Why Your Ads Aren’t Converting: The TAM, SAM, SOM Breakdown for Marketers

First, what is TAM, SAM, and SOM?

It’s a trio of market sizing metrics. Marketing can use them to be more precise (SOM) or misuse misused for scattershot ocean boiling (TAM too early). Let’s unpack why. 

TAM (Total Addressable Market) represents the total demand for a product or service, assuming unlimited resources and reach. It’s the broadest view of your potential market. Pursuing this too early is an easy trap. When decision makers get ahead of themselves, they can pressure marketers to pursue less targeted volume before fishing where the fishing is good.

SAM (Serviceable Available Market) narrows this down to the segment of the TAM that your business can realistically serve, considering factors like geography, regulations, and product capabilities. Some think of this as the current “stretch” audience. Not super targeted, but we can at least service them well. More likely to convert. Less likely to churn.

SOM (Serviceable Obtainable Market) is the portion of the SAM that you can realistically capture, factoring in competition, market saturation, and your company’s resources. This is the area where marketers and businesses need to be honest with themselves. What is realistic? Not just aspirational. For marketing purposes, it’s useful to consider who can you target where you can get 5-10 touches or impressions? Meaning, if they’re only have exposure to us less than 5 times, we’re aiming too broad. Time to narrow. But narrowing is tough. It’s saying no to good customers. Actually it’s more like “not yet.”

Challenges in Applying TAM, SAM, and SOM

While the framework is powerful, implementing it isn’t without hurdles:

1) Data Accuracy: Reliable data is essential for accurate market sizing. It requires data from the business, media platforms, search data, etc.

2) Ever-Changing Markets: Market conditions change, requiring constant reassessment. Demographics change. Psychographics and behaviors can change even more frequently.

3) Complex Customer Journeys: Understanding where potential customers fall within TAM, SAM, and SOM can be intricate. Especially when the marketing cycle and sales cycle are lengthy.

How Marketers Can Make TAM, SAM, SOM Their Friend

Start with TAM to understand the full market, then refine to SAM and SOM for actionable insights.

1) Get Organizational Buy-In: If you’re targeting SOM but your goals require rapid acquisition of TAM then failure is just a matter of time. Collaborate with sales, product, and finance teams to align on market definitions and strategies.

2) Stairstep Forecast: It’s a “yes and.” Everyone wants to get to TAM. Show the steps to get to SOM then SAM then TAM. Help everyone understand that winning SOM is the first step. Nothing else is possible until then. But in the process, you’ll have created a model for progression. Plus collected a ton of useful data.

3) Align Marketing Strategies: Now execute. Tailor your campaigns to target the SOM for immediate gains, while keeping an eye on SAM and TAM for future brand growth.

The Benefits of Partnering with a Performance Marketing Expert

Navigating the complexities of TAM, SAM, and SOM requires experience and precision. At Native Digital, we deliver expert analysis, customized audience strategies, continuous optimization and forecast models.

Understanding and applying TAM, SAM, and SOM is more than a theoretical exercise—it’s a practical approach to maximizing your marketing efforts. Contact Native Digital to learn how we can start the climb toward TAM dominance.