Serviceable obtainable market (SOM)

Definition

Serviceable obtainable market is a concept in business strategy and market analysis, which refers specifically to the portion of the SAM that a company can actually capture.

What is a serviceable obtainable market?

SOM represents the subset of the serviceable available market (SAM) that a company can effectively capture and convert into revenue. It reflects the achievable market share within the target market segments.

SOM analysis requires the segmentation of the market into relevant and distinct segments. However, SOM focuses on identifying and prioritising segments where the company can gain a competitive advantage and achieve market share.

Calculating SOM involves evaluating the company’s competitive position, market penetration strategies, and market share objectives within the target segments. It requires an assessment of the company’s strengths and weaknesses relative to competitors and an understanding of customer needs and preferences.

Understanding SOM informs resource allocation decisions. By focusing resources on segments with the greatest potential for market share gains, companies can optimise their efforts and maximise returns on investment.

SOM analysis provides a basis for revenue forecasting by estimating the company’s potential revenue within the target market segments. By projecting market share gains over time, companies can set realistic revenue targets and track progress towards achieving them.

Example of a serviceable obtainable market

Let’s consider an example of SOM for a company that produces premium coffee targeting coffee enthusiasts in a specific city.

Through market research, the company estimates there are approximately 50,000 coffee enthusiasts in the city. However, considering factors such as competition from established coffee chains and limited marketing budget, the company determines it can realistically capture around 10% of this segment.

SOM = Number of target customers x Company’s market share objective

SOM = 50,000 customers x 10% = 5,000 customers

The serviceable obtainable market for premium coffee among coffee enthusiasts in the city is estimated to be around 5,000 customers.