Sometimes when you’re in the middle of a case you’ll get asked a question about how you’d do something in practice. For example, you may be talking about growth rates and the interviewer could ask you how you’d figure out a growth rate for a particular product in real life.
These questions are designed to test if you understand if you could quantify an unknown without spending countless hours tracking down the information.
In general there are three ways to do this:
1. Choosing A Proxy.
2. Internal Benchmarking.
3. External Benchmarking.
Choosing a Proxy
As we discussed in the article on market sizing, choosing a proxy is one of the most efficient ways to quantify something. In the example of growth rate for a specific product, the best proxy depends on what the product is.
If it’s a product for which the market is saturated the growth rate may just follow population growth or GDP growth rate (both of which are readily available quantities).
If it’s a product for which the market is new and unsaturated, you’d have to use one of the benchmarking techniques most likely.
The key to using proxies is to use something that is easy to look up (like the change in GDP. population growth, etc.)
Internal benchmarking is looking at data you have from inside your company. For example, if you’re trying to quantify the growth rate for a new product you could look at the growth rate of an existing product you already sell.
The product you look at could be complementary to the new product (such as razors and shaving blades) or just within the same class (sofas and lamps for example).
Or, you could look at the growth rate of the same product in a different market (if you have access to it) if the two markets are similar.
This data would also be easily available.
If you can’t find a good proxy or internal benchmark, use an external benchmark. This would be things like looking at the growth rate of your competitors (based on yearly sales numbers, if available), analyst reports, newspaper articles, business journals, etc.
If you’re asked how to quantify something in a case, don’t panic. This is an opportunity to show off your ability to efficiently discover unknown information. Your best bet is to identify an easy to quantify proxy (such as GDP). If that doesn’t work you could look for internal benchmarks (such as data from other countries or complementary products that you’d have access to) or external benchmarks (such as competitors growth rates, newspaper articles, market research reports, etc.).
I’ve had this question come up many times so, hope it helps!