Market-sizing & Guesstimate Questions: How to Nail Them!

In a case interview, guesstimate and market-sizing questions are two of the most common types questions of question in a case interview.

Guesstimate questions ask you to guess/estimate a random number/quantitative variable. Market-sizing questions are a subset of guesstimates where you’ll be asked to guess the market size of a certain product.

This article will help you nail down a perfect answer for these questions. 

Why Guesstimates and Market Sizing?

The majority of day-to-day consulting work is answering these two question types. That’s why almost all case interviews include them, to test your fit as a consultant.

Guesstimate questions help you plan a project ahead and optimize resources. 

"How much time should be spent on a certain task? Where can the data for this certain thing be found? If not, what is a reasonable, realistic estimate? How long would it take my team members to do X?"

Getting a right estimation for questions like these can save you and your clients tons of man-hour. It’ll also keep a project more well-organized and professional looking in front of clients.

Market-sizing questions help you convince clients. Whenever you propose your solutions to clients, e.g. we should expand into this market, or we need to acquire Monster Energy, C-level executives will always fact-check you.

They’ll ask about the total addressable market of that segment, or the market share of Monster Energy. If the data isn’t available, you must show them a guesstimated market size answer, demonstrating the large amount of research you put into the decision.

How to answer guesstimate and market-sizing questions

Watch more: Guesstimate and market-sizing questions is not that hard 

The most important thing to note is that you must answer these questions like a real consultant would. 

Your interviewer only cares about the process that led you to produce the result. It does not matter if the number is a little bit off, as long as it makes sense.  Even if you do know the exact number, do not jump straight to the result. 

Below is the five-step process for a perfect answer to guesstimate and market-sizing questions. 

We will look at these steps through a sample market-sizing question: “What is the smartphone market size in Germany?”.

Step 1: Clarify the problem

After receiving the question from the interviewer, always begin by recapping the information and clarifying all vague terms in the question. If you do this right, you’ll know which data you need to guess and which to ask the interviewer. 

Getting a segmentation right can divide your problem into a smaller set of calculation, creating an ultimate formula to calculate the final answer. 

Here is our recommendation of factors to clarify:

• Unit Of Measurement: What kind of units will you use to quantify the final answer (like tons, pound, unit, people, USD, etc.)?

• Timeframe: What is the timeframe used for the question (day, week, month, year)? E.g. Calculate market size for a year or a quarter?

• Distribution channels: If the question asks about a commercial product, what are its distribution channels (Online, offline, retailer, wholesaler)?

• Customers: Who will be the main target audience/demographic (B2B, B2C, etc.)

When clarifying, try to be as close-ended as possible to control the narrative of the question. For example: 

“I can’t help but notice some unclear terms in the question, so I’ll clarify it with four assumptions:

• A smartphone is a phone exclusively using a touchscreen, i.e without a physical keyboard

• The unit of measurement is the number of smartphones sold to end consumers

• The timeframe used is annual

• The question concerns the German market size at present

So, are we on the same page on this?”

Most of the time, interviewers don’t have a specific goal in mind, so they tend to say ‘yes’, to your proposal. They just need to see where your thinking process is going. However, remember to always align your answer with the interviewer (to double-check and show courtesy).

Step 2. Time out and break down the problem

After clarifying the question, always ask for some time out. Even if you know the goal number (e.g. you performed market research for smartphones in Germany before), you still need time to organize your thoughts into a presentation.

Use the time out to break down the problem into clearly defined MECE portions. You can use issue trees for simple questions or tables for more complex data sets.

Only use them to create a barebone formula for your answer (like Usage = Population * Use rate). Do NOT try to make any calculations or estimations at this stage. You’ll present your calculations in front of the interviewer.

For example:

“For this question, we can calculate the “number of smartphones sold to end consumers” by estimating four data points:

• The size of the German population

• The percentage of mobile phone owners within the German population.

• The percentage of smartphone owners within German mobile phone owners.

• The average lifespan of smartphones in Germany.

Since this is a fairly straightforward analysis, I will be using a simple issue tree to illustrate. The necessary data points will lie at the bottom of the issue tree.”

Step 3. Estimate each piece

Now, you will get to work out and guess the specific number for all of the above data points.

You must demonstrate this step right after step 2, to keep the time-out period short and engage with the interviewer.

You should:

• Round up the numbers/estimates to the dozens or easy to calculate numbers (divisible by 10, 5, etc.)

• Base the estimation on experience or common facts to avoid absurd errors

For example:

“Here are some quick guesstimates for the German smartphone market, using the four previous data points:

• Germany’s population is 80 million (double check with the interviewer if you are unsure)

• The percentage of mobile phone owners is 80% (assuming German life expectancy is 80, the population is evenly distributed across age groups and they own mobile phones from age 15)

• The percentage of smartphone owners is 95% (assuming only 5% own mobile phone owners choose a “keyboard phone” since Germany is a developed country)

• The average lifespan of smartphones in Germany is 2.5 years (so the average consumer “uses” 0.4 phones every year)”

Do not push yourself too hard to get a perfect number, as the main thing that will be assessed is your approach to the problem. If you meet any unfamiliar data point (outside of your area), you can always ask for this from the interviewer.

Step 4. Calculate

During the case interview and most consulting work, calculations must be made quickly and on the spot. 

If you estimate your data correctly, this step will be slightly easier to get through. That is why you need to present all your calculations to the interviewer to demonstrate your mental math skills.

Here are the calculations for the example:

• Germany’s population: 80 million

• The number of mobile phone owners: 80 million x 80% = 64 million

• The number of smartphone owners: 64 million x 95% = 60 million

• Total annual unit sales of smartphones in Germany: 60 million x 0.4 = 24 million

In reality, 22.9 million smartphones were sold in Germany in 2020. 24 million is a relatively close answer. However, most of the time, the accuracy of your answer can fluctuate more widely.

This is a totally acceptable fact and will not affect your performance much (though a close answer would be much appreciated). In real consulting work, there is always an acceptable margin of error, as long as your number is not too absurd.

Step 5: Sanity check the result 

There is no quick way around this. All your answers and numbers must be realistic and seem sensible in an everyday context. 

Any absurd errors will show that you have no common sense in certain areas, which is a huge red flag. 

For instance, even though Germany is a developed nation, it is NOT okay to say 100% of its citizens have mobile phones. This number does not account for people who cannot use mobile phones, like kids and elders, or who live in remote regions where a smartphone cannot be used effectively and therefore do not buy one.

Therefore, you must perform regular re-cap of your answers and go back into your issue trees to correct your mistake right away. It will show the interviewer that you can still control the case.

Guesstimate and market-sizing questions – Tips and tricks

You can follow the five tips below to further enhance your performance with guesstimate and market-sizing questions.

Tip 1: Ask close-ended clarification questions

This one is already mentioned above. However, many make this mistake in the case interview by being too open and, therefore, lose control of the narrative and make the question a lot more harder. 

For the given sample question about smartphones in Germany, here are a few questions you may ask:

• What can be counted as a smartphone?

• What is the unit of measurement?

• What is the timeframe to measure the market size?

• At which point in time is the market size measured? 

These questions are quite open-ended and the interviewer can surprise you with unwanted, difficult information. For instance, when you ask ‘What is the timeframe to measure the market size?’, they may answer “It would be in five-year increments”. 

The question now become a lot harder than when you set the timeframe yourself, for example “the German market size at present”. This will hide away the ‘no’ option and nudge the interviewer into agreeing with you. 

Of course, they could still go out of their way to disagree with you if they wish to ask for a certain situation (e.g., the market size over 5-year periods). However, this is very rare as the interviewers must also consider that they only have a limited amount of time and brainpower for each candidate. 

Tip 2: Make defendable, fact-based estimations

Base your estimations on facts and logic to make them more defendable and sensible in front of others.

First of all, always follow up your estimates with a short explanation and hypothetical conditions. Consulting is a fact-based industry, and accountability is a desirable trait. As such, the interviewer will likely question you on your estimations, so always have valid reasons to defend them.

For example, when estimating the percentage of mobile phone owners over the German population:

"The percentage of mobile phone owners is 80% (assuming German life expectancy is 80, the population is evenly distributed across age groups and they own mobile phones from age 15)”.

Of course the real Germany’s demographic distribution is completely different, but it is not necessary for our estimation.

In addition, make estimations that are based on logic and sensible real-life observation. If you have worked with a certain industry and have a good memory about the data sources, do not be afraid to cite them. 

For example, if you need the average life-span of a smartphone, do not say “10 years” just because you are still using an iPhone 5 from 10 years ago. 

2.5 years, on the other hand, can be derived from daily observations; I can also cite Morgan Stanley on the average smartphone being replaced every 2.75 years in 2019. After that, you can reason that Germans may replace phones more frequently, considering their high income.

Your estimation can be wrong, but do not be too wrong. Do not guess that Germany’s population is 150 million, when in fact it is only around 80 million. 

When you are unfamiliar with a certain figure and cannot make an estimate, you can always double-check and ask the interviewer. If both you and the interviewer do not know the correct number (though highly unlikely), then you can be wrong together.

Tip 3: Round up the numbers for easy calculations

Do your brain a favor, and round the numbers for easier calculations.

Ideally, you would alternate between rounding up and rounding down so the offsets will cancel each other out and minimize your margin of error. You can read more about rounding in consulting math here.

Notice in the example how I chose the rounded, easy number: 80 million instead of 83 million; 80% instead of 81.25%; 60 million instead of 61 million.

Tip 4: Solve the problem with explicit visual aids

Try drawing an issue tree or a table, and point to it as you speak. Without visual aids, it is easy to lose track amidst a network of data and estimations. 

Besides, if you do not draw your issue tree/table out, you will appear less organized. This is not good in a case interview.

An issue tree is best used for simple questions that can be quickly sub-divided into ONE level of details. 

For instance, with the sample “smartphone in Germany” question, it’s best to use an issue tree as you only need data points for the population of Germany.

For more complex questions, you need to use tables, like when the interviewer asks for “smartphone usage in Europe”. 

For this, you need to calculate figures for multiple countries/regions, so an issue tree will be hard to demonstrate. You can look at the below table as an example. 

You can find many more killer tips and techniques in my deep-dive video within the Guesstimate and market-sizing Questions sections of the Case Interview E2E Secrets Program.

Tip 5: Perform regular sanity checks

Regularly check if your numbers are sound – logically, factually, and mathematically. 

Go back and recap your answer after each step, from clarification, estimations to calculation. Double-check all the assumptions you make, e.g “Are there any other terms that need clarifying?”, “Is my break-down of the problem and issue tree MECE?”, “Do all the numbers sound sensible?”.

Between all the confusing data, estimations, and the difficult process of breaking down the problem, it’s easy to make mistakes. Your common sense should ring its alarm bell if it takes 10 years for Germans to replace their smartphones, or if “60 million x 0.4 = 40 million”.

Guesstimate and market-sizing questions – Cheat sheets

“How do I break this down?” and “What is the right number?” are two biggest questions in answering guesstimate and market-sizing questions.

You can make these questions easier by building two cheat sheets – one for common segmentations, and the other for common data. I can give you a general guideline on how to do it – you can make much better ones yourself.

Common segmentation methods

There are four easy segmentation methods to break down problems in market-sizing and guesstimating: Geographical segmentation, Demographic segmentation, Behavioral segmentation, Replacement and growth

You can list the specific common segmentations in each type (e.g: high income, middle income, low income) on a ready-to-use sheet, but you should understand the principle of each type to be more flexible in case interviews.

The correct segmentation method can point you in the right direction and avoid costly mistakes that invalidate your entire issue tree. Your accuracy in this part mostly depends on your business and background knowledge. Be sure to apply some common sense into your number to avoid making any absurd errors.

Note that there is more than one correct way to break down a problem. Choose the easiest one or the one you are most familiar with.

Geographical segmentation

Geographical segmentation works great at the higher levels of your issue tree or as labels in your tables.

You can describe them on a three-level geographic scale as follow:

• Local area/Domestic region/National

• Country/Continent/International

However, not all questions require geographical segmentation. For our Germany smartphone sample question, the regional differences will not contribute much to our answer, so we will not use this segmentation method.

But if the question is about “smartphone usage in Europe”, since this is a large and complex region, we can divide it into Northern, Southern, Western and Eastern Europe for easier estimation. 

Demographic segmentation

Demographic segmentation is best used to work out the necessary data points of your answer. You can describe the target demographic in your question along multiple metrics, such as age, gender, income, family status, education, etc.

The specific metrics you choose will depend on your knowledge on the topic and how each metric relates to the final answer. 

For example, when describing smartphone usage, its best to segment them into age group. However, when it comes to car ownership or jewelry purchases, you might want to use income level segmentation.

Nonetheless, to keep the issue tree and calculation simple, use one (two at most) metric to describe the demographic. 

For example, I only used age in the above example as it is the most relevant determiner to owning a smartphone – once you’ve reached late teens, you’ll most likely buy one regardless of other demographic factors.

Behavioral segmentation

This one segments the market based on the customers’ actions. There are many types of behavioral segmentation in marketing, but it all revolves around how customers interact with a product. 

Using the correct behavioral segmentation can help make your calculation more accurate. They can dive down into the specifics of the demographic groups, and help you seek out some hidden trends.

If you look back at my example, you can see two behavioral segments there: mobile phone users are divided into smartphone users and keyboard-phone users. Because, in general, not everybody is into smartphone and some still use old-school ones.

Replacement and growth

If the market size does not change significantly, replacement is useful to estimate potential sales from existing customers, for products with predictable lifespans, such as FMCGs, digital devices, motorbikes, and cars.

However, if the market size grows significantly (positive or negative) within the question timeframe, you need to calculate that growth separate from replacement.

In my smartphone example, if the interviewer asked me to calculate the market size in 2030 with 5% consistent growth, I would need to add a 60% total growth to 24 million, for a final 38 million units per year.

Common data points cheat sheet

From the previous section, we can see that segmentation methods inform how our answer is structured, and each constitute a different element contributing to the final result. 

Nonetheless, you will notice that 2 types of data that come up repeatedly:

• Population numbers

• Demographic factors (life expectancy, age structure, income segments, education, etc.)

On a geographical basis, those two data types often appear on three scales:

• Your own locality (on a national or domestic regional scale)

• Major country groups/continental regions

• World

So when practicing for guesstimates and market-sizing questions, try to perfect how you segment and guesstimate these types of data. Then, compile the common data points into a cheat sheet to memorize and use in your case interview.

Here’s an example cheat sheet I drafted in a few minutes for illustrative purposes:

Do your research based on those criteria, and you’ll soon have a much more detailed data cheat sheet!

Guesstimate and market-sizing question example

We will apply all the tips and techniques above to solve another example, from start to finish.

Take your time and work on an answer of your own, following the 5 steps as well as the tips and tricks I gave you.

You can also make the best out of each example by “twisting” the definitions, effectively creating new questions to practice.

EXERCISE: How much Earl Grey tea is drunk by British people in a typical afternoon?

Clarify

• Earl Grey tea is any tea marketed as such, regardless of the ingredients.

• British people consist of inhabitants across all 4 municipalities of the UK.

• The consumption is measured in cups (as in tea cups).

• A typical afternoon will be between 1.pm and 5.pm

NOTE: This is an example of close-ended clarification. Don’t ask questions like “Which region’s population count as British people?” You may be asked to calculate the figure for the entire Commonwealth.

Break down the problem

The answer depends on three determinants:

• The total population of the UK

• The number of tea cups drunk by an average British person in a typical afternoon

• The chance of a tea cup being Earl Grey.

Since there’s no significant difference in tea consumption habits between, let’s say, Scotland and England, you don’t need to break down the geographical region further. You just need to break down the behavior of tea consumption based on tea brands.

Solve each piece

The basis of each estimation is in brackets:

• The UK has a population of 65 million. (the correct number is around 66-67 million)

• Each afternoon the average British drink 1 cup of tea. (based on the afternoon-tea party, where people usually eat snack and drink tea, the cup is quite big, and tea is a caffeinated drink that should not be consumed too much)

• The chance of the tea being Earl Grey is 10%. (Earl Grey is among top 5 popular teas, which together may take up 50% of all tea in the UK)

Remember to always back your estimation up with a list of hypothesis and reasonings, and round up the number so calculation is easier.

Consolidate the pieces

The basis of each estimation is in brackets:

• Each afternoon, British people drink 65 million cups of tea. (65 million people x 1 cup)

• Among them, 6.5 million cups are Earl Grey. (65 million cups x 10%)

=> Answer: in a typical afternoon, British people drink 6.5 million cups of Earl Grey tea.

Presenting the answer – Interview script

You know the steps, the tips and you already have your cheat sheet in mind. However, case interviews are not just about content, but also presentation! How do you present an answer to a guesstimate and market-sizing question in a truly consulting-like way and impress your interviewer?

In the Prospective Candidate Starter Pack, I’ve prepared an interview script using various tips and techniques tailored for this specific kind of question, along with a full set of free materials to prepare for a consulting career!

Want to learn even more advanced tips and tricks of guesstimate and market-sizing questions, or explore the secrets of consulting case interviews?

Subscribe to our Case Interview E2E Secrets Program and its Guesstimate and market-sizing Questions package to join countless other successful candidates!