Latest / Pitch to Product / TAM, SAM, SOM Explained: What Market Research Really Means for Your Business
Transcript
- Pitch 2 Product: You've probably heard this if you've watched Shark Tank in the past. they don't they always get discouraged when someone says, Yes, the total market is It's a billion dollars, a hundred billion dollars. It's hundred billion dollars and and all we need is one percent of that. Well, look at that one percent is extremely difficult to get. Hey, welcome back to another episode of Pitch the Product Podcast. This is the 52U series. What number are we on, Dan? Six. Holy match. Lucky six. Lucky number six. And what are we talking about today? What market research really means. Okay. Like the very definition of what market research means. And I have here written the word of the day is Tam, Sam, some. Yes. There you go. Yeah. Good. Someone's calling you. Yeah, yeah. hopefully hopefully it wasn't eight Vars. No, it's a fifty-two launch lead. Someone's calling in from the Wow, that's perfect. Yeah. You wanna put on live? No, no, we're not gonna do that. Okay, good. Yeah. So if you're an entrepreneur, you're gonna hear the words TAM, Sam, some. those are acronyms for very important marketing. Definitions. and and there's look it, we're we're on a kick of the overused c you know words. And and so look it is TAMS, SAM and SOM. So let's it's a total TAM is a total addressable market. SAM is the total or is a serviceable serviceable available available market. Yep. Kind of the same thing in my world. But some is a serviceable obtainable market. And so yes, these are these are high level conversations that you should have before you call us. Right. Because if you don't have a very specific point where your idea fits into any of that conversation, you have a long way to go. And what I am also trying to tell you is that you're the core teaching moment here is that you're not really looking for your TAM. You're looking to figure out how to sell your first thousand, five thousand, hundred thousand units. Like it's a progression. You find a customer. If you can make one sale, you can make ten sales, you can make a hundred sales. Right. And so I think the the onus of well, am I gonna be a millionaire? Yeah, but there's a process to that. It doesn't happen. You don't instantly get recognized by your total addressable market. Right. And so I think there's some realistic conversation there is like truly required. Yeah. The idea with Tam is that you understand what your how big the market is. Like if you're going into a very niche market. Well, for instance, let's go into the we talk about lobster nativity as one of our successful products. Yeah. So Really at the end of the day, the TAM on that wouldn't be that impressive. so you know, if you were basing it on TAM, you'd probably say, this is not all right. The market's not big enough to support lobster nativity sets. nativity sets as a whole, obviously every Christian, which is the largest, you know, denomination of religion out there. That's Sir TAMS. Yeah, that that's a huge market, but someone that That likes lobsters and wants to see a lobster nativity set, you you're not Tam's not gonna be that nice. Well, first of all, they're lobsters, so Sam comes into this conversation. Service serviceable area market, right? So it is definitely a New England thing. I would even say Maritime Canada, right? That that would be your your Sam. So you you've just narrowed it down. But the nichier you get, Dan, that is the more defined how you find your real audience. Right. Right. Yeah. You've probably heard this if you've watched Shark Tank in the past. they don't they always get discouraged when someone says, Yes, the total market is It's a billion dollars, a hundred billion dollars. It's hundred billion dollars and and all we need is one percent of that. Well, look at that one percent is extremely difficult to get. it's not even likely you'll ever get that. But what you can look at the r the real n the real the real thing here is is some. It's it's serviceable, obtainable market. That's That's really what you can build your, your house around. how much of that total market can I capture? and that's really the number that you want. It's the slice you realistically capture given the competition and the resources. That is that's more important than that. And and there's no secret. Like we have a minimum quantity order of about a thousand pieces, right? That's our recommended. You could you could order more. Yeah. But what is your sum when you have a thousand pieces? Well, I mean, you pretty much can sell a thousand pieces of anything. that's not that hard to sell a thousand pieces. Right. So that that's really the core is that, you know, if you have margin and you have a thousand pieces, you go find your song. Right. And and that's that's been our success. Is that, you know, it doesn't happen overnight, but you haven't also you haven't forfeited the bank. You haven't invested hundreds of millions of dollars. Like I always sell tell people that the you know, if you're if you're looking for Tam, nobody's got TAM marketing money. Tam means like if it's a hundred billion dollar market, what do you think you need to spend in marketing dollars to just break through to a fraction of a percentage. Right. It's too big. Start smaller. Your your ideas are small. They're nichey. That's why we look for the unique value proposition. Cause the unique value proposition demonstrated properly, you find your sum. Right. Well, let's talk, let's give an example so everybody can understand. Cause I think examples are much better than talking about something that other people don't completely understand. so we'll use a product called Dart Links. it's a two sided Dartboard. cricket style on one side, which is a traditional Dart game. And on the other side, it's a nine-hole golf course. For those of you who haven't seen it, it's a pretty amazing product. Let's put that link in the in the fantastic. Because it's Dart with the links L-I-N-X. And you are supporting a 12-year-old inventor every time you purchase one. So go and grab yours. maybe we'll put a little coupon code in here, like 52U coupon. Sure. Sounds good. so that So when we did the, we looked at the total market on that. There's 50 million people that play golf in the United States. Right. There are 17 million people that play darts. So your TAM, total addressable market, is 67 million people. but people who play darts but don't care about golf are never gonna buy dart links. They're just buy the other, you know, they're buy a cricket style board. People who are worried about putting putting holes in walls are never gonna buy dart links because they don't want to damage their wall by putting a hole in it. So that cuts down our Tim significantly. and so trying to market to those people, it's a waste of time and money. and that's sometimes where people get confused that like just keep spending ad dollars. Well if you're spending ad dollars in a, you know, an auditorium full of people that won't buy your your product, that's it's entirely a waste of money. A lot of people make that mistake. Yeah. so you focus on the Psalm And that is a much more successful path to Dart links. So the market that you can realistically capture that likes both golf and darts, right? That's the market and does one who put hole in their walls and that like thinks it's fashionable, thinks it's cool, thinks it's fun, thinks it's unique. So look at the psalm is is what you're what you need to go and measure. That's the big word that if you're looking to raise money or f help get an investor involved. But how do you get your psalm? It's finding that person. Right. And I think you've got this on the next deep dive of questions, right? So who would buy my product? And you have to be as specific as possible. The more specific you are, believe it or not, the easier and less money you spend in marketing dollars. When you spend general marketing dollars, you end up spending money for all the people who wouldn't buy your product. You know, the person that doesn't want the hole in the wall, the person that is a golfer or a dark person that didn't find the they don't want it. Right. Right. You want to find the people, you want to build your audience. That's how you build your psalm. So, be specific. And and again, we have some metrics on this, don't we do we not, Nat? Like who who would be our who's our best purchaser of of Dart Links right now? All of them. She shed and man cave. So if you have a she shed or you have a man cave, this is exactly who you're looking for. It's a great example of a very specific thing that would give you at least a starting point of the right direction. Right. look at most maybe that's well, not not most, because it's 67 million people. Well, 50 million people play golf. So I was gonna say most dads play golf, but this 358 million people, so that's not most. But it's a b good f good percentage of people play golf. It's a great dad gift. I mean. It's so unique and so cool. But again, we're not here to pitch Dart Links, but but but know your species. Yeah. You're not gonna be selling Dart Lynx to somebody that's that's an outdoorsman that that likes to hunt and place and and good ride motorbikes and snowmobiles. this is this is somebody that's well and I I love the specificity of the of the she shed or the the man cave because that really gets you, again. Keep mind, we have a thousand units to sell, right? And you're first order, then you go five thousand, then you go ten thousand. you keep building those little audiences that you understand, but that's where you don't spend a lot of money because you're so targeted to find someone who is into she shed stuff and man cave stuff that also golf, right? Now, how identifiable is that person in a key term or a search word or just being out there in social media? It's it's much more findable without spending huge money. Right. And again, Some of our 52U episodes have gone longer than we initiated because we had a lot to talk about. This is very precise. We're talking about market research and it it can it can be we're gonna be done in a few seconds here. So I just, to take home and recap what we just talked about. TAM, total addressable market proves that the industry exists. Very important that you know what that number is, because that means the industry does exist. Psalm tells you whether a whether a business is feasible, meaning that if that was a very low number, we'd probably tell you, let's not go down that's your starting point on the map. We we need you you need to make sure that it's large enough to turn it into a business. And that's what Psalm will tell you, right? Yep. service serviceable, obtainable market. and you know, a small specific market beats a large, big one every time. So every time it goes back to what we just talked about, lobster nativity again. by all definitions, that should not have been that successful. But because it was very specific and and very unique, it was easier to find that audience. To identify with that audience. Exactly. Well, look at also tell you the the big TAMs, I guarantee you if you do some research and use AI, how many the of the biggest TAM markets that there are, how many of those are Fortune 100, 500, 1000 companies? Those that that's the playing field for all the what do we use here? a hundred billion dollar industry. Yeah. You tell me who's which one of the fortune one hundred and five hundred companies that are already in that market and spending huge money in product deliverables, marketing and the whole like that's a Coca Cola conversation. Right. You better you better have a really good unique value proposition if you're going up against a big tan. Right. And then, you know, everything that we discuss in market research comes down to one thing and that is who's my customer. Who is my customer? That's the most important thing when it comes to market research. I'll go one more. Who is my customer and how would they feel using my product? Yeah. Right. That's a John Draperism right there. Good. Cool. So quick one today. I don't usually Steve has our next podcast all mapped out with. Well, I it's off episode number seven. What's number yeah? What's we'll we'll keep that a secret. Yeah, I'll Steve didn't want anybody to know, clearly. But again, There'll be a link down below for you to recap this episode. as always, we appreciate you joining us. always, as we say, share, follow us. Yeah, share, share, share. Yeah. Share this with people that know that you know are looking for, you know, advice. they've got a product, they've told you about it, they've shared it with you, shrouded it on the beach in the sand. If the if you know that you got that that friend pointing our direction. And more importantly, even if you've never gonna bring a product to market. Just listening to us and and understanding what it takes to bring our product to market. It's a great conversation piece. around the kitchen table sometime. Absolutely. Thank you for watching. Appreciate your time.