Market sizing
Brainteasers & GuesstimatesEstimating the size of a market from first principles, assessed on the structure of the estimate rather than its accuracy.
Also written: guesstimate, estimation question
A market sizing question asks how many coffees are sold in London each day, or what the market for lifts in Germany is worth. Nobody expects the right number, because nobody knows it.
What is assessed is whether you can decompose a problem sensibly, hold assumptions in your head, and arrive at a defensible order of magnitude while talking. The structure is the answer.
Work top down from a population and segment it, or bottom up from a unit and scale it, and say every assumption aloud so the interviewer can follow and correct you. An interviewer who can see your method will forgive a wrong input; one who cannot forgives nothing.
Finish with a sanity check. Compare the answer against something you know, and say so if it looks implausible. Noticing that your own estimate implies every adult buying eleven coffees a day scores far better than presenting it with a straight face.
Worked example
How many coffees are sold in London daily? Start with 9 million people. Say 60% are coffee drinkers, so 5.4 million, averaging 1.5 cups a day, giving 8.1 million cups.
Then split: perhaps a third are bought out of home, so about 2.7 million purchased cups a day.
Sanity check it. At roughly £3 a cup that is £8M a day, or nearly £3bn a year for London alone, which is large but not absurd. Saying that out loud scores better than presenting the number with a straight face.
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