Sales Strategy

Decoding TAM, SAM, SOM: Keys to Successful Business Strategy July 19, 2023 (0 comments)

San Francisco, CA--An entrepreneur or business owner requires a comprehensive understanding of the market and potential customer base. The trifecta of Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM) form the backbone of these insights.

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An article published on Medium denotes TAM as the entire market demand for a product or service, thus showing the maximum revenue potential assuming no competition and total product adoption. On the other hand, SAM is the portion of TAM realistically accessible to a business, focusing on potential customers having a product need, purchasing resources, and market accessibility. Lastly, SOM represents the realistically achievable portion of SAM within a set timeframe, considering elements like competition, marketing efforts, and other external factors.

The article noted that the significant advantage of understanding TAM, SAM, and SOM is its clear comprehension of market size and potential. A detailed analysis of these segments can reveal the market opportunity size, prospective customers, and potential entry barriers as the basis for creating a strategic marketing and sales plan to capture market share.

Further, TAM, SAM, and SOM insights can help businesses identify their ideal target market and market segmentation. By studying SAM and SOM, companies can pinpoint the most lucrative customer segments and devise marketing strategies tailored to each group, allowing more customized marketing messaging and product feature development.

The article noted that TAM, SAM, and SOM also provide a platform to gauge market potential and performance over time. Observing fluctuations in these values can help spot trends and trigger strategic adjustments. For instance, if a TAM shrinkage is noticed, it might indicate the need to alter the marketing strategy or switch to another market segment.

These metrics offer a view of performance indicators like customer acquisition cost, customer lifetime value, and market share. This allows businesses to measure the efficacy of their marketing and sales strategies and make necessary adjustments.

TAM, SAM, and SOM serve as guides in efficient resource allocation. They help identify profitable market segments, help prioritize marketing and sales efforts and optimize resource distribution.

Learn more in the entire Medium article.