No. of iPhones sold marketsizing (US)

Question

This is quite a typical question but i have seen wildly different approaches on that one. How would you rate my approach? I tried to be straightforward

1.) assume 300 Mio people in the US - 8/10 will have a smartphone, 2/10 will have either no phone or now smartphone -> pop. with smartphone = 240 M. ; pop without = 60 M

2) staying on the branch of people who own a smartphone for now - lets estimate an average replacement rate of 3 years. This would mean that 80 M phones will be replaced in each given year

3) of that 80 M. phone buyers, let's assume three income levels a) low b) medium c) high . I would say 30% is in the lower income bucket, 50% in the medium income and 20% in the high income

4) for the low income bucket I would assume that only 1 out of 10 persons is able to afford a (new) iphone = 2.4 M ; for the medium income person I assume that 4/10 person would buy an iphone, mentioning here that competitors such as samsung will take a large share of the market s well = 16 M. ; finally, for the high income bucket I would actually estimate that 7 out of 10 people buy an Iphone - that is reasonable by my assumption, and would equal another 10.2 M. iphones

5) lets look at the second branch: I would assume that first time smartphone buyers will not be inclined to buy a high end phone such as an iphone, say 1/10 there which would total another 6 Mio Iphone

Overall this would lead to approximately 29 Million Iphones bought in the US each year.

Answer 1

Hi,

thanks a lot for your question. As you said, this is a standard market sizing. You'll find a lot of ressources on the forum about how to approach them.

And while there isn't one valid approach (far from it), here is how I would personally modify your approach to this case. I have two kind of remarks: general remarks for all market sizing and specific ones regarding this particular case.

In term of general remarks what really strikes me is the lack of two elements:

the lack of justification
the lack of sanity check

The first element in particular is extremely important because the goal of market sizing is to see how you think.

How do you get that 70% high income would buy an IPhone? Every number you use must be justified. It can be through personnal experience (Me and my friend belong to this group and among us 70% have an iPhone) for instance. Or industry knowledge : I have a 3 year contact with my operator so i'll take an average lifetime of 3 years for my phone, etc. This is important.

The second element is also important because it shows that you're capable of analyzing the number you use. Does this number makes sense, etc.

One last important remark: you should check with the interviewer at every single step. "Now i would do this. In my opinion 70% of people do that because blabla. Do you think it's reasonable and by any chance would you have some data about that".

Now regarding this specific case

four things that i would have done differently (not necessarily in that order):

First i would have considered age groups. People below 10 are very unlikely to have their own iPhone and change one every 3 years just like people above 70 (or even 60). So i would have use several age categories.

Second i would have considered two markets : new phones and already used ones. Unless the case was specifically about new phones.

Third, i would have considered the lifetime of a phone at the very end because it's completely disconnected from the rest of your approach which is entirely focused on "people and their habits" and not the "product specs". But this is personnal.

Fourth i would have asked about the number of products consider and their price. Or at least i would have estimated them and compare their price to incomes as it is important for your income segmentation (but this is related to the lack of justification).

Answer 2

Hello!

Honestly, is one of the most complete attempts for solving a market sizing question that I have seen in this Q&A for a long time, congrats!

Overall I agree with you.

The only comment I would tell you is that usually, you have litle time for this exercises -and they are included in a bigger problem-, hence, it´s probably over-complitcated for the MBB interview context.

Best,

Clara

Answer 3

This is exactly the right way to do this. Excellent job...everything I aim to teach/coach!

Answer 4

Hi,

interesting question and approach indeed.

However I wonder if we shouldn't at least mention the aspect of B2B-Sales/ Company mobile phones in our final answer, as I suspect that these would represent a significicant share of sales? (based on my observations regarding the usage of company mobile phones in European companies) Kind regards

Answer 5

Hello there!

Very comprehensive, thus impressive.
You've done everything right and managed to be straightforward.
Good luck with your further practice.

Cheers,
GB