How to Calculate TAM SAM and SOM: An Improved Method with Neuron360

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Marketing professionals and product managers are often tasked with measuring the market size of a new business opportunity. TAM is a popular way of assessing business potential. In this article, we will be introducing how the new marketing analysis tool, Rhetorik’s Neuron360, can improve the accuracy of your TAM, SAM, and SOM.

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    The Advantages of Calculating TAM, SAM, and SOM with Neuron360

    To get TAM, you’ll need up-to-date data to see your potential customers and actual market size. You must know specific data of your target clients, such as the industry, industry segment, company size, and location. This is where Neuron360 comes into play.

    The Neuron360 is a database for professional and company profiles worldwide. All data are GDPR-compliant with near real-time updates. The following information can be found:

    60 Million+ B2B Leads
    It has over 60 million B2B leads compromising technology users, influencers, and C-suite decision-makers. B2B companies can shorten their sales cycles by targeting potential clients who know the value of their product or service.

    Sourced from over 800 million global public profiles, more than 65 data fields such as email address, job title, company name, primary phone number, and more.

    200 Million+ Companies
    With over 200 million company profiles, you can find detailed information that is sourced and standardized from hundreds of public sites and datasets.

    Firmographics contain industry sectors, revenue, and number of employees. It helps you find the right companies to target.

    Technographics contain what technological products each company uses and which vendors they have bought from. It reflects their interest in certain technical products and qualifications to be a potential client.

    Understanding Total Addressable Market Analysis

    The total addressable market (TAM) analysis measures the industry’s profit potential and realistic revenue growth IF 100% of the market is achieved. It gives the possible revenue that startups and existing businesses may obtain in targeting specific markets.

    Here are the benefits of TAM on decision-making and business strategies.

    TAM can open perspectives on growth
    Many people are surprised when their business earnings today are simply a sliver of what they can earn at a maximum. TAM not only informs a business or product’s potential, it also motivates the company to grow.

    TAM determines business potential by market size
    For pioneering entrepreneurs, it also gives the “go or no” sign to potential business ideas. If the TAM is high, investors are more likely to be on board and provide financial backing.

    How to Compute Total Addressable Market (TAM) with Neuron360

    TAM’s top-down method uses industry research and market reports. It shows you the macro economy of your industry. The top-down approach is used to take a large population of the sector and then narrowing down to your target market.

    Using Neuron360, you can use technographic and firmographic profiles to get a more accurate industry size.

    For example, an IT security company wants to offer a new kind of anti-ransomware software to large financial businesses. Through Neuron360 company firmographic profiles, you can find the number of large enterprises. You can use revenue and number of employees to determine company sizes.

    Let us say that the number of large financial businesses worldwide is 1 billion. But according to their technographic profiles, only 50% use anti-ransomware similar to their product. This means that 50% will already be familiar with what they have to offer and express interest.

    50% x 1 billion companies = 500,000,000 potential clients

    The company plans to offer a free trial of their software and a premium version at the end of the trial with a $100 per year annual subscription. If they multiply this by their number of potential clients worldwide:

    TAM = 500,000,000 x $100 = $50,000,000,000

    The company could profit up to $50 billion if they were to market globally.

    * Note that this is an example only, and all figures do not reflect actual data.

    How Neuron360 Removes the Limitation of the Top-Down Method

    The top-down method is one of the few ways to calculate TAM. It is limited by outdated research. If the data is old, the TAM from the top-down approach will not reflect the actual market. But with Neuron360, all data are in near real-time updates for accurate information.

    The top-down method also does not reflect niche markets. But with Neuron360 company technographic profiles, B2B tech companies can get accurate information on the vendors that their target market trusts and the products that they use.

    Unveiling the Serviceable Available Market (SAM) with Neuron360

    Serviceable Available Market (SAM) is a served segment of a market or TAM. The segmentation of the market is often used to improve qualifying leads and targeted marketing. SAM is based on the willingness of potential clients to pay for a product or service that the company is willing to serve.

    The TAM can be segmented in different ways. In Neuron360, users can segment TAM by firmographic data such as location or industry.

    Let’s use an example we have used for TAM. With 500,000,000 potential clients, they use the filters in Neuron360 to target the ones in the US first.

    They found that 10% of their potential clients are located there.

    10% x 500,000,000 = 50,000,000 US potential clients.To calcula

    te SAM, they multiply the number of potential US clients by the price of their product:

    SAM = $100 x 50,000,000 US potential clients = $5 billion

    SAM market analysis then shows that the company can have $5 billion in sales with their new product in the US alone.

    Exploring the Serviceable Obtainable Market (SOM) Key Discussion Points

    The serviceable obtainable market (SOM) is the market size you can realistically capture or your actual possible market share and expansion. The factors to consider in this category are your resources to target them and your competition.

    Using Neuron360 techno graphics, you can look for companies that use similar products which your own have an advantage over. You can also exclude companies that would take longer to warm up to your product or service to target more qualified leads better.

    Using the example above, the IT security company discovered that its competitors have a monopoly over credit card companies. 30% of their potential US clients are credit card companies. Therefore, their product’s SOM would be:

    SOM = 70% x 50,000,000 US potential clients x $100 = $3,500,000,000

    The IT security company’s SOM analysis for their product is $3.5 billion from 35 million potential clients in the US that are not credit card companies.

    Utilize Neuron360 for More Insights

    The Neuron360 B2B data platform is a market analysis tool used for various purposes, such as segmentation, TAM analysis, account targeting, and lead generation. Many of our clients have obtained marketing insights that drive strategic decision-making through Neuron360 to embark on untapped opportunities. 

    Equipped with Rhetorik AI tools, it standardizes and normalizes data worldwide into an organized and cohesive system for your use. See our video demonstration or schedule a personalized demo at your convenience to experience how Neuron360 can give you your more accurate TAM, SAM, and SOM.

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