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

“What is the smartphone market size in Germany?”

This kind of case interview question may appear challenging and even irritating at first, but once you know which steps to take, they will become much more enjoyable.

I’ll walk you through each step, show you my tips and tricks, and give some example questions to practice. It won’t be long before you can nail every market-sizing and guesstimate question they throw at you!

Market-sizing & guesstimate questions – What are they?

What are guesstimate questions?

Guesstimate questions in interviews ask the candidate to estimate a number based on very limited information (hence “guess”). Successfully answering these questions relies on a combination of mental math, logical thinking, problem-solving skills, and background knowledge. 

Example guesstimate questions:

• How many tennis balls can fit inside a Boeing 747?
• How many trees are there in Manhattan’s Central Park?
• How many bottles of champagne are there in France right now?
• How many weddings are being performed in New York at the moment?
• How many liters of white paint does it take to paint the White House?

What are market-sizing questions?

Market-sizing questions ask the candidate to estimate the market size (e.g: “annual sales”) of a certain product, often using limited information. Good command of math, logic and problem-solving skills is needed, along with background business knowledge.

Example market-sizing questions:

• How many pick-up trucks are sold in the USA each year?
• What is the total annual sales of the global laptop market?
• What is the size of the second-hand car market in Japan?
• How much revenue does your favorite restaurant make each month?
• If you open a lemonade stand, how much money can you get from it?

In consulting case interviews (and other job interviews as well), the guesstimate questions ask you to do just that! In fact, they are among the most popular case interview questions.

To learn about Case Interview Questions besides market-sizing and guesstimates, check out this guide.

How to answer market-sizing and guesstimate questions

There are 4 steps to answer market-sizing and guesstimate questions:

Step 1: Clarify all unclear terms in the question

Step 2: Break the number down into 3-5 small, easy-to-estimate pieces

Step 3: Estimate each piece using math and background knowledge

Step 4: Consolidate the pieces to arrive at the final result

Even if you do know the right numbers, don’t jump straight to the result. It’s the approach that counts – you must be absolutely structured and top-down all the time!

These are the same steps I teach in the Case Interview End-to-End Secrets Program and its Market-Sizing and Guesstimate Questions package.

Watch the video first, then try to solve the exercise below it before continuing to the answer:

What is the smartphone market size in Germany?

Step 1: Clarify the problem

Make sure you’re on the same page with the interviewer on every detail of the question.

Clarifying at the beginning serves four purposes:

• It gives you the necessary information to solve an otherwise-unclear problem.
• It brings you and the interviewer on the same page, preventing later disagreements.
• It shows an ideal, organized approach to problem-solving similar to what consultants do.
• It buys you some time to think about the problem.

You should never skip this step, because market-sizing and guesstimate questions are almost always ambiguous about important details – if it appears clear to you, you’re missing those ambiguous points.

In the given example, at least four points need to be clarified. 

• What is 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? 

For the sake of demonstration, suppose we receive these clarifications:

• 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

Step 2: Break down the problem

Ask for timeout, then break the problem down into pieces small enough to estimate reasonably.

Each small piece has to be easier to estimate than the big piece – if you can’t estimate the small pieces, you’re not breaking down enough, or you’re doing it wrong.

In the example question, we can break down the “number of smartphones sold to end consumers” into four determinants:

• 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.

The growth of the market will not be included because Germany’s population is stable and the smartphone market there is already saturated.

This graphical break-down of the problem is called an issue tree, and it has to be MECE.

If you’re not familiar with these terms, read these articles on the Issue Tree and MECE Principle before continuing – they are must-learn concepts for case interviews.

Step 3: Solve each piece

This is where you solve each piece independently.

Don’t try to do this during the “timeout” phase – most likely it will turn the otherwise-short timeout into a long awkward silence – which is bad.

Here are some quick guesstimates for the German smartphone market:

• Germany’s population is 80 million
• 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)

Step 4: Consolidate the pieces

Use calculations to consolidate the pieces into a final answer.

Quick mental math is essential for this step – if your math is too slow, you will bore the interviewer to death. Nevertheless, don’t rush it – wrong calculations are bad for case interviews.

Practice your mental math and tune it for consulting case interviews; I wrote an article on Consulting and Mental Math to help you with just that.

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 smartphone in Germany: 60 million x 0.4 = 24 million

In reality, 22.9 million smartphones were sold in Germany in 2020.

Getting this close is good, but in a real case interview, don’t try too hard to get the right number. I repeat: the only thing that matters is a structured approach.

Market-sizing & guesstimate questions – Tips and tricks

The four steps I laid out are the theory; to help you put it into practice, I’ll give you five instant-result tips.

Tip 1: Ask close-ended clarification questions

When clarifying, limit the possibilities to only the ones favorable to you.

Such close-ended questions (or even affirmatives) help impose favorable definitions easing your guesstimating process – most often, the interviewer himself is uncertain of the details, so he’s open to your suggestions.

On the other hand, open-ended questions take away your control and give it to the interviewer, making the question much less predictable.

I intentionally used open-ended questions in the previous section to show you their shortcomings: if the interviewer made me work on “monthly sales revenue of smartphones in Germany, 5 years into the future”, the whole process will be much more complicated and difficult.

My clarifying phase should have been:

“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?”

With this method of clarification, I suggest the interviewer towards saying “yes”, as the wordings hide away the “no” option.

Tip 2: Make defendable, fact-based estimations

Base your estimations on facts and logic to make them more defendable.

After all, 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 the German smartphone market example, a smartphone lifespan of 10 years would be much harder to defend because it’s not based on any data or observations.

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, then reason that Germans may replace phones more frequently considering their high income.

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 – this is the same technique I teach for Consulting Math.

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

Tip 4: Perform regular sanity checks

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

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”.

By all means, look out for those embarrassing mistakes; do sanity checks, and do them out loud so the interviewer can see how careful you are.

Tip 5: Solve the problem with explicit visual aids

Literally draw the issue trees and point to it as you speak.

Without such visual aids, it’s easy for both you and the interviewer to lose track amidst a network of data and estimations.

Besides, if you don’t draw your issue tree out, you’ll appear less organized – not good in a case interview.

On a side note, you can also use tables to visualize your answers. Tables are much more compact than issue trees, thus very useful for complex problems.

You can find many more killer tips and techniques in my deep-dive video within the Market-Sizing & Guesstimate Questions package – part of the Case Interview E2E Secrets Program.

Market-sizing & guesstimate questions – Cheat sheets

“How do I break this down?” and “What is the right number?” are two biggest questions in answering market-sizing and guesstimate 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’ll be able to make much better ones yourself.

Common segmentations

These are four quick and easy templates to break down problems in market-sizing and guesstimating, the first three of which are actually used in real marketing activities.

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

Geographical segmentation

Break down the map until you’re comfortable estimating with the smaller units.

For example, if the smartphone example concerns the European market, I can break it down into four units – Northern, Southern, Eastern, and Western.

Demographic segmentation

Common demographic factors in market-sizing and guesstimate questions are age, gender, income, family status, education.

Among them, I used age segments for the example because that’s the only one really relevant 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.

If you look back at my example, you can see two behavioral segments there:
smartphone users and keyboard-phone users.

Replacement and growth

If the market size doesn’t 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

Although market-sizing and guesstimate topics and their data aren’t usually predictable, two types of data do come up repeatedly:

• Population
• 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 (country/region)
• Major countries/regions
• World

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!

Market-sizing & guesstimate question examples

Are you ready for the fun part?

Here are two example questions for you to practice, each with a suggested answer.

However, don’t click on the reveal button just yet – take your time and work on an answer of your own, following the four 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

Question 1: 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 of the UK.
• The consumption is measured in cups.
  

Break down the problem

The answer depends on three determinants:

• The 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.
  

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 meal, and the cup is quite big, so 1 cup each meal)
• 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)
  

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.

EXERCISE

Question 2: What is the fuel cost to cover Germany’s Autobahn (federal highway) on a car?

Clarify

The basis of each estimation is in brackets:

• The fuel is gasoline.
• The Gasoline price is measured at the present German price, in US Dollars.
• “Cover the Autobahn” means covering a distance equal to its officially-stated length.
• The car is a small sedan.
• The car moves at the typical highway speed and carries no luggage.The car moves at the typical highway speed and carries no luggage.

Break down the problem

The answer depends on three determinants:

• The Autobahn’s length
• The car’s mileage
• The gasoline price
  

Solve each piece

The basis of each estimation is in brackets:

• The Autobahn is about 13,000-km long. (I happen to know this figure)
• A small sedan typically consumes 5 liters of gasoline per 100 km on the highway (I deduct this from my driving experience).
• The current gasoline price in Germany is $2 per liter (it’s currently $0.6 in Vietnam; I know prices in Germany are usually 3-4 times higher than in my country).
  

Consolidate the pieces

• The car consumes 650 liters of gasoline to cover the Autobahn (13,000 km / 100 km x 5 liters).
• 650 liters of gasoline cost $1,300
  

=> Answer: it costs $1,300 of fuel to cover Germany’s Autobahn on a car.

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 market-sizing and guesstimate 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!

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

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