I went top-down first, which felt safe, but then they pushed me to try it bottom-up and I stumbled a bit.
Start by clarifying the product and its target market, then choose a top-down or bottom-up estimation method. Break the market into segments, estimate the number of potential users and the average revenue per user, and multiply to get TAM. Sanity-check your assumptions and consider multiple scenarios.
Pro tip: Demonstrate product sense by linking your TAM estimate to Apple's strategic goals and ecosystem, and show awareness of data sources like internal analytics or industry reports.
Ask clarifying questions to understand the product's features, target audience, and geographic scope. Define what 'total addressable market' means in this context.
Decide between top-down (using industry reports) or bottom-up (building from unit economics). For a new product, bottom-up is often more credible.
Divide the market into meaningful segments (e.g., by demographics, use case, or region). Estimate the number of potential customers in each segment.
Determine the average revenue per user (ARPU) by considering pricing, subscription models, or transaction values. Multiply by the number of users to get TAM.
Sanity-check your numbers against known benchmarks, consider multiple scenarios (best case, worst case), and refine assumptions.
AI-generated suggestions, not part of the candidate's original notes. May be inaccurate — verify before relying on them.