Tam Sam Som : Defining Market Sizes

Are you planning to look for an investor for your startup? Or are you looking forward to launch a new product in your established firm? Well, in both the cases, there is one thing that stands most important. That is, knowing and understanding the size of your market. Moreover, for any strategy or business plan, market sizing is very important. To target specific groups in market and to determine opportunities of revenue, there are terms that can help. Furthermore, these terms define the sizes of the market. These three terms are Tam Sam Som. TAM stands for “Total Addressable Market”. SAM stands for “Serviceable Available Market”. SOM stands for “Serviceable Obtainable Market”. In this article, we will be talking about these three terms.

This particular blog post explore the meaning of these three terms. Moreover, to provide the information in a bit accurate and detailed manner, we will also learn how to calculate three of these terms. Additionally, it is important for you to know why these terms are important for a business. Furthermore, there are a few challenges that come in between estimating these three terms. So, we will discuss all this information to know how businesses can define the size of market.

What are Tam Sam Som ?

These three terms are tools to define the size of the market. Moreover, these tools are useful in any kind of business strategy or plan. However, what are these terms useful for? Let us know :

• To access opportunities
• For setting realistic goals of growth.
• Businesses can show their market potential and attract customers.
• To guide the development of product.

What is TAM ?

TAM stands for Total Addressable Market. Moreover, it means the total demand for a product or a service in a market. Provided the company achieves full market share and there is no competition. Furthermore, this terms actually provides the view of high potential opportunity for a business if it could provide service to any possible customer. Tam is mostly calculated by the data of government or industry reports. Basically, it is calculated using the statistics that are available. Emerging markets often find it difficult to find out tam estimation.

EXAMPLE – if a business is launching a new mobile, calculating TAM would represent the global demand for mobile phones.

What is SAM ?

SAM stands for Serviceable Available Market. This term is smaller than TAM. This is because Tam represents the total global demand. However, SAM considers the limitations that goes with practicality of business to reach the market. Furthermore, businesses can realistically target on the basis of what they offer. Other factors are location and limiting aspects. In other words, if a business is focusing on a specific target and not the global demand, then Sam is calculated. Therefore, SAM will be greater than TAM. Hence, by calculating SAM and focusing on a particular segment of customers, the business is basically narrowing down their focus on the market.

EXAMPLE – If a business is selling a particular software. However, it is just for schools in a specific country, then SAM would be smaller than TAM.

What is SOM ?

It stands for Serviceable Obtainable Market. Just like SAM is a portion of TAM, SOM is of SAM. Moreover, it refers to the specific market size calculation. In addition, unlike TAM, factors like competition and brand presence are considered in calculating specific market size. Also, SOM represents the immediate target on which a company can focus on for a short span.

The factors that are considered while calculating SOM are –

• Market share projections based on competitors
• Preferences of customers
• How fast a business can grow.

EXAMPLE – in the first year of operations, a firm might not be able to capture the whole market. However, it can target on getting 5% of the market share.

How to Calculate Tam Sam Som ?  

TAM

Total no. of potential customers X average revenue per customer = TAM

SAM

No. of potential customers in a specific customer segment X average revenue per customer = SAM

SOM

How much % of SAM the company can capture.

Why Tam Sam Som are Important for a Business ?

• Tam helps businesses to identify the full potential opportunity.
• Sam helps businesses to focus on those markets that are accessible.
• SOM provides a short term view. Moreover, it represents potential opportunities based on current resources and market trends.

Challenges While Estimating Tam Sam Som ?

• Markets can change over time and they are dynamic. Therefore, estimating future market sizes accurately can be difficult.
• Estimation of market sizes with limited data can be challenging.
• Market share can be affected by the presence of competition in the market.

Conclusion

Tam Sam Som are three tools that help businesses to estimate the market size to understand potential opportunities. All three of these tools are used to estimate different sizes of markets. Tam is calculated to define the full potential market. Moreover, Sam focused on a specific and accessible customer segment. Furthermore, Som represents potential opportunities based on current market situations.