Friday, March 6, 2009

TAM SAM SOM - Easily explained

What does TAM SAM SOM stand for?
(Last updated 6th June 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 marke (Segment of total LED market)

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

(Click on graphic to enlarge):


The situation:
Let's say I am company XYZ who makes LED lighting bulbs for home use.
But I only have the technology to produce the non-dimmable version of LED lighting bulbs. 


would be the whole worldwide LED lighting market.
(Focus on total LED market)

would be the worldwide non-dimmable LED bulbs market.
(Focus on your own technology/ what you can serve within the total LED market)

would be the realistic and obtainable market considering:
Competition, trends, demand/ forecast, focus countries and sales channels
(distributors, resellers, direct business etc.) that I can achieve to sell in 2014.
(Focus on your realistic market share that you can obtain considering all market factors within the non-dimmable LED market)

The TAM stands for Total Available Market.
Depending on how you look at the LED market - in the above example my TAM can be:
1) The total worldwide LED lighting market (including all LED bulbs, LED streetlights, etc.)
2) The total worldwide LED lighting bulb market
(including the dimmable and non-dimmable LED versions). For the TAM you are free to choose one or the other. However, more important is the question on your SAM and SOM. The SAM is always focusing on your own technology, that, what you can serve on the market. SOM reflects the SAM and also considers all market factors that can possibly influence the success of your product. 

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

I am company XYZ, OEM Manufacturer and 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 2014 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?

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