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4 Examples of Market Sizing

Market sizing is an estimate or forecast of the market opportunity of a product, service or firm. This is most typically a dollar amount but can also be estimated in terms of units. Market sizing is relevant to the market share and growth potential of a firm. The following are common approaches for calculating a market size.

Total Addressable Market

Total addressable market (TAM) is the total size of a market for a product, service or firm. This is the total theoretical revenue a firm could capture on a global basis if it had perfect distribution capabilities and no competitors. This is often viewed as a vanity metric as this produces a very large number that doesn't necessarily correlate well to the revenue potential of a firm.
A small local restaurant could theoretically become a chain and compete in all restaurant markets on a global basis. As such, its total addressable market is the global food service market, currently estimated at around 3 trillion US.

Serviceable Available Market

Serviceable available market (SAM) is the total market size that a firm can actually reach with its distribution capabilities. For internet firms, this can be very large and similar to TAM. For firms that require physical locations and distribution, this tends to be much smaller and more relevant than TAM.
A local restaurant in a business district could theoretically capture every breakfast, lunch, dinner and catering contract in that area. The value of this may be several million dollars a month.

Serviceable Obtainable Market

A service obtainable market (SOM) is the percentage of SAM that can be realistically achieved. This means that you can reach the customer and have a good chance of selling to them.
A local restaurant has a limited number of seats and a limited capacity kitchen. As such, at most it could expect to be at capacity during meal rushes such as the lunch rush. It could not expect to be at capacity at all times, as this is unrealistic. As such it bases its service obtainable market on estimates of how much revenue it would produce if it were at capacity during the peak local restaurant demand hours in a year.

Expanded Markets

Very large firms may define themselves using concepts that are larger than industries or sectors in order to create large TAMs. This may be done to convince investors that growth is still possible despite high market share. It may also be done to downplay a monopoly position by defining the firm in terms of a gigantic market that it doesn't completely control.
A national telecom with a monopoly in a particular nation that describes itself as a global communications and media company. This implies room for growth as the firm theoretically competes in large global markets such as technology services, entertainment, news and digital media.

Market Research

This is the complete list of articles we have written about market research.
A/B Testing
Competitive Factors
Competitor Analysis
Concept Testing
Consumer Behavior
Culture Factors
Customer Analysis
Customer Analytics
Customer Attributes
Customer Success
Experience Sampling
Feasibility Study
Focus Group
Ladder Interview
Lead User
Market Analysis
Market Intelligence
Market Needs
Market Sizing
Marketing Analysis
Moment Of Truth
Observational Study
PESTEL Analysis
Product Metrics
Purchase Decisions
Sensory Analysis
Target Market
Test Marketing
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