How to quickly estimate the market size: TAM, SAM, SOM method

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Marketers often face the need to quickly assess the market size. Understanding the market size helps determine the potential of a product or company, plan a marketing strategy and predict growth prospects. Calculating the market size depends on the niche in which the business operates. For example, for construction services, marketers focus on statistics on new housing, the number of square meters of houses already built in the region and the number of households. For the children's goods market, marketers rely on birth rate statistics and the size of the segments of product users by age. When assessing the dental services market, analysts use data on residents of the region of the appropriate age category, as well as published official data on the income of the population and involvement in the use of paid medical services.

For quick analysis (especially when working malaysia company email list ith new projects), TAM, SAM, and SOM are used. In this article, we will look at what these terms mean, how to calculate these indicators, and how to evaluate TAM, SAM, and SOM.

The TAM, SAM, and SOM methodology was first described in 2001 by Harvard Business School. The method was originally developed to structure market potential analysis and was used by startups during pitches to investors. The approach has become so popular because it quickly helps to clearly demonstrate the size of the target market and the feasibility of the business idea.

What do the abbreviations TAM, SAM and SOM mean and what phrases do they come from?
TAM (Total Addressable Market or Total Available Market) is the entire fully accessible market or the maximum market volume that is theoretically available for a specific product or service. This indicator reflects all possible demand that exists in the market, excluding competition, audience coverage limitations, and the company's ability to produce and sell products. That is, if there are unlimited production capabilities and no competitors, a business can count on a market volume equal to TAM.

For example, if you manufacture electric bicycles, your company's TAM would include the entire global market for all electric bicycles available without restrictions.

The TAM indicator is used primarily to assess the potential of a business, forecast possible profits in a specific niche and the attractiveness of a business project. This indicator is also used to calculate market share (for example, the current sales volume of a business refers to TAM).