Serviceable Obtainable Market (SOM)

What is a Serviceable Obtainable Market (SOM)?

Serviceable Obtainable Market is the amount of a total market that a company or product can realistically capture and serve effectively. It represents the specific segment within the broader market that aligns with a company’s value proposition, capabilities, and resources.

Identifying SOM helps businesses:

Optimize effort and resources
Maximize market penetration
Reach growth potential

Example of SOM

Imagine a SaaS company called TechSolutions that develops project management software.

Project management software is a nearly universal need for industries and businesses of all sizes, and much of the software is targeted to specific needs.

TechSolutions has identified their SOM as:

Small to medium-sized businesses,
In the technology and creative sectors,
That prioritize agile project management and collaboration features.

By focusing its efforts on the specific needs of this target segment, TechSolutions can position itself as a tailored solution provider and capture a significant share within its SOM. This laser-focus increases win rates and decreases wasted GTM spend.

What are the Factors Involved in the Serviceable Obtainable Market?

The following factors influence how an SOM is determined and served:

Target Audience Segmentation: Identifying and categorizing potential customers based on their demographics, preferences, needs, and behaviors.
Value Proposition Alignment: Making sure products or services align closely with the unique needs and pain points of the chosen target segment.
Resource Capacity: Assessing resources, including production capacity, distribution networks, marketing budget, and employees, to make sure the company can effectively serve the chosen market segment.
Competitive Landscape: Understanding how competitors are positioned, what gaps exist, and how the company can differentiate itself to capture market share.

Benefits of Serviceable Obtainable Market

Efficient resource allocation: Companies can direct their efforts, budget, and time toward the most receptive audience. This prevents waste on pursuing customers who may not align with the company’s offerings.
Better product-market fit: Concentrating on a well-defined segment allows companies to tailor their products or services to meet the needs of that audience.
Maximized growth potential: Focusing on an SOM allows companies to capture a significant share within a narrower segment, establishing a strong foothold. As the company gains traction and expertise within this segment, it can then consider expanding into adjacent markets leveraging success and credibility.
Clearer marketing strategy: With a well-defined SOM, companies can develop targeted marketing campaigns and messaging that resonate deeply with the chosen segment.

Limitations of Serviceable Obtainable Market

Overemphasizing an SOM could cause a business to miss out on opportunities in adjacent markets or to overlook changing customer preferences.

Additionally, reliance on a specific segment might make a business more susceptible to market fluctuations affecting that particular segment, leading to revenue instability. Exclusively concentrating on the current SOM may hinder a company’s ability to innovate and develop new solutions to address emerging market needs, limiting its long-term growth prospects.

How to Calculate the Serviceable Obtainable Market

The formula for calculating the Service Obtainable Market is:

SOM = 
Total Addressable Market (TAM) 
x Serviceable Available Market Percentage (SAM%) 
x Serviceable Obtainable Market Percentage (SOM%)

Where:

Total Addressable Market (TAM) is the total market demand for a specific product or service without any constraints or limitations. It’s the entire pool of potential customers if there were no geographical, financial, or other restrictions.

Serviceable Available Market Percentage (SAM%) is the percentage of the TAM that a company can realistically serve and reach based on its resources, distribution channels, and capabilities.

Serviceable Obtainable Market Percentage (SOM%) is the percentage of the SAM that the company can effectively convert into actual sales, factoring in competition, pricing strategies, and market trends.

Calculating TechSolutions’ SOM:

The TAM for TechSolutions is the total market demand for project management software across all industries and business sizes. Let’s assume this TAM is $1 billion.

Now, let’s say TechSolutions has a strong presence in the IT sector and can effectively target around 20% of the TAM due to its specialization. This would be the SAM%.

However, not all of the SAM can be converted into actual sales due to factors like competition and varying customer preferences. Let’s assume that TechSolutions can convert around 15% of its SAM into actual sales, reflecting the SOM%.

Putting it all together: