A guestimate is an estimate or approximation of a quantity or value based on limited information or assumptions. It is a way to make an educated guess or prediction about something without having all the relevant information. Guestimates are often used in situations where the data is incomplete or uncertain, or where it is not possible to obtain accurate information. Guestimates can be made using either a top-down or a bottom-up approach, and they can be useful in a wide range of contexts, from business and finance to science and engineering. These articles are part of our Free Product Management learning Program.

There are 2 approaches to solving a Guesstimate problem.

• Top-down approach: This involves starting with a larger population or figure and breaking it down into smaller components to arrive at an answer.
• Bottom-up approach: This involves starting with a smaller statistic or figure and building up to arrive at an answer.

Lets look at some examples using both the approach to understand this better.

Guesstimate Examples With Solutions: Guesstimate Running Shoes Market Size in India

Top Down Approach

1. Determine the total population of India: According to the World Bank, the population of India was around 1.366 billion in 2020.
2. Estimate the percentage of the population that runs: We can estimate the percentage of the population that runs based on various factors such as the number of running clubs, fitness centers, and running events. For example, according to a report by Goqii, the number of people who use running apps in India increased by 20% in 2020, indicating a growing interest in running among Indians. Based on this report and other sources, we can estimate that around 2% of the population in India runs.
3. Determine the number of runners in India: We can estimate the number of runners in India by multiplying the total population by the percentage of the population that runs. Therefore, the number of runners in India is approximately 27.32 million (1.366 billion x 2%).
4. Estimate the frequency of shoe replacement: We can estimate the frequency of shoe replacement by considering factors such as the lifespan of the shoes and the intensity of training. For example, a regular runner who runs 3-4 times a week may replace their shoes every 6 months.
5. Determine the average price of a pair of running shoes: We can estimate the average price of a pair of running shoes based on the prices of running shoes available in local sports stores and online retailers. For example, the average price of a pair of running shoes in India is around Rs. 3,000.
6. Calculate the market size for running shoes in India: Based on the above assumptions, we can estimate the potential market size for running shoes in India as follows:

• Total number of shoes purchased by runners per year = (27.32 million runners x 2 shoe replacements(1 pair per 6 month -2 per year) = 54.64 million pairs of shoes per year
• Average price of a pair of running shoes = Rs. 3,000
• Market size for running shoes in India = (54.64 million pairs of shoes per year x Rs. 3,000 per pair) = Rs. 163.92 billion.

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Bottom Up Approach

1. Identify the major cities in India: We can start by identifying the major cities in India where there is likely to be a high demand for running shoes. Some of the major cities in India include Mumbai, Delhi, Bangalore, Chennai, and Hyderabad.
2. Estimate the population of runners in each city: We can estimate the number of runners in each city based on various factors, such as the number of running clubs, fitness centers, and running events. For example, according to a report by the Mumbai Road Runners, there are around 15,000 runners in Mumbai who regularly participate in running events.
3. Estimate the number of running shoes purchased per runner per year: We can estimate the number of running shoes purchased per runner per year based on various factors such as the frequency of running, the intensity of training, and the lifespan of the shoes. For example, a regular runner who runs 3-4 times a week may purchase 2-3 pairs of running shoes per year.
4. Estimate the average price of a pair of running shoes: We can estimate the average price of a pair of running shoes based on the prices of running shoes available in local sports stores and online retailers. For example, the average price of a pair of running shoes in Mumbai is around Rs. 3,000.
5. Calculate the market size for each city: Using the above estimates, we can calculate the potential market size for running shoes in each city. For example, the potential market size for running shoes in Mumbai can be estimated as follows:

• Number of runners in Mumbai: 15,000
• Average number of running shoes purchased per runner per year: 2-3 pairs
• Total number of running shoes purchased annually in Mumbai: 15,000 x 2-3 pairs = 30,000-45,000 pairs
• Average price of a pair of running shoes in Mumbai: Rs. 3,000
• Estimated market size for running shoes in Mumbai: Rs. 90 million – 135 million (30,000 x Rs. 3,000 – 45,000 x Rs. 3,000)

6. Aggregate the market size across all cities: Finally, we can sum up the potential market size across all major cities in India to arrive at an estimate of the total market size for running shoes in India. For example, if we assume that the potential market size for running shoes in each of the top 10 cities in India is similar to Mumbai, the total potential market size for running shoes in India would be around Rs. 900 million – 1.35 billion.

The Actual numbers may not match between both the approaches. Bottom Up Approach example considered only 10 cities, so the market size will be less for this. In Guesstimate problems, actual numbers wont matter, the structure of your solution and your reasoning will matter the most.

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