TAM (the overall revenue opportunity if 100% market share was achieved) can refine and impact a business’s growth strategy. As a metric, TAM is essential for accurate forecasting and financial modeling, particularly when developing a go-to-market strategy.
Calculating a precise TAM that captures maximum potential begins with addressing a series of questions about your business — namely, the characteristics of current and prospective customers, the competitive landscape and assessing the optimal calculation method most relevant for your business.
See also: What is TAM?
1. Create a Data-Based Customer Segmentation Strategy
All TAM calculations are rooted in data. Therefore, collecting accurate, up-to-date information on the current client base within your target industry (or industries) and what they currently spend on similar solutions is essential. Keep data from your company’s sales pipeline as clean as possible to have as a reference point when calculating TAM.
Consider the target audience in TAM calculations. For example, B2C businesses tend to be concerned with individual information such as age, budget, gender, job position, and consumer behavior, whereas B2B businesses are more likely to use firmographic data such as industry, size of organization, and business location and budget.
To maximize TAM, delve into the full range of target industries that may be able to use the product or service to capture all potential growth opportunities. The more in-depth insight, the easier it will be to answer these key questions:
- What are the characteristics of our current and potential customers and where are they located?
- What s...