Definition
SOM, which stands for Serviceable Obtainable Market, refers to the portion of the Total Addressable Market (TAM) that a business can actually reach, compete for, and serve effectively with its current resources, distribution channels, and competitive situation. SOM is key in strategic planning and investment discussions.
Why Use
- Helps prioritise sales and marketing efforts for attainable growth.
- Clarifies the business’s immediate opportunity in a market.
- Guides realistic goal setting and forecasting.
- Facilitates investment decisions and resource allocation.
Core Concepts
- Market segmentation: dividing wider markets into actionable groups.
- Defined resource and channel limitations affect reach.
- Alignment with target market strategy.
- Basis for revenue projections and benchmarking.
Examples
Example: If a TAM is £10 million, and only 20% is realistically accessible due to distribution, the SOM is £2 million. Formula: SOM = TAM x realistic access percentage. Here, SOM = £10m x 0.2 = £2m, indicating more focused opportunity.
Common Pitfalls
- Overestimating accessible market due to optimism bias.
- Ignoring channel, resource, or budget constraints.
- Confusing SOM with broader market definitions.
See Also
Related: TAM, SAM, and target market help clarify total, addressable, and focused opportunities.
