Friday, March 6, 2009

TAM SAM SOM - Easily explained

What does TAM SAM SOM stand for?
(Last updated March 2014)

Before you enter the market with your product, you have to keep 3 important questions in mind.
What is the TAM SAM SOM for my product?

Here the official definition:
Tam: Total Available Market
(Focus on total market / size)
Example: Total LED Market

Sam: Served/Serviceable Available Market
(Focus on your own technology/ services)
Example: The total Living colors LED market  (segment of total LED market)

Som: Serviceable Obtainable Market
(Which realistic market share can be obtained by myself, considering competition, countries, my sales/distribution channels and other market influences?) 
Example: My realistic goal to sell Living Color Products into the LED market.


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The situation:
Let's say I am a company XYZ who makes LED Lamps for home use. But I don't have the technology to make dimmable LED lighting bulbs. 
My TAM would be the whole worldwide LED market.
My SAM would be the worldwide non-dimmable LED bulbs market.
My SOM would be the realistic & obtainable market - considering competition, country and sales channels (distributors, resellers, direct business etc.) that I can achieve to sell in 2014.

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Here a deeper explanation to TAM SAM SOM
in terms of OEM/ODM business model:

Example:
I am company XYZ
> an OEM Manufacturer & supplier entering the LED Living Colors Market:

TAM: From my market research and reports which I have read, I found out that the total number of LED Living Colour Lamps being sold in 2014 in Europe will be approximately 1 Million pieces. 
Total Available Market
The TAM Question:
What is the Total Achievable Sales Amount of LED Living Colour lamps incorporating all market players together?


SAM: Philips has the highest market share of the LED Living Colour lamps with 800.000 units a year. The remaining 200.000 units are being sold by other brands.
My SAM (Servable Available Market) is 80% of the total market of 1 Million LED Living Colours lamps.
The SAM Question: What can I achieve in 2011 in maximum sales?


SOM: My strategy as OEM manufacturer is to focus and work together with the Top Market Player, in this case Philips only. As I am a new supplier to Philips, they agree to test me out and ask me to produce only 200.000 pieces of the 800.000 that they expect to sell in 2014.
The remaining 600.000 units are being produced by their current suppliers.

In this case my SOM (Serviceable and Optainable Market) will be 200.000 pieces (a share of 25%) of the 800.000 pieces from Philips. This SOM is my realistic and reachable target for 2014.
The SOM Question: What can I (as company XYZ) achieve in 2014 selling to Philips?

Questions?
Just contact me on carstenschade@hotmail.com