Serviceable Addressable Market (SAM) calculates the total possible revenue that could be earned by capturing 100% of a specific market limited to geography, target demographic, or other factors that segment the market for a product or service. A complete market share analysis will include SAM, Total Addressable Market (TAM), and Total Obtainable Market (TOM).
TAM helps quantify the market's potential and stability, SOM measures realistic market share and sales potential, while SAM quantifies the size and revenue potential of your target audience as a whole. In terms of hierarchy, TAM is the biggest picture of market share, followed by SAM, and finally SOM.
While TAM is used in broader analyses of market potential, SAM narrows down this focus to a specific target audience. SAM assumes that you are a monopoly within your geography/target demographic, and returns the potential revenue of operating as a single entity within that market.
For example, if you are the only online trade platform operating within your city, it is safe to assume you own 100% of the serviceable accessible market. In reality, this is exceedingly rare and you have to calculate SOM to obtain the true picture of potential sales.
SAM is a great way to measure demand for a product or service. It is especially useful when presenting market share analyses to potential investors. By reducing the scope of your market share calculation to your target segment, you lower the risk of investing in your startup.
