Hello,
I was wondering — when I have a market sizing question, should I calculate the TAM, SAM, or SOM? In real consulting missions, which of these is typically used?
I have some experience in venture capital, where it’s quite common to differentiate between these three market definitions, but I get the impression it might be less common in consulting. Am I wrong?
Best regards,
Victor
Hi Victor,
I have never used this terminology as such during my time at Bain, though the concepts are familiar. For instance, we will often start from the Total Addressable Market, and then add a second layer of insights to understand what's truly addressable with the current offer or what factors are limiting the company's growth.
To answer your question - it's always good to clarify with the interviewer what he is looking for. This is a general advice that applies to most questions !
Hi Victor,
This is depending on the case. You normally want to calculate a market size relevant for the company (which is usually SAM or SOM). To tackle such a question, it's important to define the market based on the intro and clarification questions.
For example, if the company is active in the coffee industry, currently focusing on EU B2C market, the market size is coffee consumption for end consumers in EU which is sold via it's channels they are currently active in. It does not make sense to include VS market or B2B market if they have no intentino of intering the markt.
Let me know if you have further questions.
Mattijs
Hi there,
this is definitely something you need to clarify when you determine the relevant scope for your case. If you are looking at a specific company within a market, it would make sense to break down market sizing exercises to the SOM level - or at least SAM if you want to talk about potential future avenues said company could consider (for e.g. revenue growth). If you are just talking about a market more broadly, TAM might be applicable. So there is no universal answer which is always correct. It really depends on the case and when unsure, make an assumption on which market size you are planning to use and explain your rationale to the interviewer before you proceed. Then you can always still react to the feedback you get.
Best
Victor,
You should always clarify this with the interviewer.
This way you not only know you're going for the right metric, but you also signal to them that you know how to seek this alignment.
Best,
Cristian
This calls for a clarifying question.
Could be any of them - depends on the interviewer.
