Market Sizing - TAM, SAM, SOM
Market Sizing is a form of research and analysis that identifies who will buy your product, who might buy your product, and who could be persuaded to buy your product under the right conditions.
Understanding this distinction is crucial to a successful product launch. It shows you the sales potential of your offering.
Let’s break it down:
TAM – Total Addressable Market is how much opportunity is out there for your product, assuming that you could capture 100% market share.
SAM – Serviceable Available Market is the piece of TAM that your product directly targets – your ‘would be’ users.
SOM – Serviceable Obtainable Market is your realistic user base.
Nobody ever captures the TAM, but it’s helpful to know your maximum (i.e. “If every potential customer on the planet bought our product, how much revenue would we make?”). Remember: ‘potential customers’ only includes people in the demographic who might actually buy your product. The TAM for a barbeque includes any adult with an outdoor space to use it, but it does not include children or people who live in apartments.
SAM represents your target market; a group that isn’t guaranteed to buy your product, but they are the correct demographic. Your advertising efforts should go toward the SAM.
The SOM is your expected user base that doesn’t need much convincing. It takes competitors into account, and focuses on the geographic location of the company. This gives the most conservative estimate of your market share. Using the barbeque example: “Men aged 30-50 with families who live in the GTA. Competition: Weber, Traeger, Napolean, etc.” The real test here would be navigating a crowded market category – but demand exists
There are 2 ways to estimate market size:
Top-down: Industry data and market reports. These have general info, like how many working professionals are currently active in your target field. (Broad, accessible, fast.)
Bottom-up: Interviews with potential customers and suppliers, surveys. (Direct, credible, costly to perform at scale.)
Market sizing is not an exact science, but an actionable estimate based on the information available.
How does you market look?
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