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The term “total addressable market” is a bit misleading.

In theory, your total addressable market (TAM) is the high-level demand for products or services in your market — the maximum potential revenue you could generate from the market.

However, even the world’s biggest companies can’t actually capture their total addressable markets. Amazon doesn’t own the entire eCommerce market and Apple doesn’t own the entire smartphone market.

Even though your TAM might technically be several-billion dollars, strategizing around that figure can lead to significant waste.

Instead of diving straight into your ABM strategy with an impractical view of your TAM, take the necessary steps to narrow your focus and find the true buyers in your market.

Don’t Let TAM Lead to Wasted Resources

“Just because you can make Excel say anything doesn’t mean you’ll actually be able to generate leads from 90 percent of your entire market! So basing the entire model on what can actually be engaged seems fundamental, but is surprisingly missing from many marketing organizations.” Matt Heinz

One of the many benefits of an ABM program is that it keeps you from blindly pursuing every single lead that enters your CRM.

Traditional lead-centric marketing programs pit sales and marketing against one another. You’re focused on filling the top of the funnel with individual leads while sales is trying to close broader accounts.

When you use broad TAM figures for ABM, you risk falling back into the same old lead-centric marketing activities that led you to ABM in the first place. Worse yet, even minor mistakes in TAM calculations can lead to wasted resources:

  • Including too many accounts and contacts in your TAM calculation can lead sales to waste resources trying to close accounts that aren’t actually in the market for your products and services.
  • Failing to identify the right size of your TAM can limit your revenue opportunities, leading to a frustrated sales team because you couldn’t fill your funnel.

Knowing your total addressable market may be a good starting point in your ABM planning process. But once you start to get deeper into strategic planning, you need a more targeted list of accounts you can pursue — ones that are actually available and in search of the products and services you offer.

That’s why you can’t stop short with a TAM calculation. Instead, build your ABM strategy around total active demand.

3 Steps to a More Practical View of TAM

The key to making practical use of TAM calculations is to gather the right data before trying to execute an ABM strategy. You might be eager to align with sales and start targeting accounts more efficiently, but you won’t be able to achieve business results if your strategy is built on a faulty foundation.

Taking the following 3 steps can help you go beyond TAM to gain deep insight into the total active demand for your products and services.

1. Define Your Ideal Target Accounts

Before you can even get a vague idea of your total addressable market, you need to have a clear picture of your ideal customer. That means creating a profile for ideal demographics, firmographics, contact titles, and more.

Just because a company has purchased from one of your competitors in the past doesn’t mean they’re a fit for your ABM strategy. Eliminating accounts that don’t fit your ideal profile from the start sets you on the right path to a practical TAM calculation.

2. Calculate Your Broad Total Addressable Market

Once you have your ideal target profile down, you can start to evaluate the white space that makes up your broad TAM. By working with a third-party data provider, you can obtain an accurate list of accounts in your market that match your target profile.

Having that data lets you come up with the revenue opportunity from your total addressable market. To calculate the broad TAM, you multiply the total number of customers in your market by the average annual revenue you expect from a customer.

3. Use Intent Data to See Total Active Demand

The most important step of this process is when you use intent data to narrow the focus of your total addressable market. It’s not enough to recognize that an account matches your ideal characteristics. What if they just purchased from your competitor a month ago and have no interest in going through the buying process again? They might be a good fit, but you’ll waste valuable time and resources pursuing an account you can’t close.

Quality intent data gives you specific insight into which target accounts are actively in your market. When you and your sales team work together to pursue these accounts, you can be confident that you have a chance of closing the deal. Not only that, but intent data also helps inform your marketing activities so that you can personalize both content and conversations to increase the likelihood of a sale.

Intent data is the key from turning vague TAM calculations into a practical component of your ABM tool—but only if you make the most of it.

Do you know which specific companies are currently in-market to buy your product? Wouldn’t it be easier to sell to them if you already knew who they were, what they thought of you, and what they thought of your competitors? Good news – It is now possible to know this, with up to 91% accuracy. Check out Aberdeen’s comprehensive report Demystifying B2B Purchase Intent Data to learn more.