What is Serviceable Obtainable Market (SOM)?
The Serviceable Obtainable Market (SOM) is the segment of the Serviceable Available Market (SAM) that a company realistically expects to capture in the short to medium term.
It's a narrowed down market segment that accounts for factors like competitive presence, marketing capacity, sales channels, and other operational facets of the company.
SOM is particularly relevant in the Indian market, where diverse competition and varied consumer preferences play a significant role in defining a company's achievable market share.
Example:
Referring back to the app connecting local organic farmers with consumers in India, if the SAM was established as ₹27 crore, and considering the startup's current marketing strategies and competitive scenario, they estimate capturing about 10% of the SAM in the first year.
Thus, the SOM for this startup would be 10% of the SAM, quantifying their short-term market potential in the regions they operate.
The formula to calculate SOM from SAM is:
SOM = SAM x (Percentage of SAM that can be captured)
In the given example:
SOM = ₹27 crore x 10% = ₹2.7 crore
Significance:
Calculating SOM helps in crafting business strategies, financial projections, and conveying potential to investors.
Unlike TAM and SAM, SOM is more actionable, focusing on immediate market realities and opportunities. It aids in formulating a concentrated strategy for short-term goals and serves as a benchmark for evaluating actual market performance against achievable targets.