Serviceable Obtainable Market

Definition

The Serviceable Obtainable Market (SOM) is the portion of the Total Addressable Market (TAM) that a business can realistically capture, considering factors such as competition, resources, and market dynamics. Understanding SOM helps entrepreneurs set achievable sales goals and focus their marketing efforts on the most promising segments. It is a crucial metric for assessing market potential and guiding strategic planning.

5 Must Know Facts For Your Next Test

1. SOM is typically a small percentage of the SAM and reflects the most realistic sales expectations for a new venture.
2. Estimating SOM involves analyzing competitors, customer needs, and market entry strategies to identify achievable goals.
3. SOM can change over time as businesses grow, new competitors enter the market, or as consumer preferences evolve.
4. Effective marketing strategies are often tailored to focus on the SOM, maximizing resource allocation and enhancing customer engagement.
5. Investors often look at SOM when evaluating a startup's growth potential and scalability before making funding decisions.

Review Questions

• How does understanding the Serviceable Obtainable Market (SOM) help entrepreneurs set realistic sales goals?
  • Understanding the SOM allows entrepreneurs to align their sales goals with what is realistically achievable given their resources and market conditions. By identifying the specific segment of the market they can capture, entrepreneurs can create focused strategies that enhance their chances of success. This targeted approach not only helps in setting attainable objectives but also informs marketing efforts and resource allocation.
• Discuss how estimating the Serviceable Obtainable Market (SOM) can impact a startup's marketing strategy.
  • Estimating SOM directly influences a startup's marketing strategy by providing insights into which customer segments are most accessible and likely to convert. A well-defined SOM allows startups to tailor their marketing messages and choose the right channels for communication. This focused strategy leads to better customer engagement, efficient use of resources, and ultimately a higher return on marketing investments.
• Evaluate the role of competition in determining a company's Serviceable Obtainable Market (SOM) and its implications for growth.
  • Competition plays a critical role in shaping a company's SOM by influencing how much market share is realistically attainable. A saturated market may limit a company's ability to capture significant SOM, prompting businesses to either innovate or differentiate themselves to gain an advantage. Understanding this competitive landscape allows companies to strategize effectively for growth, whether through unique offerings or targeted marketing efforts, ensuring they focus on capturing viable segments within their reach.

Related terms

Total Addressable Market (TAM): The overall revenue opportunity available for a product or service if it were to achieve 100% market share.

Serviceable Available Market (SAM): The segment of the TAM targeted by a company's products and services that is within its reach.

Market Segmentation: The process of dividing a broad consumer or business market into sub-groups based on shared characteristics.