Market sizing analysis helps us understand potential market size, demographics, and geography. The focus is on industry trends and growth opportunities. Insights inform business strategy, financial projections, and investor presentations.
Key terms + glossary
- TAM - Total Addressable Market - the total market demand for a product or service in dollars.
- SAM - Serviceable Available Market - segment of the TAM reachable by your current business model.
- SOM - Serviceable Obtainable Market - realistically attainable portion of SAM, Accounting for size, reach, etc.
- CAGR - Compound Annual Growth Rate - average growth rate of a specific industry or market over a certain period.
- Market Segmentation Dividing - a target market into distinct subsets of consumers with common needs or characteristics.
Case studies
- TAM/SAM/SOM + Geographic Analysis
- Proxy Market Sizing
Step-by-step
1. Define the market you are studying
- Identify specific product/service category
- Identify customer base
- identify geographic area
2. Determine market sizing approach
- Conduct preliminary research to determine data availability and market maturity
- Selecting appropriate sizing approach (found on next page, may change)
3. Collect and analyze market data
- Consult market research librarian to guide search
- Consult market research databases, news sources, journals, etc.
- Apply your selected sizing approach (adapt if needed)
4. Segment the market (optional)
- Will likely be a TAM/SAM/SOM division, split up geographically - split further as needed
5. Estimate/determine segment sizes
- Consolidate + present data collected
- Include CAGRs + emerging trends
- Cite all your sources
- Validate and be transparent with your assumptions
Adapt and modify this guide as needed to best serve clients needs.
Questions to ask clients
- Who are your target customers? What are their demographics?
- What is the geographical reach of your products or services?
- Who are your main competitors? What is their market share?
- What trends were changes have you noticed in the market?
- What is the price range for your products or services?
Remember to
- Validate your assumptions
- Include sources
- Present your calculations
Approaches
TAM/SAM/SOM: a hierarchy of total opportunity (TAM), realistically serviceable market (SAM), an achievable market share (SOM)
Use case
- Lots of data
- Mature market
- Pitches
- Revenue projection
- Product launch
- Planning
- M&A
Geographical analysis: a method to segment customers by location – TAM, SAM, and SOM in manageable units
Use case
- Lots of data
- Mature market
- Pitches
- Product launch
- Expansion
- Planning
Top-down/bottom-up: from broad industry data (top-down), or small scale data (bottom-up)
Use case
- Low or high data availability
- Any market
- Pitches
- Planning
Multiplicative: segment value = estimated # of customers x $ average anticipated expenditure
OR
Proxy: when direct data is limited, using a similar ‘proxy’ market data and making validated assumptions
Use case
- Load data
- new market
- revenue projection
- product launch
- M&A
Resources
MarketLine | IBISWorld | Statista | Factiva | Rachel Figuerido