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How SOM Market Sizing Defines Competitive Needs

If you’ve ever tried to figure out what, and how much, your firm can sell over the next quarter or year, then you’ve dealt with the concept of Serviceable Obtainable Markets (SOM). But you may not have seen how directly it translates to your firm’s competitive enablement and positioning.

This post briefly examines key aspects of a successful SOM exercise and its resulting competitive value, and places SOM in the context of related market sizing concepts TAM and SAM.

Identifying key competitive needs

We define SOM as the share of market sales that a business can realistically capture now, given:

  • Currently obtainable resources;
  • Known buying behaviors; and
  • Established competitive environments.

An effective SOM exercise answers the questions:

  • What can we sell where we are, with what we have?
  • What is the best way to sell it?
  • How much revenue can we expect?
  • How profitable can we expect to be?

What can we sell where we are, with what we have? SOM tells us which existing buyers in existing markets are willing to purchase what offerings, at what prices. A SOM exercise therefore should act as a test of the firm’s business plan, especially as regards the traditional “5 Ps” of Sales and Marketing (Product, Price, Presence/Place, Promotion, and People). Data, analysis, and insight developed from a SOM exercise can identify significant differences between initial sales and business planning, and what really exists and occurs in target market(s).

The key to SOM is the focus on “where we are, with what we have.” SOM is the reality check that tells us whether or not we are ready to compete.

How can we sell it? SOM exercises should tell us how we need to get to market – and (when properly executed) what is needed to accomplish that.  Value propositions, marketing approaches, partner and channel needs, packaging, support, and distribution strategy and approaches should all be defined or refined through SOM exercises. This is part of the core SOM challenge: Are we ready to compete?

How much revenue can we expect?  This is the core answer that every TAM-SAM-SOM client seeks. Unfortunately, those attempting such exercises on their own tend to focus on this question, because they seek a robust top-line sales number. My firm estimates that more than 70% of business failures stem from tunnel-vision by planners and investors on top-line sales revenue estimates at the expense of knowing how competitive we must be.

How profitable can we expect to be? We can’t be competitive if we’re not profitable. Any firm that adequately answers the above questions can develop a very accurate picture of its costs to get to, expand in, and support, a market. The better the estimate, the better a firm’s ability to grow profitably will develop.

What is the “competitive environment” angle?

Effective SOM exercises can help to identify what competitors are selling, how much they are selling, and why. The most effective SOM initiatives build around competitive intelligence developed from known market data and primary research and analysis.

Successful competitors have asked and answered the above questions. Your firm is most likely to be successful by (1) understanding and emulating these competitors’ approaches effectively, and (2) improving upon these competitors’ approaches in some manner.

“Emulating” does not mean “duplicating.” Copying and repeating competitors’ approaches may lead to success, but will lead to duplicating competitors’ mistakes. Understand what, how, and why competitors sell; apply whatever is relevant and achievable; and then improve upon it.

Part of the TAM-SAM-SOM market sizing continuum

SOM is part of the larger TAM-SAM-SOM continuum of market sizing. Total Addressable Market (TAM) is the volume of sales that an entire marketplace can support, given unlimited access, availability, and resources. Serviceable Available Market (SAM) is the percentage of that market that a single business can reasonably expect to support.

Figure 1: The TAM-SAM-SOM Market Size+Business Strategy Continuum

Source: Addressable Markets LLC, a member of The Analyst Syndicate

SOM identifies expectations for sales, marketing, finance, and distribution by the immediate target market. This helps to scope and define the effective reach of the business. That helps identify what we lack competitively, and where.

The Analyst Syndicate and market sizing

To help Finance, Sales, and Marketing leaders and investors, we regularly conduct workshops on TAM, SAM, and SOM for tech developers, vendors, and services providers. We quickly and cost-effectively provide objective, data-driven, experience-built insights and recommendations regarding:

  • Sizing estimates for new or existing technology and services markets
  • Go-to-market plans and positioning
  • Customer support needs and expectations
  • Channel partner characteristics and requirements

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The views and opinions in this analysis are my own and do not represent positions or opinions of The Analyst Syndicate. Read more on the Disclosure Policy.