Service Available Market: Definition & How To Calculate (2024)

Launching a business is thrilling, but turning your dream into reality requires much more than passion. You often need to join forces with investors, banks, and potential partners—all of whom will look for concrete numbers to validate your business potential. 

While your product or service’s total revenue opportunity might paint an attractive picture, it often overestimates the true potential of your business. Instead, your service available market (SAM) offers a more realistic view of your potential reach. That’s because it focuses on the portion of the market you can actually serve given your business model, operational capabilities, and resources.

Here’s what you need to know about SAM, how to calculate it, and tips for growing your business over time.

What is a service available market (SAM)?

A service available market (SAM)—also known as a serviceable addressable market or serviceable available market—is the portion of the total addressable market (TAM) your company can target and serve with its current business model and capabilities. Your SAM is the subset of potential customers who need your product and fall within your reach based on factors like geographic location and price point. This metric does not, however, consider competitors or market barriers.

For ecommerce businesses, understanding SAM reveals your maximum potential market size and revenue opportunities, shaping growth and investment decisions. For example, say you run an online boutique selling luxury handbags. Your SAM might include fashion-forward consumers with disposable income in areas where delivery is feasible—not every handbag purchaser in the world.

SAM vs. SOM: What’s the difference?

Whereas your SAM is a subset of your TAM, representing the customers you can currently reach and sell to, your serviceable obtainable market or service obtainable market (SOM) is a subset of your SAM. It represents what’s actually achievable given real-world market conditions. SOM reflects the specific share of the market you can capture when accounting for competitive forces, brand recognition, market saturation, and the practical limitations on your marketing and sales efforts.

Here’s an example: Let’s say you manufacture microphones. Your SAM might include recording studios, podcasters, streamers, and public speakers in regions where you can effectively ship and service your products. Your SOM might focus specifically on podcasters and small recording studios in cities where you’ve already established relationships with retailers and have established brand recognition. 

How to calculate SAM

At the highest level, calculating your SAM is simple subtraction: You take your TAM—the total demand for your product or service across the entire market—and subtract out market segments you know you don’t serve. 

For example, if you’re a luxury fashion retailer, you might start with the total clothing market size. then exclude:

• Regions you can’t serve
• Income brackets that don’t match your price point
• Demographics that aren’t interested in luxury fashion

To make these estimations, gather data from platforms like Nielsen Market Measurement, IBISWorld reports, and Gartner Insights, and supplement with government census data and trade association insights. Validate these numbers by surveying existing customers about their purchasing power, brand preferences, and price sensitivity. Cross-reference your findings with industry reports that include competitive market share data, customer acquisition costs, and average order values (AOV) in your category. 

For instance, if industry reports reveal high-end skin care brands typically capture 15% to 20% of their target demographic, use this benchmark to refine your SAM calculations. 

Factors for calculating SAM

Here are some key factors to consider when calculating SAM:

• Geographic reach. Evaluate which regions you can realistically serve based on your distribution capabilities, shipping networks, and local market regulations. For example, an ecommerce business might focus on countries where they have established fulfillment centers.
• Customer demographics. Analyze age groups, income levels, and other relevant characteristics defining your ideal customer profile. These insights help determine the portion of the entire market matching your target audience.
• Price point positioning. Consider how your pricing strategy aligns with your target market’s purchasing power and willingness to pay.
• Market maturity. Assess your target market’s readiness to adopt your product, as this directly affects the serviceable portion of your SAM. In mature markets, where customers understand similar products, you might include 60% of your target market, while in emerging markets needing education, you might count only 20%.

How to increase SAM

Your SAM is dynamic and evolves with your business capabilities. For example, a direct-to-consumer (DTC) cookware brand might initially target urban millennials in major US cities. As its operations mature, it can later launch premium lines for professional kitchens or introduce budget-friendly options for college students. 

Here are a few ways to increase your SAM:

Expand geographic distribution

Adding fulfillment centers in high-density areas with strong shipping infrastructure expands your ability to serve new regions, directly impacting your service available market. If you currently serve only the continental United States, consider expanding into Canada, Mexico, and South America to access untapped market segments. 

Expanding requires significant capital investment and a dedicated team of operations managers and warehouse staff. Alternatively, partnering with established third-party logistics (3PL) providers allows you to enter new markets without the overhead of owning facilities. 

Launch product lines at different price points

Introducing products at varied price points allows you to capture different income segments within your specific market. A luxury brand might introduce an accessible line to capture mid-market consumers, while a value brand can launch premium offerings to attract high-end customers. 

For instance, the fashion brand Donna Karan successfully expanded its SAM by launching DKNY. The more accessible diffusion line maintained the brand’s design foundations while attracting younger, price-conscious consumers. However, it’s important to maintain brand integrity and avoid brand dilution when expanding across price points.

Build strategic retail partnerships

Partnerships with established retailers and online marketplaces accelerate growth by tapping into their distribution networks and customer bases. Placing your products in major retail chains, specialty stores, or ecommerce marketplaces allows for quick market entry, shared costs, and increased trust with new customers.

For instance, Bite, a sustainable personal care brand, expanded its reach through partnerships with specialty retailers like Erewhon, instantly accessing new customer segments. 

Localize marketing for different regions

Expanding beyond your region opens new market segments, with businesses choosing between full localization or standardized global operations. Some brands maintain consistent products and operations worldwide—like luxury fashion houses preserving their heritage. Others opt for a comprehensive localization strategy—from translating websites and adapting payment systems to altering marketing approaches. 

A beauty brand entering South Korea, for example, might need to revamp its product storytelling, focusing on “glass skin” benefits. It may also partner with K-beauty influencers, while adapting its mobile commerce experience for the market’s unique digital ecosystem.