Over the past several weeks, there have been multiple occasions where we have been challenged on whether or not we know our business/customers. There are actually two similar but different points to the challenge … 1) understand your customers (current base), and 2) understand your business (future opportunity). I originally touched on this topic in my post The Numbers Don’t Lie, and I commented a follow-on discussion would likely be necessary with respect to articulating Available Market. It’s time to further dig in to both points to the challenge.
Challenge Point #1 – Understand Your Customers –To hit upon this first point, I want to re-iterate something Cheryl Bachelder said in her book Dare to Serve. But first, it’s important to have context.
If your business is transactional in nature, and it has stopped growing organically, can you answer why? Net new sales/customers will certainly help, but if your existing base is no longer growing, it could be a cause for concern. What have your customers done differently (B2B) in the way the service is offered, or what are consumers (B2B2C) doing differently behavior wise? Both of these could be leading indicators changes may be necessary.
You need data to answer these questions, and part of the point Cheryl made in her book is the absence of data shouldn’t stop you from defining/pursuing the key metrics that will allow you to proactively answer these questions rather than reacting when things go south. Rarely have I been in a role where the data was just magically available … more often than not you will have to pursue it!
The numbers don’t lie. Once you actually know the truth, you can start improving.
The numbers don’t lie. The numbers hold you accountable to making real improvements.
The numbers don’t lie. The numbers inspire you to make action plans for reaching goals.
Understand Your Business – two really good sources to draw from on this portion of the discussion. The first comes from the article The 10 Commandments of Product Marketing. Really good article by the way. If you have never walked in the shoes of a Product Marketer and want to understand what they are up against on a daily basis this article will give you some keen insights! It will also help guide you to understand what you can/should expect from your Product Marketing team.
Point # 4 from this article states it this way – Know where your product’s customers and users are coming from. wouldn’t it be great if—when your business leader [came asking] … —you had that data at your fingertips and could weigh in on the addressable market?
Not just great, but as Product Management leaders this should be an expectation. Which brings me to the second source highlighting the importance of the TAM, SAM and SOM framework to your overall business plan. I looked at many sites focusing on this topic, and my favorite came from this blog post titled 3 Markets You Need to Know. I encourage you to dig into the post directly, but to summarize:
Your TAM is your Total Addressable Market. In all of the world, what percentage of people broadly need the category of product or service that you’re offering?
The key question to ask about your TAM is: who COULD buy our services?
The second area is the SAM, or the Serviceable Addressable Market. What percentage of the total market is serviceable or reachable for your product or service specifically?
The key question to ask about your SAM is: who IS going to buy our service from some vendor, whether or not it’s us?
The final area is the SOM, or the Serviceable Obtainable Market. What percentage of the SAM is realistically obtainable? What piece of the pie can your business realistically convert into revenue?
The key question to ask about your SOM is: who is going to buy our service from US?
Bottom line? Position yourself to never be caught unaware of the data, or unable to answer the question(s) should they arise!