I started top-down and then tried to sanity check with a bottom-up pass, which I think helped.
Start by clarifying the scope of the food delivery market (e.g., restaurant delivery vs. grocery, on-demand vs. scheduled) and then use a top-down or bottom-up approach to estimate the total addressable market. Break the problem into key drivers such as population, frequency of orders, and average order value, and validate your assumptions with known benchmarks.
Pro tip: Show that you understand the difference between TAM, SAM, and SOM, and anchor your estimate to a relatable metric like 'number of orders per person per month' to make your reasoning transparent and defensible.
Ask clarifying questions to define what 'food delivery market' includes (e.g., restaurant meals, groceries, meal kits) and whether it's for on-demand delivery only or also scheduled. Confirm if you should estimate annual revenue or number of orders.
Decide between top-down (starting with total US population and segmenting) or bottom-up (starting with a small sample and scaling). For a PM interview, a top-down approach is often simpler and faster.
Divide the US population into relevant segments: e.g., by age, urban vs. rural, and income. Estimate the number of potential users who are likely to use food delivery services.
For the target segment, estimate the frequency of orders (e.g., orders per month) and the average order value (AOV). Multiply to get annual spend per user, then multiply by the number of users.
Compare your estimate to known industry figures (e.g., market reports) and adjust assumptions if necessary. Acknowledge any uncertainties and state your final estimate with a range.
AI-generated suggestions, not part of the candidate's original notes. May be inaccurate — verify before relying on them.