You might have a great idea, but if you don't know your total addressable market, it's easy to target the wrong segment or aim too low. This often results in poor budgeting, weak projections, or missed revenue targets. In this article, we'll cover three methods to calculate TAM, explain why it matters, and show how it differs from SAM and SOM, so you can plan with more clarity from the start.
What is total addressable market
The general definition of total addressable market is that TAM is the total potential demand for a specific product or solution.
In broader terms, TAM refers to the total revenue a brand can generate by selling its product or service to everyone in its target market, assuming no competition and full market share.
The total addressable market allows businesses to see the growth potential and decide whether brand building in a market is worth the effort. It's important to know your TAM, so you can set realistic goals, attract investors, and plan long-term business strategies.
How to calculate total addressable market
To figure out how big your market can get, you need to estimate your Total Addressable Market (TAM). There are three common ways to estimate it: top-down, value theory, and bottom-up. Each method looks at the market from a different angle.
- Top-down
The top-down calculation method starts with broad industry data, like market reports or stats from research firms. From there, you narrow things down. You slice the total industry into smaller parts based on location, customer type, or use case.
Say you're launching a paid app for small businesses. You find that there are about 1 billion businesses globally. If 30% of them don't use any premium accounting software, that gives you 300 million potential customers. Now, narrow it down even more, maybe only 10% of those businesses don't already employ a full-time accountant. That leaves you with 30 million. Multiply that by your annual price, say $100, and your TAM hits $3 billion. It's a rough estimate, but it gives you a starting point using broad data.
But the risk here is that the numbers may be too general, and they don't always show your real-world reach.
- Value theory
Value theory looks at what your product is worth to customers, not just how much you charge. You figure out how much they benefit from using it and what portion of that benefit can realistically turn into revenue.
Take a ride-sharing service, for example. People use it instead of driving themselves, walking, or using public transport. If they regularly pick your service over others, it shows how much value they place on it. You then estimate how much of that value your pricing captures. This method often works well when you're bringing something new into the market or selling more to your current customers.
- Bottom-up
In a bottom-up total addressable market calculation, you begin with your own data. You look at your pricing, sales so far, and how many customers you've already reached through your physical or e-commerce marketing efforts. Then you estimate how many more people you can realistically reach in the same way. For example, if you sell a $10 product and reach 5,000 customers through one channel, you can scale that to estimate the total market size using similar channels. This method usually gives the most realistic estimate because it's grounded in actual results rather than broad guesses.
Why does the total addressable market matter
- Understand market size at a glance
When you are starting a business or launching a new product, the total addressable market shows how many people or companies could pay for what you offer. You don't have to dig through piles of data to figure it out because you have a clear number that shows how far your reach can go.
- Support smarter business decisions
When you know the total market size, you can see if it's worth investing time, energy, and money. If the number's too small, it signals a need to rethink the idea. If the market's too broad, you can narrow your focus. Either way, your planning stays grounded in facts, not guesses.
- Set practical sales goals
With a clear estimate of potential customers, your sales targets become more realistic. You're not just throwing out numbers; you're setting goals based on what's actually possible. That brings more direction to your sales strategy.
- Measure market share against competitors
TAM gives you a way to compare. You can see how much of the market others are reaching and how much is still open. When you know where you stand in the larger picture, it shows you where there's room to grow or improve.
- Plan for growth with real numbers
Real numbers guide better decisions. You know how far you've come and how much is still available. That creates a stronger path for future steps based on facts, not just hope or guesswork.
Total addressable market vs SAM vs SOM
Before you go after a market, it's important to know how much of it you can actually reach. This is where TAM, SAM, and SOM come into play. These three terms often get tossed around together, but each one points to a different layer of market potential.
When you compare the total addressable market vs serviceable addressable market, the difference lies in what's possible in theory versus what's practical right now. TAM includes everyone who might ever use your product, no matter where they are or what tools they use. SAM, on the other hand, focuses only on the group you can reach with your current product, services, and delivery setup.
For example, if your TAM includes every business worldwide, your SAM might narrow that down to small businesses in countries where your product is available, and your team can offer support. It removes the segments that fall outside your reach due to language, geography, or product limitations. So, while TAM shows the full scale of demand, SAM shows where you can actually compete today.
Now that you've identified who you can serve, SOM focuses on what's realistically possible for your team to reach in the near term. It takes into account your marketing efforts, brand presence, and available resources. SOM allows you to set goals that don't depend on perfect conditions or sudden spikes. It's the most grounded view out of the three and often shapes your short-term strategy.
Once you know which part of the market is within reach, it becomes easier to notice groups that others might miss. These might be regions that speak a different language, have different preferences, or simply haven't been approached with content that speaks to them directly. That's where Pippit comes in!
Target untapped segments with localized content using Pippit
Pippit is an online content creator that offers a marketing video maker, sales poster generator, AI product photo, preset templates, and editing tools to let you create content that speaks to different regions and audiences.
If you're a seller expanding to new countries, a coach reaching non-English speakers, or a brand targeting local festivals or cultural moments, Pippit shapes your message for each group. You can use templates in regional languages, adjust visuals to match local trends, and generate product clips specific to local habits. This opens up markets that usually get overlooked.
3 easy steps to use Pippit for creating videos for TAM marketing
If you want to create engaging product display videos for your marketing campaign, open the following link in your browser to sign up for Pippit and go through these steps:
- STEP 1
- Open the video generator
Go to "Marketing video" from the home page. You'll land in the AI video generator tool, where you can guide the video creation by entering a text prompt. Use this field to describe the type of video you want. Type in a text prompt that tells the AI what kind of video you want. If you already have existing content, you can paste a web link, upload media files (like product photos or video clips), or drop in a DOCX or PDF file. After that, click the "Settings" icon to adjust the language, choose the video length, pick a format with or without an avatar, and then click "Generate."
- STEP 2
- Generate video
Pippit will take you to the customization page. This is where you can fine-tune your video based on your needs. Use the "More info" section to add highlights, define your target audience, or adjust the core message. Then, move to the script options. You can use the AI-generated version or upload your own. Pick your preferred avatar style, voice tone, language, aspect ratio, and duration. Once everything feels right, click "Generate" again. Pippit starts producing videos based on your settings.
- STEP 3
- Export and share
After your video is ready, preview it directly on the screen. Click "Export" below the selected video. Set your preferred resolution, choose your file format (MP4 is the default), and toggle options for frame rate, watermark, and quality. Once satisfied, click "Download" to save the file to your device. If your social accounts are already connected, you can also publish the video directly from Pippit to your Facebook, TikTok, or Instagram page using the built-in scheduler.
Quick steps to create product images for TAM marketing using Pippit
If you're running a TAM-focused marketing campaign and need product visuals, click the link below to get started with Pippit and follow these steps:
- STEP 1
- Upload the image
Start from the Pippit Home page and click "Product photo" on the left menu. Upload your product image by dragging it into the upload box or clicking the "+" icon to select it from your computer. Pippit will automatically remove the background, giving you a clean base to work with.
- STEP 2
- Create product images
Once your photo is uploaded, you'll see tools for customization. Click "Background color" above the canvas to change the backdrop color to suit your campaign's tone, or leave it transparent for flexible use. To set the product in a themed environment, go to "AI background", select a suitable scene (office, nature, shelf, etc.), and click "Generate."
If you're preparing promotional material, switch to the "Poster" tab. Enter a short text prompt about the product, select poster type and layout, and tick "Layout to posters." Then, hit "Generate" to create ad visuals.
- STEP 3
- Export to your device
Once your design is ready, pick the version you like best. Click "Download" in the top-right corner. You can choose the file size, format, and watermark options. Then, hit "Download" again to save it to your device.
Key features of Pippit AI
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- Powerful video solution
Pippit's AI video generator quickly turns your ideas into short-form videos using your prompt, link, media, or document. It understands your input and shapes it into a full video with voice-over, avatar (if needed), and layout. You can choose the language, set the duration, and adjust the tone so your message lands exactly the way you want.
- 2
- Smart video & image editing space
ippit offers a clean editing space where you can adjust text, timing, audio, layout, and visuals. You can fix shaky video, sharpen blurry clips, or adjust lighting. If you're working with product images, you can swap out the background, add stickers, shapes, text, and frames to create a layout, use the text to design tool, apply filters & effect, fix the low-light issue, upscale the resolution, and resize picture for any YouTube, TikTok, and other platforms.
- 3
- Pre-cleared assets for content creation
Pippit's built-in template library saves time and removes the guesswork. These templates are pre-designed for social platforms and organized by business type, format, and duration. You can swap in your own text, change images, and adjust colors. Best of all, every asset is cleared for commercial use. That means once your video or poster is done, you can publish it right away without worrying about copyright issues.
- 4
- Auto-publisher and analytics
Pippit connects directly to your Facebook, TikTok, and Instagram accounts so you can schedule posts from the same dashboard. There's no need to export files and upload them manually. Once your content goes live, the built-in analytics track key data points, such as views, clicks, engagement trends, and more. This gives you a real-time sense of how your content performs, so you can plan your next steps with clarity.
- 5
- Sales poster generator
For quick promo visuals, Pippit's AI poster maker lets you create banners, flyers, and product ads based on a simple prompt. You get a custom-looking design that's ready to download and publish. It's perfect for sales events, product launches, and seasonal campaigns where timing matters.
Conclusion
In this article, we've explained what the total addressable market is and how you can calculate it in three different ways. We've also discussed why it matters and how it differs from SAM and SOM to give you a clear view of what's possible, what's practical, and what's within reach right now. Once you know your market size, the next step is reaching those segments with content that connects. From AI video generation to sales posters and image editing, Pippit has everything you need to reach each group in a way that fits their context. Start creating now with Pippit and turn your market insight into action-ready content.
FAQs
- 1
- What is the total addressable market example?
Total Addressable Market (TAM) shows the full revenue potential of a product. For example, if a company sells accounting software for $100 a year and there are 300 million small businesses worldwide, the TAM would be $30 billion. It's the total value if every possible customer chose that product. Once you know your TAM, the next step is reaching those segments with the right content. Pippit turns your ideas, documents, or links into short videos and product visuals for each audience. It's a direct way to connect your message with the market you're aiming for.
- 2
- Is there any free online total addressable market calculator?
There isn't one official TAM calculator used by everyone, but you can find free templates and basic tools online. Many business platforms and startup guides offer downloadable spreadsheets or calculators that let you enter numbers for pricing, estimated customers, and market size. These tools work best when you already have some research or assumptions to plug in. After estimating your TAM, you still need to turn that number into content that speaks to potential buyers. With Pippit, you can create AI-generated product photos that remove distractions and set your item in realistic scenes. For promotions, the sales poster generator gives you banners and flyers based on your product and campaign type, so you can reach new segments with visuals that match their world.
- 3
- Is the total addressable market calculated per year?
Yes, the total addressable market (TAM) is usually calculated on an annual basis. This means the revenue potential is estimated for one year, based on how much one customer would spend in a year and how many potential customers exist. It helps businesses set yearly sales goals and understand the market's full value within a set timeframe. Once you've mapped your annual TAM, your marketing efforts need to highlight the scale and timing of that opportunity. Pippit supports this by offering social media calendar features. You can line up product videos and visuals to go live in sync with campaign launches, seasonal pushes, or monthly goals, so your outreach is active throughout the year.
