serviceable market

Serviceable Market

Serviceable Market Jonathan Poland

Serviceable available market (SAM) is a term used in business and marketing to refer to the portion of a market that is potentially available to be served by a particular product or service. It is a subset of the total addressable market (TAM), which is the total potential market for a product or service. SAM takes into account factors such as the ability of the business to reach and serve customers in the market, as well as the willingness of customers to purchase the product or service. By understanding the SAM for a particular product or service, a business can make informed decisions about how to target and market its offerings to maximize its potential in the market.

Calculation
Serviceable available market is based on a company’s products and distribution channels. Calculation of SAM requires industry data such as the size of a particular industry broken down by nation or city. For example, an auto manufacturer may calculate SAM by adding the market for their products in every nation that they reach with their distribution partners.

Value
Serviceable available market is relevant to product development and distribution strategy. It represents the total revenue a company could achieve if it had no competition. A company with a high market share may need to increase its SAM in order to continue to grow. A small company with a large SAM may be able to reach its revenue targets with less than 1% market share.

Example
The global market for restaurant services is counted in trillions of dollars whereas a restaurant chain with locations in 12 cities can only reach a serviceable available market of 12.1 billion USD.

Serviceable obtainable market (SOM) is a conservative and realistic estimate of the revenue for a product or service. It may be based on the total size of a market and the percentage of that market that a company is likely to win. This is based on strengths against the competition in areas such as promotion, sales, distribution, pricing and brand awareness. Service obtainable market also considers customer needs and preferences to assess what percentage of a market can realistically be captured by an offering.

Example
A Japanese restaurant opens in a mid-sized Australian city. The total market for restaurants in the city is $4 million dollars a month. They estimate the demand for Japanese food at 15% of this, or $600,000 a month. There are three other Japanese restaurants in town meaning that they each on average will have gross revenue of $150,000 a month. The restaurant assesses its competitiveness and feels it will do better than average. They set their serviceable obtainable market at $200,000 a month this represents a 5% market share.

Total addressable market (TAM) is the global, regional or national market size for a product or service.

Calculation
Total addressable market can be calculated by total sales or total unit sales for a year. Such data may be available from governments, industry associations and market research firm. TAM is often a global number but can also be calculated for a nation or region.

Value
TAM may be calculated for a company’s entire product line. This is extremely relevant to large company as they may require large markets to continue to grow. For example, an electronics company with a high market share may expand their TAM by entering a new industry such as transportation infrastructure. TAM is also relevant to small businesses which in an extremely large industry requires a unique value proposition that larger competitors will find difficult to match. Alternatively, a small business with a small TAM might aim to take a high market share and plan to service the entire market.

Example
The total addressable market for global telecom services was around 1.1 trillion Euro in 2016

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