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5 GUESSTIMATES
FRAMEWORKS FOR
PRODUCT MANAGERS
Guesstimates Frameworks for Product Managers
The Market Sizing Approach
Break down the problem into manageable parts and
estimate the market size step by step.
Sample Question:
"Estimate the market size of electric scooters in the
USA."
Framework Approach:
Understand the Scope: Clarify the scope of the
question. For example, if we're estimating the market
size of electric scooters, we need to know if it's for a
specific time period or for a particular segment.
Define the Market: Identify the target market. In this
case, it could be all electric scooters in the USA.
Guesstimates Frameworks for Product Managers
The Market Sizing Approach
Segmentation: If needed, segment the market into
categories like personal use, commercial use, rental
services, etc.
Assumptions: Make reasonable assumptions about
factors like the average price of electric scooters, the
adoption rate, and the average usage time per day.
Calculation: Multiply the number of potential users by
the average usage time and the adoption rate to get
the estimated market size.
Sample Question Answer:
"Based on my assumptions, let's say there are 50
million potential users of electric scooters in the USA
(considering people of driving age in urban areas).
Assuming an average usage time of 30 minutes per day
and an adoption rate of 20%, the estimated market size
would be 50 million x 0.5 hours x 0.2 = 5 million hours
of usage per day."
Guesstimates Frameworks for Product Managers
The User Base Approach
Understand the target audience and estimate the number
of potential users.
Sample Question:
"Estimate the number of Starbucks coffee drinkers in a
major city."
Framework Approach:
Define the User Base: Clearly define the target user
group. For example, if we're estimating Starbucks
coffee drinkers, it could be regular customers who visit
at least once a week.
Identify Data Points: Look for data or information
that can give insights into the number of potential
users. It could be the population of the city, coffee
consumption habits, or Starbucks' market share.
Guesstimates Frameworks for Product Managers
The User Base Approach
Estimation: Make assumptions on the percentage of
the population that drinks coffee and the percentage
of coffee drinkers who prefer Starbucks.
Calculation: Multiply the population by the assumed
percentages to arrive at an estimate.
Sample Question Answer:
"Let's assume the population of the city is 1 million. If
70% of the population drinks coffee and 30% of coffee
drinkers prefer Starbucks, then the estimated number
of Starbucks coffee drinkers would be 1,000,000 x 0.7
x 0.3 = 210,000."
Guesstimates Frameworks for Product Managers
The Conversion Funnel Approach
Analyze the user journey and estimate conversion rates at
each stage.
Sample Question:
"Estimate the number of premium users for a popular e-
commerce platform."
Framework Approach:
Define the Funnel Stages: Identify the stages of the
conversion funnel, such as website visitors, registered
users, active users, and premium users.
Gather Data: If available, gather data on conversion
rates at each stage from historical performance or
industry benchmarks.
Guesstimates Frameworks for Product Managers
The Conversion Funnel Approach
Assumptions: Make assumptions on the number of
website visitors and the conversion rates at each
stage.
Calculation: Use the conversion rates to calculate the
estimated number of premium users.
Sample Question Answer:
"Let's assume 100,000 website visitors per month. If the
conversion rate from website visitors to registered users
is 20%, from registered users to active users is 50%, and
from active users to premium users is 10%, then the
estimated number of premium users would be 100,000
x 0.2 x 0.5 x 0.1 = 1,000."
Guesstimates Frameworks for Product Managers
The Time-Series Approach
Use historical data to project future numbers and trends.
Sample Question:
"Estimate the growth rate of Netflix subscribers in the
next five years."
Framework Approach:
Obtain Historical Data: If available, collect historical
data on the metric in question (e.g., subscriber count,
revenue) over time.
Analyze Trends: Study the historical data to identify
any patterns or trends that could help project future
numbers.
Guesstimates Frameworks for Product Managers
The Time-Series Approach
Extrapolation: Use simple extrapolation methods
(e.g., linear or exponential growth) to estimate future
values based on the trends observed.
Validate Assumptions: Ensure the assumptions made
align with the industry's growth potential and any
external factors that may impact the metric.
Sample Question Answer:
"Based on the historical data of Netflix subscribers, the
number has been growing exponentially over the past
five years. Assuming this growth trend continues, we
can estimate the subscriber count for the next five
years by extrapolating the growth rate."
Guesstimates Frameworks for Product Managers
The Analogous Approach
Draw parallels from similar scenarios and extrapolate
data.
Sample Question:
"Estimate the daily active users of a new productivity
app based on a competitor's app data."
Framework Approach:
Find Analogous Data: Identify similar products,
markets, or scenarios with available data that can be
used as a referencee point.
Analogous Comparison: Compare the available data
from the analogous scenario to the scenario at hand,
and draw insights to make estimates.
Guesstimates Frameworks for Product Managers
The Analogous Approach
Account for Differences: Consider any differences
between the two scenarios and adjust the estimates
accordingly.
Sample Question Answer:
"Let's look at a competitor's app that offers a similar
service. Based on their data, they have 2 million daily
active users. Assuming our app provides added features
and better marketing, we might expect a 20% increase
in daily active users compared to the competitor."
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