Market Sizing Definition:
Market sizing refers to the process of determining the total size of a particular market, or the number of potential customers that a company could serve within that market. Market sizing is an important aspect of business strategy, as it helps companies to understand the potential demand for their products or services, and to make informed decisions about how to allocate their resources.
How do you size a market?
There are several different methods that companies can use to size a market, including analyzing data on past sales, conducting market research to gather data on customer needs and preferences, and using industry benchmarks and trends to make projections about the future. Market sizing can be performed at different levels of granularity, from a broad overview of the entire market to a more detailed analysis of specific segments within that market.
How do you explain the market size in a pitch deck?
TAM, SAM, and SOM are acronyms that are often used in business to refer to different aspects of the market size for a product or service.
- TAM stands for "Total Addressable Market," and refers to the total potential market demand for a product or service. This represents the upper limit of the market size, and includes all potential customers who could potentially be interested in the product.
- SAM stands for "Serviceable Available Market," and refers to the portion of the TAM that a company can realistically serve with its current resources and capabilities. This is the portion of the market that a company can effectively target and sell to.
- SOM stands for "Share of Market," and refers to the percentage of the SAM that a company actually captures. This represents the actual market share that a company has, and can be used to measure the company's performance and success within the market.
Together, these three measures can help companies to understand the potential size and scope of their market, and to make informed decisions about how to allocate resources and pursue growth.