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This is a classic market sizing question that you would get asked in any consulting interview. I didn't understand why you split the market into 'above-average
by smallnamespace 10y ago
This is a classic market sizing question that you would get asked in any consulting interview.
I didn't understand why you split the market into 'above-average' and 'below-average' prices though? I highly doubt the distribution is symmetric -- most of the probability mass is probably in cheaper cars, and there are smaller numbers of very expensive luxury vehicles pulling up the average price [1]. In that case, a much smaller number of households buy the 'above-mean-price' vehicles. Also, wealthy households tend to replace their cars more frequently; luxury car dealerships do much of their business in rolling people over every 3 years into a new vehicle lease.
In any case, 116mm / 17.5mm cars per annum households is 6.6 years per car per household, which seems totally reasonable to me since many households own multiple vehicles, and many vehicles are owned outside of households.
[1] http://fortune.com/2015/02/17/luxury-car-sales/ http://fortune.com/2015/02/17/luxury-car-sales/ - 'Top-shelf brands, with cars generally selling for more than $40,000, represent a big and growing slice of the car business. They now account for 11% of total new car sales, when measured by number of units sold'
- linkregister 10y agoThank you! It's a good thing I haven't gone for any business consulting interviews lately. This context helps to explain what's going on, especially the cars per year metric you added. It would be nice to have more information, but it appears that 11% luxury segment can have an outsized effect on the mean sales price of the vehicle sales.
- pault 10y agoHow does one size a market? I've always been curious about this. Where do you go looking for the data? Are there any biz-dev people that could point me towards some introductory material?
- smallnamespace 10y agoOne common technique is to use basic demographic estimates: https://www.preplounge.com/en/bootcamp.php/case-cracking-toolbox/identify-your-case-type/market-sizing https://www.preplounge.com/en/bootcamp.php/case-cracking-too... In a real interview, you normally wouldn't have access to a calculator or a computer. The point is to show you can arrive within a factor of 2-3x of the actual real-life answer just by smart guesstimating and doing arithmetic in your head. One reason is because consultants often get asked these sorts of on-the-fly questions by clients, and they need to provide reasonable answers without looking them up.
- Klinky 10y agoIs testing who can sound the most competent while pulling a number out of their ass really the best test to determine the right candidate? There are good consultants out there, but there are also the horror stories.
- smallnamespace 10y agoFor better or worse, consultants are often paid by clients for sounding like the smartest person in the room. Bullshitting convincingly is very much part of the job. Anyway, if the technique is good enough for Fermi [1] or Drake [2], what's the problem? [1] https://en.wikipedia.org/wiki/Fermi_problem https://en.wikipedia.org/wiki/Fermi_problem [2] https://en.wikipedia.org/wiki/Drake_equation https://en.wikipedia.org/wiki/Drake_equation
- Klinky 10y agoFermi questions can be polarizing, especially for precision/accuracy focused individuals. Beware. Drake equation has its criticisms, and ET has yet to phone home.