- By: Mark Jakobsen
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Understanding your serviceable addressable market
Calculating your serviceable addressable market means narrowing down your total addressable market. This will enable you to understand who you can realistically target and serve. There will always be factors that will stop you from obtaining 100% of your potential customers, depending upon your product, service, or solution and the industry you work in. For example, they could be a combination of:
- Competition within the market.
- Budget limitations of a portion of your market.
- Geographical limitations of exporting, servicing, or fulfilling customers overseas.
- Customers who are not yet ready for your product, service, or solution.
Or it could be another reason linked to the demographics of your customer base.
How do you calculate your serviceable addressable market?
You will need to delve into your demographics and understand how they align with your product, service, or solution. A simple example is this year, you will only target customers within the United Kingdom and ignore the rest of Europe (perhaps due to language). Or it could be that while you have a payment solution for the retail sector, only the smaller independent shops would be interested.
In both instances, you end up identifying and eliminating customers with whom you have a smaller chance of converting. This allows you to focus more on your core customers, leading to a higher conversion rate and a better return on investment for your sales and marketing teams.
One last step – The serviceable obtainable market
While you are closer to getting a figure you can trust and use within your strategy, we’re not there just yet. There is one more stage to consider and go through until we reach the final figure: The serviceable obtainable market.
If you need a hand understanding your serviceable addressable market, get in touch, and we would be happy to talk it through.