Total Addressable Market, or TAM, refers to the complete revenue available for a product or service if it were to capture every possible customer in a specific category or market. It serves as a high-level benchmark for understanding the scale of business opportunity, assuming no constraints on competition, reach, or product-market fit.
A TAM estimation involves:
- Identifying all possible customers or businesses that could benefit from a specific offering
- Estimating market demand based on pricing, usage patterns, or industry benchmarks
- Segmenting the market to assess long-term opportunities across regions, channels, or customer types
In practice, businesses use TAM to inform current investment practices as well as long-term planning and go-to-market strategies, helping them evaluate whether new initiatives are worth pursuing. Rather than focusing only on current reach, it also shifts attention to the full commercial landscape for a product or service, supporting broader, more strategic conversations about growth, investment, and resource allocation.
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