Marketing Strategy Tip Number One: Know Your Market
Minute 1: Know Your Market
The TAM SAM and SOM model is loved by investors everywhere as it helps provide a quantifiable size to the growth potential for a business. It also helps you understand your opportunity for growth.
How to use TAM SAM SOM
You can calculate TAM, SAM and SOM by any measure that makes sense to your business: market size by monetary value, units or consumers. You’ll still be able to calculate the value to your business whichever measure you choose.
TAM is your Total Available Market, i.e., the world. In reality, few businesses have this scale and so SAM – your Serviceable Available Market, is a more realistic goal. SAM is the markets you can geographically reach and support. Support is the key word here. You can be in any market selling online BUT can you support customers in, say, Vietnam? So, SAM is also about the markets you can, and want, to be in.
To work out both TAM and SAM you need Google. There is a wealth of data that is available at zero cost that will give you a good idea of market sizes. A simple search such as ‘what is the market size for …’ can yield valuable results. Check out your larger, stock market-listed competitors’ website investor sections and news. Look at market research companies, management consultancies and business schools, who often publish free reports and will always provide a synopsis of their latest research in their website news sections. You can also source reliable data from organisations such as the World Bank, EU databases and, in the UK, the Office for National Statistics. Search and read widely!
Once you know TAM and SAM look at SOM, your Serviceable Obtainable Market.
If you were the only business in your chosen market, SOM would be 100%. It won’t be 100% as your business will have a host of competitors, not all of whom are obvious.
That leaves what your market share is now. What percentage of SOM do you have today? It’s probably lower than you think, which is good news as it shows the opportunity for growth.
TAM SAM SOM example
Here’s my worked example for a health product company who only operate in Europe due to licencing regulations. This analysis based on consumers and then translated these numbers into revenue.
- TAM (Europe) is 49 million people (EU data widely available)
- SAM (10 target European markets) is 8 million people (same EU data source)
- SOM (in these 10 European markets) is 1 million people (existing client research)
- Current market share by consumers is about 10%
This company’s growth opportunity if it sells more in existing markets to existing and new customers is worth in excess of £20m of new revenue. New markets are worth, potentially, a further £30m in revenue.
TAM SAM and SOM matters for your business. It will help you define the potential ‘size of the prize’ market value your business can achieve whilst providing significant competitor insight.