Introduction
In the realm of product management, particularly within the FAANG (Facebook, Amazon, Apple, Netflix, Google) sphere, interview questions can range from market estimation to strategic decision making. The purpose of this blog section is to provide a detailed exploration into one such typical market estimation question faced by PM candidates – estimating the size of the total addressable market (TAM) for mobile app loans targeting SMBs in Indonesia in 2019. This is crucial as understanding market potential is a key aspect of product management.
Detailed Guide on Framework Application
Selecting a Framework:
For market sizing questions, the most appropriate framework is often the ‘top-down’ approach, where we start with a broad metric and narrow it down to the segment of interest or ‘bottom-up’, where we build up from individual units to arrive at a whole. Here we will use the top-down approach.
Step-by-Step Framework Application:
- Identify the broad market: The broad market would be the Indonesian financial sector as it encompasses the provision of mobile loans.
- Narrow down to the lending market: Within the financial sector, identify the portion that pertains to lending services.
- Focus on the target audience: SMBs (Small and Medium Businesses) in Indonesia.
- Estimate the prevalence of mobile app usage among SMBs: This includes both smartphones penetration and the adoption of financial technology.
- Gather any available data: Look for data on the average loan size to SMBs, the number of SMBs likely to seek mobile loans, and the percentage of those that would use an app for this service.
- Calculate the TAM: Multiply the number of SMBs by the average loan size and the adoption rate to estimate the TAM.
Example:
Assuming Indonesia has 1 million SMBs and, based on surveys, about 20% are interested in mobile app loans. The average loan size SMBs require is $10,000. Therefore, the TAM estimation would be 1,000,000 SMBs * 20% adoption * $10,000 = $2 billion. This is a hypothetical number made to illustrate the use of the framework.
Fact Checks:
While the exact figures might not be accessible during an interview, it is crucial to demonstrate logical estimations and understanding of the market. Interviewers are looking for your thought process, not necessarily exact numbers.
Tips for Effective Communication:
Avoid getting bogged down with trying to find exact numbers; clarity and logical thinking are more important. Always explain why you’ve made each assumption, and never leave out how you arrived at your final figures.
Conclusion
While the numbers used are notional, the process of breaking down the market size is valuable in any PM interview. This systematic approach helps the interviewer understand your thought pattern and gives insight into your potential as a product leader. Remember, the detail lies in understanding not just the current market but the potential for expansion and scale, which is critical for any product management role.
Call to Action
Have you faced a market estimation question in your interviews? How did you approach it? Share your stories or ask questions in the comments below to make this a collaborative learning experience for all aspiring PMs.