, How many bottles of wine are sold both... America, Europe, etc be profitable? to rectify your course of action if they had plan... Time and energy a little bit of time memorizing the data on demographics... You to train on people can get married at any adult age, there is a psychological?. Has been collected, you estimate an average New Yorker its use of following...