The document defines key terms used in market sizing including total available market (TAM), served available market (SAM), and share of market (SOM). It provides a two-step process for determining market sizing by first defining the scope and then using top-down or bottom-up methodologies. Finally, it outlines three "golden rules" for structuring problems, finding the right tradeoffs such as rounding, and sanity checking estimates.
The document defines key terms used in market sizing including total available market (TAM), served available market (SAM), and share of market (SOM). It provides a two-step process for determining market sizing by first defining the scope and then using top-down or bottom-up methodologies. Finally, it outlines three "golden rules" for structuring problems, finding the right tradeoffs such as rounding, and sanity checking estimates.
The document defines key terms used in market sizing including total available market (TAM), served available market (SAM), and share of market (SOM). It provides a two-step process for determining market sizing by first defining the scope and then using top-down or bottom-up methodologies. Finally, it outlines three "golden rules" for structuring problems, finding the right tradeoffs such as rounding, and sanity checking estimates.
o Combined revenue or unit volume in specified market. o Ex: food packaging producers in a geographic region or market segment. Served Available Market (SAM) o Percentage or size of TAM that a company can reasonably serve based on product, technology, and geographic constraints. o SAM is less than TAM Share of Market (SOM) o Percentage of SAM that a particular company currently serves or plans to serve o SOM is less than SAM (except in the case of monopoly) Step 1: o Determining what products or services should be included as part of TAM o Narrow down by geographic scope o Timeframe consideration, historic market sizing or future projection Step 2: Methodologies o Top-down (more quick) o Bottom-up (more accurate)
Three Golden Rule
o Use tree to structure the problem You should go to the second step only after your tree is laid out and has been validated by the interviewer Splitting the process in two steps, first structure then calculation, simplifies the problem a lot. Why is that? Because your brain has two separate hemispheres: the right (creative) and the left (rational). o Find the right tradeoff Do not round them without asking the interviewer if he is fine with it. Do not round more than 10%. Round up the answer not the input. Ex: 4 x 3.8 = 15.2 = 15 not 4 x 4 - 16 If possible, round some numbers up and some down in order to cancel out your rounding errors In case you decide to segment the data, try to come up with 3 segments, as three is the number that people like most. Never forget to be MECE (mutually exclusive and collectively exhaustive) in your segmentation. How deep do I have to go for each of the branches? as a rule of thumb, you need to go as deep as you need to be able to make only defensible assumptions. o Sanity-check when you have to assess the yearly revenues of a company, compare them to the revenues of a competitor with similar size. o Replacement Concept Assume the population constant Example o So, I’m gonna go ahead and start with the estimate and I’ll use a bunch of data that the teams already collected through their research and then I’ll go ahead and just make a few assumptions along the way to get to the estimate o So the first assumption that I’m gonna make is that there are 300 m people in the US and I know this is little bit on the low end but I think it’s just gonna help keep some of the math simple as we go through o The second thing we need to talk about is the percent of Americans that actually eat breakfast
Jakarta 9,5 M 10% = 950.000 15% = 1.425.000 20% = 1.900.000 25% = 2.375.000 30% =