Why is it necessary to determine market size? When a company decides to expand, launch a new product, or offer its services in new locations, it is taking on a significant financial risk. Taking that risk without considering the potential market size would be foolish. For this reason, companies go through a market sizing process that involves understanding the overall potential market size and what share they can hope to capture of it.
How to calculate market size Market sizing involves a lot of metrics: If you’re even slightly familiar with market sizing, you’ve probably heard the terms TAM, SAM, and SOM. We use Similarweb to determine azerbaijan cell phone number list market size . Here, we’ll dive into what each of these means and how to calculate them using bottom-up analysis that takes into account a variety of variables that affect market value.
Total Addressable Market (TAM) looks at the entire potential value of a market (think, for example, of the total value of toothbrush sales in the U.S. in a given year). This is a huge number, and unlikely to be achieved by a single company (unless it is a monopoly). TAM can provide a basis for assessing the potential and stability of a market.
There are two ways to do this: ) add up the toothbrush sales figures for each grocery, drugstore, and retail chain, and ) estimate the number of toothbrushes the average person buys, multiply that by the number of people in America, and then multiply that by the average price of a toothbrush.
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