ACME CPG management has asked you to estimate the size of the market to assess whether it is financially worthwhile to enter the market. To conduct a thorough approach to the problem, you plan to estimate the size using several different techniques, and then aggregate the results. Specifically, you will estimate the size using multiple approaches:

Available industry analyst reports

Government sources, such as Census data

Top-Down estimation methods

Bottom-Up estimation methods

Industry Analyst Reports

You learn that industry analyst firm SymphonyIRI Group (iriworldwide.com) has estimated the total size of the US laundry detergent market:

Fact 1: Laundry detergent accounted for $7.2 billion of sales for the 52 weeks ended Nov. 4, 2012.

Source: Branna, Tom. Wheres the Bounce? Household and Personal Products Industry (HAPPI) website. January 21, 2013.

Government Sources

You wonder how this industry analyst estimate compares with the Industry Statistics Sampler available through the U.S. Census Bureau. You conduct an Internet search and find the North American Industry Classification System (NAICS) code information you need:

Fact 2: United States Census Bureau data for 2007 Census:

NAICS 325611: Soap and other detergent manufacturing: $26.371 billion

NAICS 32561146 Household dry and liquid laundry detergents, heavy-duty: $6.734 billion

Source: U.S. Census Bureau, Industry Statistics Sampler, NAICS 325611 Soap and other detergent manufacturing.

Top-Down Estimation Methods

Having determined the industry analyst and government data, you proceed to the next step, which is to estimate the size using top-down techniques. To perform the top-down technique, we will need to know the total universe of detergent-using entities in the United States (i.e., households who do laundry), how many loads of laundry they wash per year, and the average cost of detergent per load. Luckily, we are able to find all of the facts we need:

Fact 3: Number of U.S. Households (designated as HH in U.S. Census Bureau data) in 2010 Census:

U.S. Households (HH) in 2010: 114.8 million

Source: U.S. Census Bureau, Current Population Reports: Projections of the Number of Households and Families in the United States: 1995 to 2010. April 1996

Fact 4: Average number of loads of laundry washed per year per household: 400 loads/year.

The article mentions the impact of children on the loads of laundry washed, so we assume the figure refers to loads/year washed by households with children.

Source: California Energy Commission, Consumer Energy Center: Appliances: Clothes Washers.

Fact 5: Average cost of detergent per load of laundry: $0.23/ load

Source: Consumer Reports, Laundry Detergent Test: High Price Doesnt Guarantee High Performance. June 1, 2010.

At this point, you have the data you need to estimate the market size using top-down techniques.

1. Estimate the size of the U.S. laundry detergent market using the Top-Down approach using the data given.

Bottom-Up Estimation Methods

Next, you estimate the market size using bottom-up techniques. You research the space and learn that different types of households have different laundry-washing behaviors. Specifically, you learn that married couples (especially those with children) wash many more loads of laundry than bachelors. You examine U.S. Census data and learn that the government breaks down households into three segments: Married Couples, Male Householder, and Female Householder. You obtain the data for each segment:

Fact 6: Breakdown of U.S. Households, according to 2010 U.S. Census Bureau data:

Married Couples: 58.4 million

Armed with this information, you set out to estimate the market size using bottom-up techniques. In general, the bottom-up approach will sum up usage from each segment like this:

Total Usage = Usage from Married Couples Households (i.e. Segment 1)

+ Usage from Female Householder (i.e. Segment 2)

+ Usage from Male Householder (i.e. Segment 3)

We can express this as follows:

Total Usage = (Married HH * #Loads/yr) + (Female HH * #Loads/yr) + (Male HH * Loads/yr) * $cost/load

Female Householder: 35.3 million

Male Householder: 23.8 million

Source: U.S. Census Bureau, Americas Families and Living Arrangements: 2010.

Armed with this information, you set out to estimate the market size using bottom-up techniques. In general, the bottom-up approach will sum up usage from each segment like this:

Total Usage = Usage from Married Couples Households (i.e. Segment 1)

+ Usage from Female Householder (i.e. Segment 2)

+ Usage from Male Householder (i.e. Segment 3)

We can express this as follows:

Total Usage = (Married HH * #Loads/yr) + (Female HH * #Loads/yr) + (Male HH * Loads/yr) * $cost/load

We assume that behavior for each segment will be different. We make the assumption that married households (especially those with children) will wash more laundry than female households, who in turn will wash more laundry than male households. We will need to quantify (or estimate) the difference in behavior as we calculate the bottom-up value.

2. Estimate the size of the U.S. laundry detergent market using the Bottom-Up approach.

You decide to combine the values you estimated. In this process, if you feel particularly strongly about the accuracy of one of the methods, you can weight it higher or lower than the others. Alternatively, you can perform a simple arithmetic average.

3. Submit a final estimate by triangulating the data from the different approaches.