Market size

How big is a given market? How big could it grow?

• Look for boasting in press releases
• Look for news reports
• Look for government statistics.
Some reality should intrude: growth of 100% per year
almost never happens (the Internet was briefly an
exception). You run out of people in the world or dollars
very quickly.
 Product life cycle

Commercialization
Introduction
Takeoff
Growth
Slowdown
Maturity

Decline
Golder &
Tellis,
2003
Very fast growth: DVD
Start of the S-curve
Or, as sales, bell-shaped
 Boston Consulting Group
What to expect in a BCG interview

At BCG, we look for something beyond intellect. In the interview, we want to

learn who you are as well as how you think. So each interview has two
parts: the personal discussion and the case.

The personal discussion is our way of getting to know you. There is no fixed
format or agenda, but interviewers often focus the discussion on an
experience or a period of your life. There is very little that can be done to
prepare, so relax and use the time to help us get to know you better.

The case interview makes up the greater part of the interview time. The
best preparation is to familiarize yourself with types of analysis you may
employ and practice generating sound, defensible hypotheses. To help you,
we've assembled several resources as well as some
tips to prepare for the case interview.

(From their Career advice on their website)

 Market size (BCG)
Q: How many pay phones are there on the island of Manhattan?

A: A logical place to begin your analysis might be to ballpark the number of

pay phones on Manhattan street corners. If you think of New York City as a
grid of streets, you might guess it is about 300 streets long (north to south)
by ten streets wide (east to west), so it has approximately 3,000
intersections. You might then assume there is one pay phone for every two
intersections, for a total of about 1,500 pay phones.
If you’re feeling really creative, you might subtract the number of
intersections that are “invalidated” because they fall in the area of Central
Park. Say Central Park is ten blocks long by two blocks wide, or 20
intersections. Using your one-pay-phone-for-every-two-intersections
assumption, you would want to subtract ten pay phones from the original
1,500.
You might then add to the 1,490 the number of pay phones that might be
found in restaurants, hotels, schools, hospitals, and office-building lobbies.
 Sloppy journalism
May 12, 2003
Verizon Plans to 'Wi-Fi' Pay Phones
By Ryan Naraine
Just weeks after slashing its monthly DSL fee, Verizon plans
to build Wi-Fi (define) "hotspot" (define) extensions of its
broadband service in New York, using existing pay phones
as the distribution vehicle.
A spokesperson for Verizon (Quote, Chart) said the company
would upgrade more than 200,000 pay phones in Manhattan
to create 802.11b-compliant network nodes for its high-speed
subscribers. The move is yet another carrot to lure
customers in the burgeoning marketplace for offering
wireless Internet access via Wi-Fi.
 How many pay phones?
Gotham Gazette: 4,000 payphones in Manhattan
Wall Street Journal: Verizon has 20,000 payphones in NYC.

Something reasonable: There are 1.8M payphones in the

USA (down from 2.6M in 1998); Manhattan is like 1/300 of
the population of the US, but perhaps 1/100 of the
employment; that would suggest a few thousand payphones.

However payphones are more common in urban areas.

 The Web turned up a flame…
RESOLVED, that Community Board Six, Manhattan,
opposes the application for installation of all 476 proposed
public pay telephones, unless they are installed in kiosks or
other structures of minimal width and depth, because they
will obstruct pedestrian traffic solely for the purpose of
generating advertising revenue and without any benefit to
the community; and

BE IT FURTHER

RESOLVED, that Community Board Six, Manhattan,

opposes the application because the widespread placement
of these oversized structures upon public sidewalks will
severely detract from the beauty of the community.
 How many pay phones?
But that screed told me who regulates payphones in NYC:
the city Department of Information Technology and
Telecommunications. And on their website:
 The answer: 10,500 payphones
It’s a little harder to understand the trends, because they’re
tied up in Federal regulation.
a) Many more people use cellphones, so the need for
payphones on the streets is dropping.
b) Payphones are a nuisance to maintain, and they get
vandalized, and for a time in the 1990s as more and more
people used phonecards the operators got less and less
revenue.
c) But lobbying resulted in a rule that every time you use a
payphone to call an 800-number the phone operator is paid
25 cents.
d) So payphones are now profitable, and more are appearing.
Q: How many hotel-sized bottles of shampoo and conditioner are produced each year
around the world?
A: You might begin by assuming that hotel-sized bottles are produced for two purposes only:

1. To supply hotels and upscale motels

2. To provide samples for gift packs, salons, and so on

You would then want to start by estimating the number of hotels and motels around the
world that offer the products to their guests. One way of estimating the number of hotels is
to assume that hotels are found predominantly in major cities and resorts. Figure that there
are 2,000 major cities and resorts around the world, an average of ten for each of the
world’s approximately 200 countries. Assume that each city averages 20 hotels that offer
bottled hair products to their guests. Multiplying 20 by 2,000 gives you 40,000 hotels
around the world that require shampoo and/or conditioner for their guests.

To understand how many bottles of shampoo and conditioner the 40,000 hotels require,
you now need to estimate the total number of uses each hotel on average represents. You
can arrive at that number through the following calculation: assume that there are 100
rooms in each hotel, and that those rooms are occupied 50 percent of the time. Multiplying
40,000 by 100 by 0.5 by 365 (don’t forget the number of days in the year!) gives you
approximately 750 million.

However, it is probably reasonable to assume that a guest staying for longer than a day
will not use a whole shampoo bottle every day. If you assume that an average of one
shampoo bottle is used for every two occupied days in a given room, you can now divide
your 750 million estimate in half to 375 million.
 Hotel rooms (2000)
Cendant 523,000

Bass Hotels 457,000

Choice 402,000

Marriott 325,000

Best Western 313,000

Accor 292,000

Starwood 217,000

The top 300 chains had 5,900,000 rooms.

 Shampoo bottles
Marietta: $150M/yr (half to hotels)
Guest Supply: $60M/yr (local, by the way, North Brunswick)

Another site shows ½ oz. shampoo bottles are sold for

$30/1000.

So Marietta, if all its dollar volume was hotel shampoo,

would be selling 2+ billion bottles of shampoo a year. It’s
not all their business, but they’re not the only supplier. (In
fact they claim they make 1.2 billion “units” each year).
 More tidbits on shampoo
Pantene claims it is used in 4,500 hotels with 110M room-
night-usages per year.
So if that’s about 10% of the hotels in the world, there
would be about 1B uses of shampoo per year.
(Pantene, by the way, is one of the Marietta brands)
 As for the rest of the BCG ideas
How many bottles of hotel shampoo are needed? They say
375 million: 40,000 hotels times 100 rooms times half
occupancy times 365 days/yr times half of the guests use
the stuff. This turned out to be a bit low.
(US has 3.9M hotel rooms; average occupancy 63%).
And the electric switches/light trick is an old game (hot bulb).
Global high-tech market share, by
selected country/region: 1980–2001
 Number of competitors
Somebody innovates
Lots of imitators
Market sorts itself out
Consolidation & mergers
How many automobile makers?
Know the stage of your product
Are you trying to make something new?
Are you competing for an improvement on something older?
Are you fighting to salvage a declining market?

There are aphorisms for anything:

“pioneers are the folks with arrows in their back”
“dead cat bounce”

Basically, it’s very hard to win by growing market share in a

declining business.
 Summary
Marketing requires a lot of optimism. To some extent, the
job of the competitive intelligence specialist is to introduce
some reality.
Try to learn which are the growing markets, and which are
the shrinking ones.