Serviceable Addressable Market

AspectExplanation
Concept OverviewThe Serviceable Addressable Market (SAM) is a business term that represents the portion of the Total Addressable Market (TAM) that a company or business can realistically serve or target with its products or services. While TAM represents the entire market’s potential, SAM takes into account factors such as geographical limitations, regulatory constraints, and the company’s operational capacity to identify the specific segment of the market that the business can effectively reach. SAM is a critical concept in market analysis and business planning.
CalculationCalculating SAM involves defining the boundaries of what is realistically reachable by the business:
1. Define Market Scope: Determine the specific parameters of the market, including geographic regions, customer segments, or any other relevant criteria.
2. Consider Limitations: Identify any constraints, such as regulatory restrictions or logistical limitations, that may affect the company’s ability to serve certain portions of the market.
3. Estimate the Reachable Customer Base: Calculate the number of potential customers or clients within the defined market scope, considering the limitations.
ImportanceUnderstanding SAM is crucial for several reasons:
1. Realistic Planning: SAM helps in setting achievable targets and crafting business strategies that align with the company’s capabilities.
2. Resource Allocation: It assists in allocating resources, including marketing budgets and sales efforts, to focus on the most promising market segments.
3. Risk Mitigation: SAM analysis helps identify potential risks associated with market expansion and entry.
4. Investor Appeal: Demonstrates a company’s understanding of its market opportunity, making it more appealing to investors.
SAM vs. TAMSAM differs from TAM in that SAM represents the practical, achievable portion of the market, while TAM represents the maximum potential market size. SAM is a subset of TAM, and TAM is often used as a reference point when calculating SAM.
ChallengesDetermining SAM can be challenging due to the need for accurate data and a deep understanding of market dynamics. Factors such as changing customer preferences, competition, and regulatory changes can impact SAM over time. Businesses must continually reassess their SAM to stay relevant and competitive.

Tech CompanyTAMSAMSOM
Apple Inc.Global market for consumer electronicsConsumers and businesses in developed and developing countriesCustomers who purchase Apple products and services
Amazon.com Inc.Global e-commerce and cloud computingOnline shoppers, businesses, and organizationsAmazon Prime subscribers, AWS customers, and marketplace sellers
Google LLCGlobal internet search, advertising, and cloud servicesInternet users and businesses seeking digital advertisingGoogle Ads advertisers, G Suite users, and Cloud Platform customers
Microsoft CorporationGlobal software, hardware, and cloud servicesEnterprises, governments, and individual consumersWindows OS users, Office 365 subscribers, Azure cloud customers
Facebook, Inc.Global social media and digital advertisingSocial media users, businesses, and advertisersFacebook, Instagram, WhatsApp, and Messenger users
Alphabet Inc. (Google’s Parent)Global internet-related servicesInternet users, businesses, and advertisersGoogle search users, YouTube viewers, and GCP clients
Tesla, Inc.Global electric vehicle and clean energy marketsCar buyers interested in electric vehiclesTesla car owners and solar energy customers
Netflix, Inc.Global streaming entertainment marketInternet users seeking on-demand video contentNetflix subscribers
Uber Technologies, Inc.Global ride-sharing and food delivery marketUrban and suburban commuters, restaurant-goersUber riders and Uber Eats customers
Salesforce.com, Inc.Global customer relationship management (CRM) marketBusinesses and organizations of all sizesSalesforce CRM and cloud service subscribers
Airbnb, Inc.Global short-term lodging and vacation rental marketTravelers and property ownersAirbnb hosts and guests
Adobe Inc.Global software for creativity, marketing, and documentsCreative professionals, marketers, and enterprisesAdobe Creative Cloud and Document Cloud users
PayPal Holdings, Inc.Global digital payments and financial servicesOnline shoppers, businesses, and freelancersPayPal and Venmo users
Twitter, Inc.Global social media and microblogging marketIndividuals, businesses, and advertisersTwitter users and advertisers
Snap Inc. (Snapchat)Global multimedia messaging and AR technologySocial media users, advertisers, and AR enthusiastsSnapchat users and Discover content consumers
Spotify Technology S.A.Global music streaming and podcast marketMusic lovers and podcast enthusiastsSpotify Premium and Free users
Alibaba Group Holding LimitedGlobal e-commerce, cloud computing, and fintechOnline shoppers, businesses, and financial servicesAlibaba.com, Taobao, and Tmall users
Tencent Holdings LimitedGlobal internet services, gaming, and social mediaGamers, social media users, and online shoppersWeChat, QQ, and Honor of Kings players
Square, Inc.Global financial services, mobile payments, and POS systemsSmall businesses, retailers, and service providersSquare payment and hardware users
Zoom Video Communications, Inc.Global video conferencing and virtual collaborationBusinesses, educational institutions, and remote workersZoom Meetings and Webinars participants

Related Market Development Frameworks

TAM, SAM, and SOM

total-addressable-market
A total addressable market or TAM is the available market for a product or service. That is a metric usually leveraged by startups to understand the business potential of an industry. Typically, a large addressable market is appealing to venture capitalists willing to back startups with extensive growth potential.

Niche Targeting

microniche
A microniche is a subset of potential customers within a niche. In the era of dominating digital super-platforms, identifying a microniche can kick off the strategy of digital businesses to prevent competition against large platforms. As the microniche becomes a niche, then a market, scale becomes an option.

Market Validation

market-validation
In simple terms, market validation is the process of showing a concept to a prospective buyer and collecting feedback to determine whether it is worth persisting with. To that end, market validation requires the business to conduct multiple customer interviews before it has made a significant investment of time or money. A transitional business model is an example of market validation that helps the company secure the needed capital while having a market reality check. It helps shape the long-term vision and a scalable business model.

Market Orientation

market-orientation
Market orientation is an approach to business where the company focuses more on the behaviors, wants, and needs of customers in its market. A company will first target a niche market to prove a commercial use case. And from there, it will create options to scale.

Market-Expansion Strategy

market-expansion-strategy
In a tech-driven business world, companies can move toward market expansion by creating options to scale via niches. Thus leveraging transitional business models to scale further and take advantage of non-linear competition, where today’s niches become tomorrow’s legacy players.

Stages of Digital Transformation

stages-of-digital-transformation
Digital and tech business models can be classified according to four levels of transformation into digitally-enabled, digitally-enhanced, tech or platform business models, and business platforms/ecosystems.

Platform Business Model Strategy

platform-business-models
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.

Business Platform Theory

business-platform-theory

Business Scaling

business-scaling
Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable business model. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.

Strategy Lever Framework

developing-a-business-strategy
Developing a successful business strategy is about finding the proper niche, where to launch an initial version of your product to create a feedback loop and improve fast while making sure not to run out of money. And from there create options to scale to adjacent niches.

FourWeekMBA Business Toolbox

Business Engineering

business-engineering-manifesto

Tech Business Model Template

business-model-template
A tech business model is made of four main components: value model (value propositions, missionvision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.

Web3 Business Model Template

vbde-framework
A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.

Asymmetric Business Models

asymmetric-business-models
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Business Competition

business-competition
In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.

Technological Modeling

technological-modeling
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.

Transitional Business Models

transitional-business-models
A transitional business model is used by companies to enter a market (usually a niche) to gain initial traction and prove the idea is sound. The transitional business model helps the company secure the needed capital while having a reality check. It helps shape the long-term vision and a scalable business model.

Minimum Viable Audience

minimum-viable-audience
The minimum viable audience (MVA) represents the smallest possible audience that can sustain your business as you get it started from a microniche (the smallest subset of a market). The main aspect of the MVA is to zoom into existing markets to find those people which needs are unmet by existing players.

Business Scaling

business-scaling
Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable business model. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.

Market Expansion Theory

market-expansion
The market expansion consists in providing a product or service to a broader portion of an existing market or perhaps expanding that market. Or yet, market expansions can be about creating a whole new market. At each step, as a result, a company scales together with the market covered.

Speed-Reversibility

decision-making-matrix

Asymmetric Betting

asymmetric-bets

Growth Matrix

growth-strategies
In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).

Revenue Streams Matrix

revenue-streams-model-matrix
In the FourWeekMBA Revenue Streams Matrix, revenue streams are classified according to the kind of interactions the business has with its key customers. The first dimension is the “Frequency” of interaction with the key customer. As the second dimension, there is the “Ownership” of the interaction with the key customer.

Revenue Modeling

revenue-model-patterns
Revenue model patterns are a way for companies to monetize their business models. A revenue model pattern is a crucial building block of a business model because it informs how the company will generate short-term financial resources to invest back into the business. Thus, the way a company makes money will also influence its overall business model.

Pricing Strategies

pricing-strategies
A pricing strategy or model helps companies find the pricing formula in fit with their business models. Thus aligning the customer needs with the product type while trying to enable profitability for the company. A good pricing strategy aligns the customer with the company’s long term financial sustainability to build a solid business model.

Other business resources:

About The Author

Scroll to Top
FourWeekMBA