How to Market Sizing Anything

“Most investors are obsessed with the market size today and they don’t think about how the market is going to evolve.”

— Sam Altman

The Past

As In end of 2020 I just want to move to other startup company, when I started going to looking for another jobs, and started doing some interview on several company as a product manager Question, they kept asking me the same question over and over about, how to count how many chair on all theatre on the Jakarta? or several interviewers questioning how many cats that are living in Jakarta? or even how many piano that exist in Jakarta?

Photo by Muhammad Ravel on Unsplash

So those Question’s didn’t have a correct answers right? the interviewer just want to know how they thinks about me as a product manager on how capable am I on Market-sizing or solving some problems, because they’re no correct answer, they’re just assumptions.

Why its Important

As a product manager we also need to be good in numbers and market sizing. Because we’re the one who know how the product works, we also close to the stakeholders that if they want to make some improvement we also need to judge them how that idea can increase the GTV of the company. So it’s an essential framework for us to KPI / metrics on our product and predict the growth of our products.

Case Study

So back again to my story, when I was on 2020, I just got some test case.

How to Estimate the market size of an online flight insurance business

Photo by jet dela cruz on Unsplash

And then here’s my assumption and thoughts that I would like to share to you:

disclaimer: this answer is just my opinion, or if you guys have a better idea feel free to add it on comments 😄

Definition

• So based on my opinion about flight insurance definition, it is an insurance that covering us from any problem you may encounter during your trip, from delays, cancellations, loss of items, to accidents.

Variable

Let say Flight insurance divided into a two variable which is Domestic plan and also international plan.

• For Domestic flight the usage of the airplane using Boeing 737, ATR72, Airbus A320 that can carry passengers for about 150 passengers per flight in average.
• For International flight the usage of the airplane averagely using Boeing 777 with averagely can carry passengers around 396 in average.
• So In Indonesia, there are 52 International airports, which is can be divided that Indonesia having a 30 International Airports and 22 domestic.

Lets assuming by data that we found

• Let say in average on airport will have flight interval every 20 minutes and with 2 hours delay everyday
• For Domestic flight: Assuming each airports have 5 Terminals so we can use this equation:
  5x(60/20)*22 Hour = 330 Flights / Day
• For International flight: Assuming each airports have 5 terminals which is divided 4 terminals are used for domestic and 1 terminals its just for international flight.
• Then we got our formula for domestic flight in international airports = 4x(60/20)*22 Hour = 264 Flights / Day
• Then we got our formula for international flight in international airports = 1x(60/20)*22 Hour = 66 Flights /Day

it means there is 594 for domestic flight and 66 flights for international flight. So for the Domestic Flights, as the passengers data that we’ve found, we got 150 passengers and for international flights 396 passengers and also with an assumption that only 90% of passengers are coming. So its 135 for domestic and 356 for International

So for the summary, we can count the market size by:

• For Domestic Airports: 330 flights * 135 Passengers * 22 Domestic Airports = 980.100 passengers
• For International Airports: International Flight: 66 International flights * 356 Passengers * 30 International Airports = 704.880 Passengers
• Domestic Flight: 264 Domestic Flights * 135 Passengers * 30 International Airports = 1.069.200 Passengers
• So we can conclude that potential flight insurance it can be offered to 2.754.180 passengers per day

Let’s Conclude the Market Sizing

Photo by Jp Valery on Unsplash

• Average cost Flight Insurance at Indonesia:
  - Domestic : IDR 38.000 = $2,7
  - International: IDR 100.000 = $7,14
  - %CVR Insurance Company based on data : 5%
• International Flights: (704.880 Passengers * 5%) * $7,14 = $251.642,16
• Domestic Flights: (2.049.300 passengers *5%) * $2,7 = $276.655,5
• GRAND TOTAL = $528.297,66 per day If per year then = $528.297,66 * 365 = $192 Mio

So there’s the market size of flight insurance in Indonesia in my opinion. So how about your calculation? please share it on the comments. Thanks and Good Luck! 😃