The best way to follow up an article about TOFU, MOFU, and BOFU is to present my other friends – TAM, SAM, SOM. Is it possible that my travels this week have knocked a screw loose? Yes, but TAM, SAM, and SOM are important marketing concepts.
And it’s interesting – and in yours and my shared interest – to think about them in terms of psychographics, not just demographics. That’s my monkeywrench thought of the day and I’ll return to it but first some nerdsplaining:
- TAM = Total Addressable Market
- SAM = Serviceable Addressable Market
- SOM = Serviceable Obtainable Market
Usually, that breaks down into something like the following: enormous TAM, small SAM, and microscopic SOM. The idea here is to draw a distinction between the theoretical size of the market for your products and services and the real size – to which you are able to (a) logistically provide services to and (b) convert from potential customers to partners.
To take a simple example, if you are a solopreneur editor and proofreader for US-based attorneys, the TAM for your services is about 1 million (yes, there are that many licensed attorneys!).
“Oh boy, 1 million potential customers.”
This is the part where the “sharks” on SharkTank roll their eyes. Because there’s no way a single legal editor can provide services to 1 million customers.
So how many licensed attorneys can she address? Even if she productized her service using a 100-person team of subcontractors all equipped with NLP text-editing software, she couldn’t even address a fraction of the market.
The latter scenario, the AI-assisted 100-person legal editing firm, her SAM is a tiny fraction of the TAM – perhaps 3,000/year at the most.
Then there’s the question of obtainability. It’s not just a sales question, but an operational question too. To build a team of 100, you need multiple managers, a finance person, a CTO, a COO, and a remarkable HR person.
You also need capital and cash flow. And then you need to market and sell your services. So of those 3,000 in your Serviceable Addressable Market, you end up with maybe 500 attorneys you can do business within a given year. And that might be a spectacular year.
That’s how you start with a Total Addressable Market of 1 million and end up with 500.
I think the entire framework was invented by someone who got sick of hearing the cliche, “the market for that is is huge”. The TAM market, maybe but not the SOM.
The addressable market theory makes the question, “What’s the market size?” invalid at worst, and inadequate at best.
The Psychographic Dimension
As precise as the addressable market theory is, it has an unseen dimension: psychographics.
I define psychographics as understanding the people you want to help by assessing their emotional realities, values, opinions, mindset, interests, and lifestyles. And for people selling expertise in the form of complex products and services, it’s extremely important.
It’s certainly important in B2B sales and as in B2C. In either scenario, one of the key psychographic qualities is:
Wants to transform
Wants to optimize
In broad strokes, what most people want is to optimize. Fewer typos. More traffic. More efficient billing.
Which is fine; many fortunes have been made in pursuit of optimization.
But in transforming, the stakes are higher. The buyer who wants to transform from present state to future state is looking for deeper engagement, more results, and thus is willing to invest more.
This is the subtlety lost on most lead generation agencies. It’s not about converting more customers to MQLs or SQLs. (marketing/sales qualified leads ). Unless you’re in the business of optimization.
So as you can imagine, it’s important to figure out which business you’re in – are providing optimization or providing transformation? Once you know that answer, you’re on the path to psychographically sizing your market. And maybe better understanding your buyer.