What Exactly Is TAM SAM SOM in Marketing?
Marketers understand that before they can launch any campaign, they have to know who their audience is, the demand for their product or service, and their opportunity to meet that demand. In essence, that is TAM SAM SOM. But let’s break that down a bit.
TAM is an acronym for Total Available Market in the business world. Marketers often use the acronym a bit differently, calling it Total Addressable Market. Either way, TAM is the big umbrella market demand for a particular product or service. It considers overall revenue opportunity available for your product or service regardless of competition. In other words, TAM is the whole pie, not just the piece of the pie you are trying to own.
An example of TAM would be an entire industry, like the global healthcare industry. This is the market your product may fall under, but in order to target your marketing messaging to the right people, you have to get more specific.
SAM stands for Serviceable Available Market. Now here’s where you get a bit closer to your target market. Serviceable Available Market sits under the TAM umbrella but is the particular industry segment your product or service is built for. It’s a section of the bigger pie.
If TAM is the global healthcare industry, SAM may be telemedicine software, for instance. You can estimate the demand for your particular software product in geographical locations, healthcare environments and certain specialties. Your SAM assumes you own the telemedicine software market in those segments. Of course, having no market competition is rare, so you need to go another step further to truly understand who your target audience is.
Your Serviceable Obtainable Market, or SOM, is the piece of pie you’re trying to own. It can also be defined as Share of Market. This is the target segment you have the best opportunity to attract and win, even with your competition nipping at your heels. It’s your actual customer base out of your SAM.
If you’re marketing telemedicine software, you aren’t going to try to win the entire healthcare industry business first. You aren’t even targeting the whole telemedicine market. With SOM, your short term goal is to start smaller with the audience your product is best geared for with the long-term goal of doing so well there, that you can then begin eating into the telemedicine market.
One expert explains that your SOM always considers your product in light of the people who will want to buy it, as well as how well your competition is doing in your market. Your SOM will be a realistic fraction of your SAM. As you begin to take over your SOM, you can move to make a dent in your SAM and if all goes well, you can set your sights on your TAM to become a global market leader.
Some people look at TAM SAM SOM as a an upside down pyramid, with the TAM being the biggest top portion that encompasses the largest audience, then the middle SAM portion that includes a more specific population related to your product, and then finally, the tip of the pyramid that is your sweet spot – at least for now. There is always room to grow and if you consistently market your product or service right, your piece of the pie will begin to grow.
Why TAM SAM SOM Is Important for Marketers
If you Google TAM SAM SOM, nearly every reference returned will be in regards to businesses coming up with a business plan. TAM, SAM and SOM is an analysis practice to understand the potential of a product or service offering and if it’s worth bringing to market. If a company is searching for investors or budget to dedicate to developing a product or service, stakeholders will inevitably want to know the overall opportunity – what potential revenue will it return given the estimated costs to bring it to market? What is the growth opportunity?
For marketers, TAM SAM SOM is critical to target messaging to the right audience at the right time. If your campaign is focused on your TAM, as in mass marketing, you’re likely wasting resources. We know that mass marketing does not work these days. People want companies to be more personal with their marketing content and to do that, you need to get to the SOM by way of your SAM.
Understanding your TAM is your starting point. It tells you how many people you have the potential of reaching with your messaging. But the vast majority of your TAM won’t be interested in your product or service because it won’t pertain to them. No sense in targeting them.
Your SAM, on the other hand, contains the segment of people that are likely interested in the premise of your product or service, but perhaps they aren’t in the right geographical location, competition completely dominates much of that market, or you will be selling your product or service at a higher price than your average SAM consumer would pay. You may be able to target some of this population at some point but you aren’t there yet.
To give your content the best bang for the buck, making it highly personalized and relevant, you want to focus on your SOM. These are the consumers that your data tells you want or need your product most. They are physicians, clinics and hospitals that are looking for telemedicine software in your product’s price point and/or with your product’s specific capabilities, for example. They may not even know they need to offer telemedicine appointments, but your market data tells you they have invested in related technology to modernize their practice. Perhaps you have identified a segment of clinics that are trying to make their services more accessible to people living remotely and your telemedicine software will allow them to care for people no matter where they are located. You get the idea.
The goal of understanding your TAM SAM and SOM is so you can personalize your campaigns to reach the right market and the right time on the right channel. This takes data. Data from multiple sources that is often disconnected within a martech stack. The best way to pull together the data you need from your CRMs, MAPs, data warehouses and other systems is to use software that is designed specifically to help you consolidate your data from across your organization.
As you use this data to personalize your messaging, you will gain greater market share – a bigger piece of that SOM pie that can eventually lead to a nice slice of the SAM part of the pie, too. How can you be certain? Because 90 percent of U.S. consumers say they want marketing personalization and 80 percent of them say they are more likely to make a purchase from a company that provides personalized experiences.
Companies who aren’t offering personalized content and experiences are less likely to attain or retain market share. Nearly two-thirds of consumers say they would stop buying from a company that doesn’t personalize their content to make it relevant to them. This creates a massive opportunity for companies that know who to target, when, how, and where.
Let technology help you calculate your TAM SAM and SOM, as well as connect data from your martech stack and across your company so you can be more precise with your content and messaging. You’ll save resources and time while getting a greater return from your marketing efforts.