Serviceable obtainable market (SOM) refers to the estimated revenue share that a business can capture within a certain product segmentation. It plays a key role in market segmentation analysis and enables companies to accurately forecast the amount they stand to earn depending on demand and competition.
A serviceable obtainable market is important in product management for a number of reasons. First, it helps businesses create financial projections for a product based on an estimated market share percentage.
Additionally, companies can use serviceable obtainable market to evaluate their potential performance with competitors and understand the level of risk they face when launching a product. That is particularly beneficial for investors who want to determine potential losses and gains before making a decision about a product.
Furthermore, a business may use serviceable obtainable market to recognize market opportunities and ascertain the value in seizing them. When analyzing serviceable obtainable market, managers can choose effective strategies to their achieve goals based on a clear grasp of the current market and their position within it.
Serviceable obtainable market is one of three key metrics used to analyze and understand markets.
TAM is the total market demand for your product. In other words, this is the maximum potential market available to you, even though it is currently unattainable. Calculating the TAM for a product helps companies understand the possibility for growth.
SAM is the portion of the TAM that you can realistically acquire based on your business model. As a result, making sense of your SAM can help you identify your audience and plan your targets.
Serviceable obtainable market is the percentage of the SAM that you can realistically capture. It is unlikely that any business can capture the full SAM and reach every single customer in the market for the product. Calculating serviceable obtainable market also helps companies assess potential short-term growth and research their competitors.
Calculating a serviceable obtainable market is fairly simple. First, you need to know your market share for the previous year. To find your market share, divide that year’s revenue by the industry’s serviceable addressable market for the same period.
Next, multiply the previous year’s market share by this year’s SAM. That will give you your serviceable obtainable market.
For example, your SAM for last year was $5 million, and the revenue was $2.5 million (50% of the SAM). Now, if your SAM for this year is $7 million, we can multiply that by .50 to reach a serviceable obtainable market of $3.5 million.