I plead guilty to enjoying a cold beer or two, and I’ve watched with amazement as the decade-long bull market in the craft beer industry shows no signs of abating.
In recent articles, we looked at why an analysis of your ideal customer profile (ICP) and total addressable market (TAM) is foundational to modern sales and marketing initiatives, and also provided a framework for how to get started with your analysis.
Now that you’re equipped to define your ICP, you can accurately determine your TAM. Most people are familiar with the concept of TAM as being the total potential revenue of the market they sell to, and this number is often used for investors. But here we’re talking about TAM as an actual list of accounts and contacts that gives you access to your total target market. In this example, your TAM is 36,308 account names, addresses, firmographics, and more. Beyond that, it’s the thousands of contacts who fit the roles and titles that match your ICP.
This is where TAM really helps supercharge other initiatives, such as account-based marketing and account-based sales (jointly abbreviated as ABM). It focuses every go-to-market program on precisely the accounts that fit your targeting criteria. Your ICP tells you the attributes of your best targets, TAM tells you who all of those targets are, and your sales and marketing teams can then pare that down into a more manageable list of target ABM accounts.
To determine the size and potential of your TAM, you generally need to utilize a third-party data service. Again, more granularity is better, and when you begin to identify unique characteristics that define your market it’s going to take more than an internet search or a list purchase to find your TAM.
Knowing your full TAM helps you identify and fill the gaps in your current sales and marketing database. Most companies do not have complete coverage of their TAM. What’s missing is called “white space”, and it’s not just missing accounts, it’s the thousands of missing contacts within those accounts, and the missing attributes (email address, phone number, etc.) of those individual contacts. Once you identify your white space, you can begin augmenting your marketing automation and CRM systems with the missing data.
Use Your TAM to Support Strategic Business Decisions
As you look to expand and grow, total addressable market (TAM) is also used to gauge the size of new markets to enter, to justify or expand investments in a current market, or to research new product opportunities. In every case, having an accurate view of the TAM is critical to making the best business decisions. Being able to visualize your market is a bonus that helps with defining and assigning territories, allocating field resources, and focusing marketing efforts.
A good example comes from HgCapital, a private equity investor based in London and Munich, who says that “being able to tell a clear story of what truly defines a company’s addressable market is a great starting point for thinking creatively about where to invest for growth.”
If, for example, your average contract value is expected to be $25,000 and the total number of potential customers in a market is 1,237, then simply multiplying those two values puts the potential market opportunity at roughly $31 million. If your TAM is inaccurate, even by a small margin, you might make the wrong go/no-go decision. Again, having a “clear story” of the TAM is critical to good decision-making, at every level, from an individual marketing campaign to a strategic business-changing initiative.
Having a solid grasp on your TAM can also help align sales and marketing on the right targets, bringing both teams together with more focus and more agreement on programs, campaigns, and budget allocations. Being able to visualize your market is a bonus that helps with defining and assigning territories, allocating field resources, and focusing marketing efforts.
Some Final Pointers
With ICP and TAM, the whole is vastly more valuable than the sum of its parts. Determining your ideal customer profile is enlightening, but not if you don’t pinpoint the target accounts and contacts that fit within it. Getting clarity on your total addressable market opens new opportunities, but not if you’re using ineffective methods to engage with them.
Here are some concluding tips to keep you on track:
With over 20 years in technology marketing leadership roles, Joe currently serves as the VP of Products & Solutions Marketing at InsideView responsible for evolving the company go-to-market strategy and leading the company’s expansion to new market segments and solution offerings. You can follow Joe at Twitter and LinkedIn.