As a marketer, I often sit down at my desk with a calculator to make basic mathematics. And most of the time I am in a kerfuffle with three acronyms: Tam Sam Som.
The calculation of your entire addressable market (TAM), your servable market (SAM) and the servant market (SOM) can be helpful beyond the area of just marketing.
Business owners can use these calculations to determine the profitability of a company. Product teams can validate new product offers. But that’s only the tip of the iceberg when it comes to the potential of Tam, Sam and Som Trio.
Ignoring these numbers can be harmful. You can enter a market that is not sufficiently sufficient to convince investors to support them, or they could set an unrealistic revenue for your company and burn out your employees.
In order to avoid these problems, I have put together a guide that is taught you exactly how you can calculate the entire addressable market in your industry, the customary market and the share of the market.
Table of contents
Tam sam som
Tam, Sam and Som are acronyms for three metrics to describe the market where your company works – overall addressable market, the marketable market and servant available.
These metrics are key components of a business plan, especially as they Create your marketing and sales strategy, set realistic sales goals and choose the markets that are worth your time and resources.
Before I collapse how you use them in your company, let us clear what Tam, Sam and Sol and your relationship with each other are.
Tam Sam Som definitions
If you are new to Tam Sam Som some, it is easy to feel how you have taken the wrong turn somewhere and ended up in Alphabet soup.
However, I want you to know that Tam, Sam and Som simply overlap key figures that make it easier to optimize your business plan, to identify achievable goals and to understand the potential income and operational effects of certain business decisions.
So let us break down.
TAM (overall addressable market)
TAM definition: The maximum potential demand for a specific market.
I know that it can look like you feel this information like a big task How How to calculate tam below.
To further simplify it, the entire addressable market or tam refers to the Overall market size – more precisely the demand for a product or service. It is the maximum amount of sales a company can achieve by selling its product or service in a specific market.
The entire addressable market is most useful for companies to objectively estimate the growth potential of a certain market. Companies also help this data to find the product market adjustment.
Sam (usable marketable market)
Sam -definition: You can sensibly aim to build your target group.
Due to the restrictions of your business model, which includes your specialization or geographical restrictions, it is difficult for you to serve your entire addressable market.
Sam is a segment of TAM with which you can identify the addressable potential of a market segment or the amount for which you can realistically be marketed realistically to appreciate the income and target group goals.
Servicemated addressable market is most useful for companies to objectively estimate the part of the market that you can acquire in order to find out your goals.
Som (usable market)
Som definition: You may be able to convert the size of the SAM.
If you are not a monopoly, you will most likely not be able to grasp 100% of your needy addressable market. Even if you only have one competitor, it would be extremely difficult to convince an entire market to only buy your product or service.
For this reason, it is crucial to measure your required market to estimate how many customers would realistically benefit from buying your product or service.
Service -safe market is most useful for companies to determine short -term growth goals. It can also help with a sense of competition and strategy.
Why Tam Sam Som is important
Tam, Sam and Som are important Business strategy and growth planning. This is because these metrics show how much chances a certain market has in every phase of business growth.
Tam Sam Som is also useful because it is a simple and concise possibility to present the value of an idea. Teams offer this data an idea of the target group and the income options for a market or a niche.
These metrics can also help companies share important insights with investors if they are looking for financial resources. The process makes it easier to make it easier Make decisions that affect growth.
Suppose you have no clear picture of the right segment for your Sam. This could make your usable addressable market too big, which can then affect your somed.
“In my experience, these tools are extremely informative when you find out how you have niches. Take your time and understand the chance or the lack of your new goal, ”says Lori Highby from Keystone click.
Highby says that their team noses in their business continue to use figures from market research reports from companies such as Gartner, Forrester etc. as well as government and trade associations to calculate Tam, Sam and Som. You can then “find out which niche is most viable,” says Highby.
How to use Tam, Sam and Som for your company
I know that all of this sounds great, but it can be difficult to understand how it works Strictly speaking Calculate Tam, Sam and Som and use the data for your company. Let us divided this into a few steps that you can follow.
Step 1. Define your market.
Before you can do Tam Sam Som some, you have to find out what your market is and what you market – a service, a specific product or even a category of products.
To calculate this, you become as clear and specifically as possible about your audience and take into account aspects such as:
- Geographical location (s).
- Gender.
- Age.
- Characteristics.
- Problem solves your offer.
Step 2. Use a TAM calculation to determine the overall market size.
Now it is the market research time – you should find out how many potential customers are out there and what potential sales value when everyone buys in this market.
For example, if I look at women between the ages of 25 and 65, I would like to find out how many women fit this definition. Then I would calculate the potential income if all of these millions of women bought their product.
Step 3. Use a SAM calculation to determine the size of your potential market.
Let us assume in the example above that I work for a high-quality luxury professional clothing dealer for women who go to the US market.
So I would like to find how many women in the USA fit the demography of 25 to 65 years and then calculate the potential income.
Step 4. Use a SOM calculation to find your potential market share.
People who live for salary check will probably buy my brand, and women who do not work in offices or do not regularly take part in professional functions are less likely to be my target market.
Since my SOM calculation is about estimating the part of the SAM for which I can realistically market realistically, I could find it by refining my market through income and/or employment. I can then further refine it by identifying the part of this market, which I will probably grasp in view of the competitive landscape.
Step 5. Identify opportunities and challenges.
Now that you have the calculation, it is time to deal with the data and strategies. I will first ask questions such as:
- What is the market doing now?
- What are your competitors doing well? Bad?
- Any gaps in the market?
- Are there any market segments that are not served?
When I am armed with answers, I can think about strategies to stand out from the competition and lean into my strengths to reach my market.
Tam, Sam and Som template
Now that you know what these acronyms are and what they are used for, let us go into the collision, such as Tam, Som and Sam.
This requires advanced market research in advance, but here are the formulas as soon as you can get these numbers.
TAM calculation of the entire addressable market (TAM)
The best way to calculate the entire addressable market is to carry out a bottom-up analysis of an industry:
- Count the total number of customers in a market.
- Identify the average annual turnover of each customer in this market.
- Multiply the two numbers.
Tam is useful for:
- Found a new business.
- Introduction of a new product, service or a product category.
- Review of market strategies.
- Revise or review your business plan.
- Determining possibilities to increase the market share.
Example TAM calculation
With our sample high-end-professional women’s clothing for this calculation, I learned that the global women’s clothing market was $ 1.002 trillion in 2023 (2023 (Imarc group). Assuming 3.3% per year, we can estimate this number at 1.035 trillion dollars in 2024.
Pro tip: If you want to facilitate your life when calculating Tam, Use the Drift Kings Media TAM analysis template. It completely demonstrated the concept for me and helped me to understand not only tam, but also the ACV itself.
Sam calculation of the addressable market (SAM)
Calculate your savable addressable market:
- Count all potential customers that are well suited for your company.
- Find the average annual turnover of these customer types in your market.
- Multiply the two numbers.
Sam is useful for:
- Planning new marketing strategies and sales tactics.
- Carry out market research and competitive analysis.
- Determination of the life capacity of the products.
Example Sam calculation
Keep in mind that we have continued to look at women between the ages of 25 and 65 in our proby high-end women’s clothing. Using data from the latest census, there are 86 million women in this area.
Let us assume that these 86 million women spend an average of 2,000 US dollars for clothing every year.
86 million x $ 2,000 = 172 billion US dollars Sam
And if we look at the numbers, we are not too far away. The US women’s clothing market was estimated $ 191.4 billion in 2024.
Legitimate calculation of the service market (SOM)
Calculation of your required market:
- Share your sales from last year by the elaborate addressable market of your industry from the previous year.
- This percentage is your market share compared to the previous year.
- Multiply your market share from the previous year to the applicable addressable market of your industry from this year to find your new SOM.
Som is useful for:
- Budgeting for operations and marketing.
- Creation of accessible, adequate growth plans.
- Development of marketing and sales strategies.
Example SOM calculation
Here we become hypothetical here. Since Tam and Sam speak to the overall markets and Som speaks for more realistic market shares, we will make up some numbers.
Our high-end brand for professional clothing from women has a higher price per article, but most customers will probably buy fewer pieces, and we probably have fewer customers than, for example, Walmart.
Let’s say for reasons of the rounds:
- We have a sales of 500 million US dollars for the previous year.
- The 172 billion US dollar was in 2023.
- The SAM from 191.4 billion US dollars is the growth of 2024.
Note: I am aware that these numbers are unrealistic market growth rates compared to the previous year-and simply make them available to show you the calculations in action.
500 million USD / 172 billion USD 2023 Sam = 0.003% market share
0.003% * $ 191.4 billion 2024 Sam = $ 574.2 million
This means that, based on these completely fictional numbers, which have drastically increasing demand, my fictional clothing company can reasonably Expect a growth of 15% compared to the previous year.
And if that is exactly, there are significant effects on budgeting, operations and production.
But if it does not happen in the overall picture that reduces the expenditure in 2023 and increased in 2024, there is a good chance that these numbers are not realistic. It is therefore important to return to the numbers to ensure that we are taken into account in the things.
Right size Your market opportunities with TAM, SAM and SOM
When I started my marketing, Tam, Sam and Sol felt like an abbreviation with a jargon. It was easier to just take with you and go out the numbers in one ear and the other.
Today, however, I know that these numbers are important. I even carry out the calculations myself!
At the start that these numbers will mostly be estimates to inform your strategy. The more market research you carry out and the more historical data you build, the more precisely your planning.
Don’t just find out the chances in your market. Use your research to decide who you want to address and how you want to include with your products. Then use these templates to make your plans clear.
Note from the publisher: This post was originally published in March 2019 and updated for completeness.