Evaluating Market Potential to Prioritize Growth

Identifying the potential market for a business’s products or services is crucial for developing a targeted growth strategy. While a broad understanding of the market’s size is helpful, businesses must drill down to more realistic market estimates to make informed decisions. This process involves analyzing the Serviceable Obtainable Market (SOM), which is a narrower and more actionable measure compared to the Total Available Market (TAM). In this blog post, we’ll define SOM, compare it with Total Available Market (TAM) and Serviceable Available Market (SAM), and how a SOM analysis lays the foundation for a strategic marketing plan.

To fully understand SOM, it’s important to see how it fits within the broader market context, alongside Total Available Market (TAM) and Serviceable Available Market (SAM).

• Total Available Market (TAM): TAM represents the total revenue opportunity available if a product or service captured 100% of the market demand without considering any practical constraints. It is the broadest market estimate and serves as a starting point for understanding market potential.
• Serviceable Available Market (SAM): SAM is the portion of TAM that is relevant to the business’s products or services based on factors such as geographic reach, target demographics, or product capabilities. It defines the segment of the market that the company can serve.
• Serviceable Obtainable Market (SOM): refers to the portion of the SAM that a company can realistically capture, considering factors such as competition, market share, and the company’s own resources and capabilities. SOM represents the actual target market that a business aims to reach in the short to medium term and is critical for setting realistic sales and marketing goals.

Conducting a SOM analysis is an essential part of strategic marketing planning as it provides a realistic and actionable estimate of market potential. Here’s how a SOM analysis contributes to building a strategic marketing plan in five key areas:

Evaluating Market Position and Competitiveness: SOM analysis provides insights into the company’s competitive landscape within its obtainable market, helping to refine its market position. By understanding the size and characteristics of the SOM, businesses can better assess where they stand relative to competitors, reveal whitespace opportunities, identify strengths to leverage, and areas to improve. This evaluation supports decisions on branding, pricing, and differentiation strategies, guiding the company in establishing or strengthening its position in a particular market niche. The SOM analysis helps companies clarify their competitive edge and tailor their offerings to align with market demands.

Guiding Product Development and Positioning: SOM analysis often reveals specific customer needs and gaps in the market that the company is uniquely positioned to fill. These insights can direct product development efforts toward features, improvements, or new offerings that resonate with the obtainable segment. In addition, SOM analysis can inform positioning strategies, helping businesses communicate the unique value of their products to target customers effectively. By focusing product positioning and development on SOM insights, companies can increase relevance and appeal to their market, enhancing the likelihood of capturing a larger share within their reach.

Optimizing Marketing Strategies: Once a company’s unique value proposition has been defined, a clear understanding of SOM helps businesses allocate their marketing resources more efficiently by focusing on the most promising customer segments. With a targeted market in sight, marketing teams can develop specific campaigns, messaging, and strategies that appeal to the needs and preferences of this segment, maximizing ROI. SOM-based insights ensure that marketing efforts are not spread thin across the broader market but concentrated on converting reachable prospects, allowing the company to achieve a higher rate of return and make more efficient use of its marketing budget.

Setting Achievable Sales Targets: Conducting a SOM analysis provides businesses with a realistic view of the market they can likely capture, enabling them to set achievable sales targets. By narrowing down the broader market potential to a practical, obtainable segment, companies can create sales goals that align with their resources, competitive positioning, and growth ambitions. These targets help define milestones that are challenging yet attainable, motivating teams and informing sales strategies. Having realistic sales targets based on SOM also builds confidence among stakeholders and investors, as these targets reflect practical expectations rather than overly optimistic projections.

Supporting Investment and Funding Efforts: When seeking investment or funding, businesses often need to present a clear picture of market potential and realistic growth opportunities. A well-researched SOM analysis demonstrates that the company has a feasible strategy for capturing a share of the market, grounded in market realities and data. This analysis can boost investor confidence, as it shows the company understands its position within the competitive landscape and has a practical plan for growth. By showcasing SOM-driven projections and strategy, businesses can make a stronger case for funding, emphasizing their preparedness to achieve sustainable, achievable growth in the market.

Serviceable Obtainable Market analysis is a vital component of strategic marketing, enabling businesses to set realistic growth targets, optimize their marketing strategies, and evaluate their competitive position. With a well-executed SOM analysis, businesses can pursue market opportunities more effectively, leading to sustainable growth in competitive markets. Read our blog post, How to Conduct a Serviceable Obtainable Market Analysis, which discusses how SOM helps lay the groundwork for a data-driven strategic marketing plan that guides the allocation of resources, product development, and sales efforts.