Suppose you have chosen consultancy as your career. In that case, you might have heard about the notorious market sizing questions that are an essential part of interviews conducted by consulting firms. The questions can be of different kinds, such as “how many fries does McDonald’s sell each day” or “how many tennis balls can fit into a regular airplane.”
Now, questions like these often come after the consultancy firm has gone through your consulting cover letter, which should be well-crafted, by the way, if you want to stand out from other applicants and candidates. But, another aspect that will make you stand out from other candidates is the way you answer the tricky questions.
It is essential to mention here that the typical market sizing questions are structured in a specific way that makes them have one correct numerical answer; however, you are very unlikely to know the single answer from guessing from the top of your head.
Why are Market Size Questions used by Consulting Firms?
Before we dive into the list of essential tips to ace market sizing questions, you should know that the underlying purpose of market sizing questions is to assess your logical ways and reasoning pattern to deduce the questions.
The Two Basic Approaches to Answer Market Sizing Questions
- The Top to Down Approach
Suppose you are facing the question of how many smartphones are sold in California annually. With the top-to-down approach, you will start with the calculation of the entire population of California. Subsequently, you will work your way down to narrow it to the population that can actually afford a smartphone. Simultaneously, you will conclude your answer with how often the “affording population” would buy a smartphone connected to the average life of the device.
- The Bottom to Up Approach
Suppose you are asked about the potential market size for customer support services for potential retail market customers in North America. While integrating the bottom-to-up approach, you will start with estimating the needs and requirements of a single retail market customer getting customer support one time.
Subsequently, you will roll up the needs of all potential retail customers over a period of twelve months. What kind of approach you will incorporate usually depends on the type of question asked – you will always find one approach easier than the other.
Typically, the top-to-down approach works perfectly for market sizing questions that deal with multiple customer aspects. The bottom-to-up approach works best for market sizing questions that deal with local markets that incorporate a similar and easily comparable customer base.
Smart Steps to Answer a Market Size Question
Before you give an answer, you ought to look at what the interviewer is looking for. For instance, you might want to clarify the question and understand whether the interviewer is looking for a time period, the number of units sold, or revenues.
Instead of jumping straight to mathematical works, take some time to plan your structure and approach to answer the question. Only start doing the math after you feel confident about your structured process of assessing the answer to the question.
Always round your numbers and ground the estimation of your numbers with facts essential to getting the maths right. Don’t forget to explain the significance of th4e answer that you came up with. Hopefully, that teaches you well about how to answer market sizing questions in a smart and professional way.
By asking market-sizing questions, the interviewer of the consulting firm is interested in knowing how good you are at structural problem-solving. They want to assess your approach at attempting the question and analyze how clear and logical your thought pattern is.
More importance is stressed upon the act of answering the market sizing question instead of the accurate answer. You will be judged and assessed based on the reasonability of the answer, your ability to think and communicate clearly, and the ratio of your effective business judgment.