Centuries ago, while studying at IIM Kolkata, I was introduced to three concepts related to calculating market size that I promptly forgot. TAM (Total Addressable Market), TSM (Total Serviceable Market) and SOM (Share of Addressable Market).  Suddenly, in middle age, while working with Start Ups who want to change the world, TAM and friends have turned up. Today I embrace these concepts and celebrate them. Because without getting the market size right, a brand cannot grow in a profitable manner.

Take a recent example. Last month, we met a floundering food start up. Their story is familiar. A young team creates a great product (organic ethnic snacks) and places it in several stores. The great taste, lovely packaging and quirky digital ads leads to initial off-take. But soon, secondary sales taper off and distributors grumble. The whiff of potential failure is in the air.

We were asked for advice. A quick dive showed nothing wrong in the brand offering per-se. The problem was in market sizing or absolute number of people interested in buying a product of this nature.   I asked the founders to tweak their positioning to appeal to a larger market. Otherwise it would end up a small (and possibly profitable) brand but the company would not achieve the desired volumes.

This is where my old friends TAM (Total Addressable Market) vs. TSM (Total Serviceable Market) come into play. The TAM for Snacks and Savories is huge but the TSM for “Baked Savories made from Organic Millet” is much smaller. And there lies the role of insight-based market sizing which helps in a successful launch.

How to calculate Market Size:

There are several ways to estimate market size. Some use the ‘Top Down’ approach based on published data while others prefer the test market / ground up insight approach. Either way works.

For my clients, I recommend familiarity with these three concepts:

TAM : Total Addressable Market

A form of market size calculation that helps us define the holistic revenue opportunity offered from the potential product or service. Moreover, it helps arrive at the future road map of the brand, identifies competitors and attracts investors.

  • TAM is calculated using either top down or bottom up approach using external research (published reports by reputed companies or government agencies).
  • eg. Total size of beauty care products is USD 1.6 Billion & projected to grow at 9% CAGR to reach USD 2.7 Billion in 2023


TSM : Total Serviceable Market

This refers to portion of the market the company will target using its specific product or service, in a more realistic manner.

  • TSM is calculated using target geographies, regulation, existing competition, consumer trends and range of products being offered
  • eg. Total serviceable market for a New Brand of Anti Aging products is 10% of the Beauty Care Market, of which 60% is sold in Urban locations. So TSM of an Anti Aging Brand targeting urban women is 6% of TAM


SOM : Share of Obtainable Market

The segment of the market or short term market size that the company can target through its ‘Go to Market’ initiative. Therefore it depends on the brand’s positioning, target audience and distribution strategy. And also plays an important role in pricing strategy.

  • The SOM is a closely evaluated aspect of the marketing strategy. It’s often linked to investment required for a successful launch.
  • eg. The New Brand of Anti Aging products positioned on an efficacy platform driven by a ‘Special Ingredient’ will try and garner 5% of the total market of Anti Aging Product Market in Bangalore, Chennai and Hyderabad sold through Modern Trade in the next three years.


So once you have arrived at the Total Addressable Market (TAM) and calculated Total Serviceable Market (TSM) it is important to specify the Share of Obtainable Market (SOM).  This ensures all efforts at launch, including MVP testing, is done keeping the target audience in mind. Remember calculating the market size correctly is the core of a successful launch.


In conclusion: Very few brands operate in a void. So all of us who are selling things – want a share of the customer’s wallet. Above all, we are fighting for a share of the pie. And I believe it’s best to know how large the pie is before spending all your money trying to get a share of it. 


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For those who are planning to launch a new business, you may be interested in  “Can a Business Plan defeat the fear of the Unknown

And check out our views on “7 Steps to a Successful Retail Launch” published in the Hindu Business Line.