TAM SAM SOM is a set of acronyms used to quantify the business opportunity for a brand in a given market. These acronyms stand for the following terms:
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Total Addressable Market (TAM): This represents the revenue opportunity at 100% market share, as if no competition exists. It is the overall revenue opportunity that is available for a product or service if 100% market share is achieved.
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Serviceable Available Market (SAM): This represents the portion of the TAM that can be served by a companys products and services. It is the portion of the TAM that is within the companys geographical and product/service reach.
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Serviceable Obtainable Market or Share of Market (SOM): This represents the portion of the SAM that can be realistically captured and served. It is the portion of the SAM that the company can realistically capture and serve.
TAM SAM SOM provides a useful framework for helping plan business strategy at different phases of a companys growth. TAM helps businesses understand the potential for growth at scale, including product capability expansion and geographic expansion. SAM helps businesses understand the potential for growth within their current market. SOM helps businesses understand the potential for growth within their current market and their ability to capture that growth.
Calculating TAM involves estimating the market size, overall investment needed, competitive landscape, unique differentiators, and expected growth rate. There are different ways to calculate TAM, including a top-down approach that starts with the total number of people (or businesses) in the world and then narrows that down based on specific criteria. A bottom-up approach involves counting the total number of customers in a market and multiplying that number by the average revenue per user (ARPU) .
TAM SAM SOM is important because it provides a relative value for the opportunity size compared to other investment opportunities. It also helps businesses validate assumptions about revenue, growth, or usage. When investors or board members are evaluating a company or product’s prospects, TAM is inevitably one of the most important data points they will ask for.
