RESULT OBTAINED
Decision concept
TAM, SAM, SOM: telling theoretical, addressable and winnable potential apart
What must be established
A useful analysis keeps its controls visible.
- 01
Calculate the TAM on the canonical definition of the market.
- 02
Filter the SAM by offer, geography, regulation and access.
- 03
Estimate the SOM by commercial capacity, competition, lead time and conversion evidence.
Decision reference
Make the next choice more explicit.
DECISION SUPPORTED
Which share of the total market actually matches the offer, the coverage and the available capabilities?
DELIVERABLE TO KEEP
Three reconciled ranges and the list of the assumptions that separate them.
NEXT ELEMENT TO EXAMINE
Define the marketExplore →Three nested scopes
The TAM measures total demand on the canonical definition of the market; the SAM the share that the offer, the geography and the regulation make it possible to serve; the SOM the share an organisation can actually win within the set horizon, given its capabilities and the competition.
- TAM: total demand on the market definition.
- SAM: share served by the offer, the coverage and the authorisations.
- SOM: winnable share, bounded by commercial capacity and competition.
Explicit filters, not percentages
Moving from TAM to SAM and then to SOM is done through named and sourced filters: areas covered, segments served, regulatory constraints, sales capacity, observed conversion. Applying a standard share, identical from one market to another, produces a figure without evidence.
- Each filter carries a source and a date.
- The SOM follows from capacity and conversion, not from a ratio.
- The filters set aside are listed, as renunciations.
Linking the SOM to a decision
The SOM is only useful if it supports a choice: opening a segment, sizing a team, setting a target. It is published as a range, with the horizon and the signal that would lead to revising it, for example a conversion lastingly below the assumption.
- One SOM per compared option, over the same horizon.
- A range rather than a point.
- A review signal based on the observed conversion.
03 · ORIGINAL ASSET
TAM → SAM → SOM calculator
Calculation method
The model applies in turn the total potential, the scope actually served and the share reachable with the available capabilities.
TAM€21,600,00012,000 × €1,800
SAM€7,560,000TAM × 35%
SOM€907,200SAM × 12%
Teaching case · simulated data · no real-world market conclusion.
- Market Sizing + Analysis, University of Waterloo (opens in a new tab)Definitions of TAM, SAM and SOM, and of the top-down and bottom-up routes.
- The Aqua Book, UK Government (opens in a new tab)Guidance on analytical quality: traced assumptions and explicit uncertainty.
DECISION SUPPORT METHOD
TAM, SAM and SOM calculation method with controls
The TAM measures a theoretical potential, the SAM the share that can really be served and the SOM the share that can be won within an explicit horizon. The three numbers must share the same unit, the same period and the same net price. Multiplying populations of different definitions produces apparent precision, not a defensible estimate.
Calculation method: TAM = eligible units × annual frequency × net price. SAM = TAM × product access rate × geographic access rate. SOM = SAM × sales capacity × win probability. Worked example: 12,000 accounts × 2 purchases × €800 = €19.2m of TAM. With 60% product coverage and 70% geographic coverage, the SAM is €8.064m. With 25% capacity and 20% win probability, the SOM is €403,200 over the year.
| Level | Reproducible calculation | Mandatory control |
|---|---|---|
| TAM | 12,000 × 2 × €800 = €19,200,000 | Check population, frequency, net price and period. |
| SAM | €19,200,000 × 60% × 70% = €8,064,000 | Document the product and zone exclusions. |
| SOM | €8,064,000 × 25% × 20% = €403,200 | Link capacity and win to observable internal evidence. |
| Sensitivity | Low/central/high SOM with ±20% on the assumptions | Present a range, never a single point without uncertainty. |
The committee can compare the value of the SOM with the cost of the required capabilities. An assumption without a source remains visible and is given a scenario; it is not silently absorbed into the central result.
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MOVE FROM ANALYSIS TO YOUR DECISION
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See the canonical definition of marketing strategy→