In our ongoing series on Understanding Market Potential, we’ve embarked on a journey to uncover the essential metrics that drive business growth and inform strategic decision-making. After exploring the significance of Total Addressable Market (TAM) and discovering the intricacies of Serviceable Addressable Market (SAM) we now turn our attention to the next crucial step: Navigating Serviceable Obtainable Market (SOM).
Serviceable Obtainable Market (SOM) represents the portion of SAM that a company can realistically capture based on its resources, capabilities, and market dynamics. Unlike TAM, which paints a broad picture of the entire market universe, SOM provides a pragmatic outlook tailored to the company’s operational realities.
Strategic resource allocation: By delineating the subset of SAM that is within reach, SOM enables organisations to allocate resources effectively, focusing on opportunities where they have a competitive advantage. This strategic resource allocation maximises ROI and accelerates growth in a sustainable manner.
Realistic goal setting: SOM serves as a yardstick for setting realistic growth targets and performance benchmarks. By aligning expectations with achievable market opportunities, companies can avoid overstretching resources or setting unrealistic goals that undermine morale and motivation.
Operational efficiency: Understanding SOM streamlines decision-making processes and enhances operational efficiency. By focusing efforts on markets with the highest probability of success, companies can streamline product development, marketing campaigns, and sales initiatives, optimising resource utilisation and minimising waste.
Define target market segments: Identify specific market segments within your SAM that align with your company’s strengths and strategic objectives. Consider factors such as demographics, industry verticals, geographic location, and buyer personas to narrow down your target audience.
Assess market penetration potential: Evaluate your company’s market penetration potential within each target segment. Analyse factors such as brand recognition, competitive positioning, distribution channels, and customer acquisition strategies to gauge your ability to capture market share effectively.
Determine realistic market share goals Based on your assessment of market penetration potential, set realistic market share goals for each target segment. Consider both short-term and long-term objectives taking into account internal capabilities, competitive landscape, and market dynamics.
Continuously monitor and adjust: SOM is not a static metric but rather a dynamic framework that evolves with changing market conditions and internal capabilities. Continuously monitor your progress against SOM goals and adjust strategies as needed to stay aligned with market realities.
Let’s consider out hypothetical HR technology company based in Australia, specialising in cloud-based human resource management systems (HRMS) for small and medium size enterprises (SMEs).
Following on from our analysis of TAM and SAM, we have established a need to build a product that has a key point of difference, and this is a bespoke compliance and regulation product built into their HRMS solution.
This allows the business to focus on heavily regulated verticals with a key point of difference. Let’s look at the calculation of Serviceable Obtainable Market (SOM) for this company.
By implementing these recommendations and leveraging insights derived from TAM, SAM and SOM calculations, our HR technology company can unlock realistic growth potential, capture market share, and establish strong foothold in the competitive Australian market.
As we conclude our three-part exploration of market potential, it’s clear that Total Addressable Market (TAM), Serviceable Addressable Market (SAM), and Serviceable Obtainable Market (SOM) are integral components of a comprehensive strategic framework for business growth.
By leveraging TAM, SAM an SOM in tandem, companies can optimise resource allocation, set realistic growth targets, and enhance operational efficiency.
To get started on your journey to calculate your TAM, SAM and SOM, sign up for your 14 day free trial in Firmable to get all the Australian data including market size, market segments and more. This data will give you the basis to begin building out your business strategy and sizing and give you precision and confidence in developing realistic growth potential and strategies for your business.
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