3 ways Total Addressable Market (TAM) can help you after COVID-19 pandemic

Rodrigo Andrade
April 23, 2020

Since COVID-19 pandemic, entrepreneurs, managers, and common people have been living in uncertainty regarding their jobs and their next plans in their professional lives.

Markets are changing and will continue due to this situation. Highest-ever unemployment rates in the United States, air travel bans between countries and states, and e-commerce business growth are some signals that exemplify it.

In this new scenario, marketing professionals need to address new roadmaps to set their customer acquisition strategy based on market research.

So, what if I talk about Total Addressable Market (or TAM for short) for those who need to assess their new growth potential situation?

In this article, I will explain what TAM is and 3 ways it can be useful for managers, and especially entrepreneurs, for gauging their market potential after the coronavirus era.

Let’s start!

What is TAM?

Total addressable market refers to the total market demand that exists in your industry. It’s the total amount of money you can possibly earn by selling your products or services within a specific market.

For example, in a monopoly, your company would be the only organization that serves the market. So, TAM is equal to market share in this case. However, if a competitor enters the market, then you’ll have to split the TAM. If you have many competitors, you’ll decrease your market share since you’ll be sharing the TAM with other enterprises.

How to calculate TAM? There are four principal methods (external research, top-down approach, bottom-up approach, and value theory approach) that are explained deeply here. But for this discussion, you should know that the most common is the bottom-up analysis, that counting the total number of customers in a market and multiplying that number by the average annual revenue of each customer.

Total Addressable Market (TAM)
Source: Unsplash

TAM has been essential in the last years, especially for startups that need to know what their total addressable market is and how to calculate it. When they discover this approach, entrepreneurs are prepared to forecast revenue growth and so present their business challenges to venture capitals for fund risings.

Now, keeping the TAM concept in mind, we are prepared to analyze the three ways how it could support your next marketing plans after COVID-19 pandemic.

1. Take opportunities

Companies all around the world are struggling with the inactivity and loss of demands of their products and services. A considerable amount of them probably will change their entire value proposition for serving customers who are adopting new purchase and engagement behaviors.

Think about some industries that have been taking this health problem as an opportunity. Google Hangouts, Zoom, Microsoft Teams, and other online-conferences meeting solutions have raised their revenues by taking advantage of the explosive demand for online communication.

Microsoft Teams
Source: Unsplash

These companies are now evaluating the new context in terms of customer acquisition. Communication services have changed not only for ordinary people, but also for millions of companies that now depends on this technology for continuing their operations.

TAM reanalysis is critical within this market if each competitor wants to understand their growth possibilities after this emergency. They should take many more actions to obtain a high market share.

So, look at your industry and comprehend if, by the total addressable market analysis, new business opportunities related to your market come up.

2.   Analyze your “new” market before changing your strategy.

Now, the tricky part. A lot of industries, large organizations, small businesses, startups, and medium-size companies are suffering from coronavirus context.

Whoever wants to go to the dentist right now? Or even in the next months, considering the asymptomatic characteristic of this virus in many people. 

What about restaurants? Lockdowns, stay-at-home alerts, and state laws have been changing prior ideologies about in-store shopping. Even if people want to go to dinner, they cannot for a long time! 

Many cases emerge in my mind. Disneyland, sports events, and entertainment shows are a few of hundreds of cases with literally dead daily operations.

Well, for those companies, the general advice has been “go online.” Or even try to. Yes, this is a good idea. In fact, the digital transformation of your company should have started a long time ago. 

Restaurant closed because of coronavirus pandemic
Source: Unsplash

New technologies often become “must” in a blink of an eye. In my previous article, I talked about how AMP technology could boost your digital strategy success this year. This particular example shows you how to improve your website speed radically for increasing KPIs performances within a website.

Returning to the main idea of selling online, someone could tell you “just hire a digital marketing agency” for creating your e-commerce. Stop there! Be calm and analyze the situation of your market first. Then move and take actions. That is my suggestion.

TAM exploration should illustrate if you are in a market that will never return to normality in terms of possible earnings. And if that would be your case, my advice is to change your strategy and move on. So, before you invest money in something that could waste your time, try to understand your customer demand and then take new actions to lead your company.

A simple thought. Don’t be discouraged. If you are capable of analyzing your situation and understanding your new market potential, then you should be able to change your business roadmap. First movers are often those who take advantage of innovation through business decisions!

If your TAM analysis shows you that your market will stay equal in terms of potential, well, maybe the digital transformation concept suddenly arrived at your enterprise. You would need to take actions to embrace these new challenges and don’t miss the train.

3.   Competitors or allies?

Maybe you are aware of your competitors moves as never before in your career.

You are in front of your laptop or smartphone, and you are receiving many emails from people who are working in their homes like you. You are maybe spending a lot of time watching the news and consuming digital media platforms such as Facebook, YouTube, and LinkedIn. 

Coronavirus context
Source: Unsplash

And of course, you want to know about the next steps of your competitors. You have assessed each social media post, digital campaign, and price discount that the other firms have been doing recently. You are desperate because your business maybe cannot survive much more, and you try to gather as much information as you can.

But how about the following idea. Mainly if you serve a niche, you should know the managers of competitors firms. So, send him or her an email, InMail, WhatsApp, or just schedule a call together, talk about the situation, and analyze if you have ways to help each other. 

You work in a restaurant? Well, maybe share the delivery costs. You are a SEO company and your competitor specializes in SEM or PPC campaigns? Offer your services as a pack together with an attractive discount for your customers. There are vast ways to cooperate within these times and avoiding historic rivalry that hadn’t let you work together before.

And what about TAM regarding this point? Well, TAM analysis will show you the new potential of the market. Probably with the COVID-19 pandemic situation, you and your competitor could be more precise calculating TAM. Maybe, this is how both will survive.

Conclusion

Total addressable market analysis is an excellent source of information for your company. Calculating the potential revenues by selling your products or services make you able to take better business decision.

Considering the coronavirus pandemic situation, companies need to understand their “new markets” and take new business opportunities or change their prior strategies to survive this period.

In what type of company do you work in? 

Do you think COVID-19 is changing your business situation dramatically? 

Are you thinking in a new way to acquire customers? 

Are you developing an e-commerce right now? 

Send your thoughts or comments by leaving us a message in hello@moov.digital.

#COVID-19 #Coronavirus #TotalAddressableMarket #Startup #MarketResearch

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