How do you calculate your market size and determine your serviceable obtainable market?

Understanding your market is a vital step in building a strong business case. It enables you to quantify the number of potential customers and estimate your revenue potential. If you’re new to the concept, start by exploring what is market size to get clarity on the fundamentals before diving deeper into the models. Accurate sizing helps secure internal buy-in, allocate resources, and prioritise opportunities with confidence.

Top-down market sizing is one of the two primary techniques used to calculate the serviceable obtainable market (SOM). This article explores what top-down market sizing entails, how to apply it, and the benefits and limitations of this approach.

What is top-down market sizing and how does it work?

There are two main approaches to estimating your serviceable obtainable market: top-down and bottom-up. Each method offers a different perspective on how to define your market opportunity.

  • Top-down market sizing begins with a macro-level view of the total addressable market (TAM)—the entire revenue opportunity available if every potential customer were to choose your product or service. From there, you narrow the focus to your serviceable available market (SAM), which includes only those customers your offering can realistically reach based on product fit, geography, or business model. Finally, the serviceable obtainable market (SOM) refers to the portion of the SAM that you can actually capture, given your resources, competition, and reach.
  • In contrast, bottom-up market sizing starts with your business fundamentals—your product, pricing, distribution, and existing customer base. From there, you build upwards, estimating how those units can scale over time. This method focuses on operational realities and helps model growth based on specific inputs, rather than general assumptions.

Comparing TAM, SAM, and SOM

To help visualise the differences between these three market size tiers, here’s a simple breakdown:

Market Size TermDefinitionExample
TAMTotal market demand for your product or serviceAll meal kit buyers in the UK
SAMThe portion of TAM you can serve based on business model and capabilitiesUrban households with broadband
SOMThe portion of SAM you can realistically win in the short term2% of urban households with broadband

This comparison gives a clear snapshot of how broad market figures are refined into realistic, actionable segments. Whether you’re assessing your current position or sizing up a new launch, distinguishing between TAM, SAM, and SOM is a vital step in making grounded commercial decisions.

How to apply top-down market sizing in practice

To apply top-down market sizing effectively, start by taking a wide-angle view of the total market before narrowing down to your realistic opportunity. This method begins at the macro level, using available industry data to assess the largest possible market size your product or service could address.

The first step is identifying your total addressable market (TAM). Look at reputable industry reports, government databases, and analyst forecasts to understand the size and scope of the broader market. From there, narrow this to your serviceable available market (SAM)—the subset of customers that your product could logically serve, based on location, product features, or business model constraints.

Let’s say you are launching a payment management platform for hair salons in the US. You would begin by estimating the total number of salons across the country. Then, refine the segment: remove those that are too small to need a digital system, or those operating in regions where your business does not currently operate. Next, account for existing clients and competitors—salons that are already served or unlikely to switch—until you are left with a realistic estimate of your serviceable obtainable market (SOM).

To strengthen your approach:

  • Use trusted data sources. Analysts like Gartner, Statista, or government bodies such as the Bureau of Labor Statistics can provide foundational data. Supplement this with primary research to validate assumptions and add nuance.
  • Maintain consistency. Use a clear, repeatable methodology and document your data sources and assumptions for transparency.
  • Interrogate the data. Ask critical questions as you work through the sizing: Who are our ideal customers? Where are they located? What share of this segment can we realistically convert?

Accurate market sizing is not just a numbers exercise—it sets the foundation for strategic planning, forecasting, and investor confidence.

Worked Example: Calculating Top-Down Market Size

Imagine you’re launching a new meal kit service in the UK. Here’s how you might size the market using a top-down approach:

  • TAM (Total Addressable Market):
    Start with the number of UK households (28 million). Let’s assume 60% are open to subscription services → 16.8 million.
  • SAM (Serviceable Available Market):
    Focus on urban households with broadband access and sufficient disposable income. Say that’s 50% of your TAM → 8.4 million.
  • SOM (Serviceable Obtainable Market):
    Based on marketing budget, delivery infrastructure, and competitive landscape, you estimate you can capture 2% in the next 3 years → 168,000 households.

Formula:
SOM = Reachable Customers × Revenue Per Customer
168,000 households × £600/year = £100.8M in potential revenue

Top-down and Bottom-up Market Sizing — Which is Better?

There’s no universal answer to which method is superior—it depends on your product, industry, and growth stage. Both top-down and bottom-up market sizing offer valuable perspectives and are often most effective when used together to cross-validate your estimates. Below, we outline the strengths and limitations of each approach to help you choose the most appropriate one.

Top-down Market Sizing

ProsCons
Quicker to execute—ideal when time or resources are limitedRelies on third-party data that may be outdated or not tailored to your specific business
Leverages existing market reports and analyst data, making it suitable for large, mature industriesNot well-suited for innovative, niche, or emerging categories with limited historical data
Provides a broad, investor-friendly view of market opportunityLacks granularity and may overlook critical micro-level dynamics such as distribution bottlenecks or customer behaviour

Bottom-up Market Sizing

ProsCons
Built on your actual sales model, pricing, and operational footprint—making it highly customisedCan be time-consuming and resource-intensive, especially without strong internal data tracking
Better suited to disruptive innovations or new product categories where historical data is unreliableRisk of compounding small errors across calculations, leading to inflated market size estimates
Enables detailed forecasting by linking market size directly to your business inputs (e.g. units sold, price, conversion rates)May be overly conservative if market expansion potential is underestimated

In practice, many successful brands apply both models. The top-down approach paints the bigger picture, while bottom-up offers a ground-level view rooted in operational reality. When both tell a consistent story, you can move forward with stronger conviction.

Ultimately, using both models in your market sizing can be useful. If they both agree, you can assume you have a reasonably accurate market size estimate. The approach you opt for will also depend on the type of business you’re building and the product you’re selling.

Why Market Sizing Should Be an Ongoing Process

While market sizing is essential for initial planning, it shouldn’t be treated as static. Markets shift. New competitors emerge. Consumer behavior evolves. That’s why the most successful brands revisit their estimates regularly—especially when expanding into new regions or launching new products.

In global contexts, market sizing becomes even more complex. Brands must factor in cultural nuances, economic conditions, and local demand patterns. Combining top-down and bottom-up approaches can help validate assumptions and reduce risk.

If you’re preparing to enter a new market, you may also find it helpful to explore our advanced techniques to calculate market size globally and dive into the nuances of how to calculate market potential in specific categories.

Market sizing is more than just a numbers game. When done right, it becomes a strategic tool to guide investment, align internal stakeholders, and prioritise where to compete. Whether you’re just starting out or fine-tuning a go-to-market strategy, it pays to get your numbers right.

Partner with Kadence to Build a Robust Market Sizing Strategy

At Kadence, we don’t just calculate market size—we help brands turn that data into direction. Whether you’re exploring a new category, entering an unfamiliar region, or reassessing your growth strategy, our market sizing services can help you build an accurate, defensible model that guides smart decision-making. Get in touch to see how our research can power your next move.

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Frequently Asked Questions

Q: What is the difference between TAM, SAM, and SOM?
A: TAM (Total Addressable Market) is the total demand for a product or service in a given market. SAM (Serviceable Available Market) refers to the portion of TAM you can actually serve based on your business model, region, or capabilities. SOM (Serviceable Obtainable Market) is the realistic share of that market you can capture, considering your resources and competition.

Q: When should I use top-down market sizing instead of bottom-up?
A: Top-down market sizing is ideal when you need a quick estimate and have access to reliable secondary data sources—such as industry reports or government statistics. It works best for mature industries with established competitors and historical data.

Q: How do I calculate SOM from TAM or SAM?
A: First, estimate your TAM using high-level data. Then define your SAM by narrowing this to only the segment your product can serve. From there, calculate SOM based on your expected market penetration rate or the percentage of the SAM you believe is attainable, factoring in competitors and current reach.

Q: Is it better to use both top-down and bottom-up methods?
A: Yes. Combining both approaches provides a more robust and accurate estimate. If both methods converge on a similar figure, it can increase your confidence in the forecast. This is especially helpful for cross-functional alignment or when seeking investment.

Since the onset of the pandemic we’ve been working with Bloomberg to understand the priorities, actions and attitudes of business decision makers across APAC. Take a look at the infographic for the key insights from our latest wave including:

  • 69% of companies foresee adopting a hybrid model post-pandemic with a mix of in-office and work-from-home
  • Yet of the surveyed companies only 4% will no longer keep a physical office
  • The pandemic has placed greater attention on sustainability with 67% believing that COVID-19 has increased the importance of green / environment protection
Infographic explaining the shift in business decision makers' priorities

Marketing textbooks are littered with examples of products or services which flopped when they hit the market. 

Take Juicero, in which investors pumped a staggering $120 million – all for a wi-fi connected juice maker which nobody had indicated they wanted or needed. Perhaps unsurprisingly, it was scrapped within two years. 

Or ESPN’s mobile phone service, which was pitched at the wrong price – some $400 – whilst also offering the target audience a lack of choice around handset. The service was swiftly shut down, with ESPN instead opting to provide content to Verizon. 

And remember New Coke? Launched in 1985, it’s still remembered today as a major marketing misstep.The product was abandoned after only a few weeks, with Cola-Cola reverting back to its old formula. 

It’s clear that some of the world’s most innovative companies have failed to accurately foresee the impact of new launches when they hit the target market. Even Google, for instance, arguably launched its wearable Google Glass concept too soon. Its sky-high price did not help, and it failed to connect with consumers.

Fortunately there is a way to avoid this type of failure. By conducting  product concept testing before a product launch, businesses are able to develop their ideas in a safe and controlled space with the target audience ahead of launch.

The concept in question can be many different things. It might be a totally new set of product ideas that no one has ever seen before. It might be a redesign or rebrand.

Testing methods can be online, for instance via quantitative surveys or via online communities focused on gathering qualitative insight; or face-to-face, in a focus group or series of in-depth interviews. 

Whatever the method, conducting concept testing can pinpoint the value – or otherwise – of specific features and benefits, as well as indicating whether a product concept will be a major hit or a more niche offering which may not justify the cost and resources needed to make a reality.

Concept testing does require an investment in market research, but any costs at this stage will be minimal in comparison to launching a product which goes on to fail.

After all, testing is the process of uncovering what your potential consumers like or dislike about your concept, helping you identify which ideas will fly and guiding their future development to ensure success. What’s more, concept testing can enable marketers to understand what to communicate at launch, whilst also helping to identify the customer segments with the most potential

Here are the five key reasons why concept testing is so important:

1. Concept testing can help you filter ideas so you know which to develop further

Concept testing can help you move beyond blue-sky thinking and determine which of your ideas will be a hit. Rather than relying on subjective opinion, it gives you data that can bring the whole team on board by providing a consensus about which projects to develop and which to shelve.

In this way, great concept testing unites teams behind the ideas that have real potential. There’s no need to worry about office politics or lengthy and frustrating ‘design by committee’. With concept testing you can hear directly from the consumer what’s likely to cut it – and what won’t.

By using a range of qualitative and quantitative techniques, you can understand the consumer view of different concepts, and explore whether the products or services you’re looking to develop will resonate. Employing a range of testing tools enables you to identify the product concepts with the highest appeal, as well as understand how these can be refined. This allows you to move to the next stage of development with confidence.

It’s no overstatement to say that the use of a well-designed, concept testing survey or a skilfully moderated online community can pave the way to success. But any survey template or discussion guide needs to be designed in such a way that ensures that the overall package, as well as individual features or attributes are each assessed and fed back on. 

This is something that needs to happen in the early stages of decision-making, too. It cannot be left too late as the point of concept testing is to help you iterate your ideas and to tweak them ahead of launch so that they are primed for success.

2. Concept testing can help you steer clear of bad decision-making.

Testing concepts in detail before launch may sound like it will delay your go-to-market strategy, but in the long run it can save your organisation significant time, prevent financial losses, and protect your relationship with customers. Failed products or services are enormously costly but fortunately concept testing exists not only to help you avoid the bad ideas, but also to uncover those with untapped potential.

Concept testing can help you to find the strongest option to take forward among a number of choices or find ways to improve underperforming concepts. Either way, it’s a great way to ensure, quickly and easily, that whatever you’re planning has a solid chance of success. In this way, concept testing can help you avoid an embarrassing failure and take your product development processes from good to great, thanks to that all-important feedback from those who matter – your customers.

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3. Concept testing can help you understand what elements matter to consumers.

Even if you immediately gauge that your product ideas are likely to fly, there are still many additional things to consider through testing methods – such as your positioning, the kind of packaging or branding that would be considered attractive and –  arguably the most important factor in the production of any product or service – the most appropriate price.

In this way, a concept test is a way to optimise your innovation, drastically reduce the risk of project failure and limit excessive costs. Concept testing is crucial for product developers to determine the innovation’s chance of success. It can shed light on blind spots, inefficiencies, misinterpretations or problems that can lead to failure. Using testing methods like surveys as well as qualitative research, via a focus group, in depth interview or online community, can all help to tease out your target audience’s wants or needs.

4. Concept testing enables you to fix problems prior to launch.

The sooner concept testing is undertaken, the more flexibility there is for optimising your initial idea to develop a product that customers truly want and need. 


Through concept testing you can understand what elements don’t fly with customers so you can ditch underperforming elements to save costs or iteratively improve concepts so that they better meet consumer needs. With an online community, for instance, it’s possible to develop concepts based on consumer feedback, and then upload them for further feedback, in this way allowing you to refine ideas swiftly.

5. Ultimately, concept testing ensures that you develop products that consumers will buy.

Concept testing puts the consumer voice at the heart of product development, thereby ensuring that new products will resonate with customers, dramatically increasing business performance. 

The results of a concept test can help you to identify the pain – or the delight – relating to new ideas. Concept testing can  enable you to establish how your product would fit into the lives of your target audience; how often they might use it and, crucially, which product concept they would be willing to pay for.

Good concept testing means getting under the skin of your customer and letting their feelings and needs guide you towards the solutions with the most potential. By putting consumers central to product development, you can develop products and services that outperform the competition.

In order to achieve this, it’s important to partner with skilled market researchers that can design studies that get you the insights you need. From a qualitative perspective, this means professionals that can help people open up, answer fully, and elaborate on their responses to concepts. In an online community for instance, the researcher must carefully guide and curate the discussion in order to gain in-depth feedback. 


Ultimately, concept testing gives you a better idea of consumers’ reactions to your ideas. It clarifies the need your solution is addressing, consumers’ perceptions of the product, how it fares against other similar solutions, and what can be done to maximise adoption and market impact. 

So it should come as no surprise to learn that this type of market research can have a huge impact on your business, enabling you to understand where to focus efforts in product development by uncovering the view of the target market. 

Product development need never be risk, nor the creation of successful products be a wild stab in the dark. If you’d like our support with a concept testing project, please get in touch or request a proposal. 

We’ve been working with Bloomberg to understand the priorities, actions and attitudes of business decision makers across APAC as the pandemic progresses. In the second of five waves, we explore attitudes towards travel, media consumption patterns and brands.

Take a look at the infographic for the key insights including:

  • 7 in 10 decision makers say their companies are restricting travel, up by 18% from the last wave in May
  • In 1 in 4 organisations, employees are given the flexibility to work from home.
  • 57% are looking for brands that are customer-focused and are flexible enough to accommodate their rapidly changing needs

We partnered with our friends at Measure Protocol to take part in a first-of-its-kind trial to harness blockchain for market research. Watch the video to discover what we learnt about the potential for this new technology.

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What is conjoint analysis? It’s often lauded as an extremely effective way to gain detailed insights and conduct market research, but how does it work?

Essentially, conjoint analysis is a way of measuring the value that customers place on a product’s features. It typically works via a survey, which looks something like this:

  • Participants are shown a combination of features (called attributes) for a product. If the product is a smartphone, for example, they might be shown the price, memory size, screen resolution, and camera quality.
  • They’re then asked to compare different attributes. For example, what would they choose out of a $150 phone and a $250 phone? Do they prefer 32GB of memory or 64GB? There are several different ways to structure this, as we’ll find out.
  • After the answers have been collected, it’s up to us to analyze the results to inform the right marketing decisions.

In this article, we’ll look at this process in more detail and dig deeper into the different types of conjoint analysis and the various benefits it can deliver. 

Why do conjoint analysis?

There are several reasons to conduct a conjoint analysis. These include:

  • To measure and understand customer preference for certain product features
  • To assess or predict how well a product will do if brought to market
  • To gain an understanding of how changes to price affect demand
  • To predict future trends, for example around the adoption of certain features

How to do conjoint analysis

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Choose the right survey type

The first stage is to decide on the correct survey type. There are several ways to do a conjoint analysis — here are the main methods.

  • Ratings-based conjoint analysis. This is where participants give each attribute a rating, for example on a scale of 1-100.
  • Ranking-based conjoint analysis. This is where participants rank the attributes in order from best to worst. There is also best vs worst analysis, where participants simply pick their favourite and least favourite attributes out of the selection.
  • Choice-based conjoint analysis (CBC). This is the most commonly used model and the one this guide will focus on. It presents combinations of attributes to participants and asks them to choose which they prefer.

One of the most powerful advantages of choice-based conjoint analysis is that it can allow you to use modelling to predict how customers will feel about combinations they didn’t even assess.

In other words, in an extremely efficient way of predicting responses to features without having to spend a huge amount of time testing each combination.

Identify the relevant attributes (features)

Next, it’s time to decide which product attributes you want to have your respondents compare and assess. The key is to not use too many. We typically avoid using more than 5 or 6 attributes e.g. for a car colour, engine size. We do this to reduce the cognitive load on respondents to ensure they really engage with the choices presented to them. 

For each attribute, you need to add levels. For example, if your participants are assessing a smartphone, one attribute might be ‘price’, and the levels might be $200, $350, and $700.

The levels will usually reflect the different tiers of the product you’re considering selling. For the smartphone, you might be releasing a basic model, a higher-end model, and a deluxe model. The levels for attributes such as price, camera size, and memory will align with those tiers.

Levels should be chosen based on factors like:

  • How interesting and valuable they are for management — will they inform useful decisions?
  • How well they avoid bias
  • How realistic they are

In the CBC method, there are two commonly used models for making choices:

  • Single choice with none. This requires the participant to make one choice out of the selection. There is also the possibility to select none of the options.
  • Single choice. This is the same as above, but there is no ‘none’ option — the participant has to pick one. 

Design the questionnaire

Screener questions

Most Surveys start with some screener questions. These are general questions around demographics like the respondent’s age, job title, or purchase habits. The goal is to filter out those who won’t be a good fit for the survey based on the people you’re trying to target.

Introduce and explain

It’s important to take some time at the beginning of the survey and in your questions to clearly explain  what the respondents need to do to answer the question. Surveys should be as clear and easy to follow as possible.

Create the right questions

The questions you choose, and how you structure them, will make or break your survey. Here are some guidelines to follow:

  • Questions should follow on from one another logically and be grouped together intuitively. It’s best not to confuse your participants by ordering your questions in a confusing way.
  • People often give more accurate and useful answers when you use situational questions g. For example, instead of asking, “Which phone would you buy”, ask something like, “Thinking back to the last time you purchased a phone — if you had the following options instead, which would you have picked?”
  • Finish with some demographic questions so that you can further understand your customer base and analyse the results by demographic to understand any meaningful differences.

Analyze and take action

Once the survey has been written, scripted , sent out, and completed by your target group, it’s time to analyze the results and take action on them. This is perhaps the most important part of the process, as it’s where your research can really make a tangible impact.

There are several ways to analyze your results, based on how you designed the survey. The most important thing is to collect and analyse your data in a way that makes it easy to draw useful conclusions and share them.

This will allow you to gain real value from the survey and present those findings to others in the company. This:

  • Helps justify your decisions and actions
  • Informs future plans and inspires new features
  • Identifies areas that need to change or improve

At Kadence, it’s our job to ensure you create and conduct the most effective surveys and market research possible, giving your brand the edge. To find out more about how we can help with conjoint analysis and more, get in touch to request a proposal.

Segmentations can be powerful tools for a business. But how do you get them right? Lizzy Pottinger explains 5 principles of a successful segmentation.

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