How to Effectively Market Your SaaS Tool by Understanding Your Total Addressable Market (TAM)

Are you feeling lost about how to promote your new software? Maybe your ads aren’t converting, or you’re reaching out to potential clients who just aren’t interested. 

This is a common challenge in the world of Software as a Service (SaaS), but there’s a way to steer clear of it: by identifying and focusing on your Total Addressable Market (TAM).

Let’s break down what TAM is, why it matters, and how you can use it to shape your marketing strategy—step by step.

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What is a Total Addressable Market (TAM)?

TAM refers to the total potential audience for your product or service—essentially, the group of businesses or customers who could benefit from what you offer and are willing to buy it.

For example, imagine you’ve developed an application to help small to medium-sized businesses (SMBs) manage their finances more efficiently. Your TAM would not include every single business out there; it would focus on SMBs that require financial management tools but may not have the resources to develop one in-house. By zeroing in on this specific audience, you can tailor your marketing strategies to meet their unique needs.

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Why Is Understanding Your TAM Important?

Marketing can be costly, especially when you’re competing in the crowded SaaS landscape. Every ad, email, or outreach effort comes with a price tag. If you’re spending your budget on the wrong audience, you’re throwing money down the drain.

Let’s consider a scenario: If you run ads targeting “businesses” in general, you might reach a wide array of companies, including those that wouldn’t benefit from your software at all. For example, if your software is designed for marketing teams, targeting every business could lead to reaching companies that don’t have a marketing department at all.

By defining and honing in on your TAM, you can ensure that your marketing efforts are focused on the companies most likely to convert, thus maximizing your return on investment.

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How to Build Your TAM List: A Step-by-Step Guide

Let’s take a practical example of a company called EasyFinance, which offers a financial management tool designed for small and medium-sized enterprises (SMEs) in the EMEA region (Europe, the Middle East, and Africa). The software costs around €500 per year.

Step 1: Analyze Your Existing Customers

Start by looking at your current customer base. Identify your best customers—not just in terms of revenue but also their engagement and satisfaction levels.

1. Customer Data: Gather information about your existing clients. Suppose EasyFinance has 200 active customers across the EMEA region. Here’s what to collect:

   • Company Name
   • Website
   • Number of Employees: Focus on SMEs, typically ranging from 1 to 500 employees.
   • Industry: What sectors are they in? For instance, retail, hospitality, or consultancy.
   • Annual Revenue: This helps understand their financial capacity.
   • Duration as a Customer: How long have they been using your software?

Data Collection: Create a spreadsheet to enter this information. Here’s a sample layout:

3. Identify Patterns: Look for common characteristics among your best customers. You might discover that most are in retail and consulting, with a company size ranging from 20 to 100 employees. This will inform your future marketing efforts.

Step 2: Identify Lookalike Companies

Now that you’ve analyzed your existing customers, it’s time to find companies that resemble them.

1. Use Data Providers: Utilize tools like Zoominfo, Clearbit, or LinkedIn Sales Navigator to locate companies similar to your best clients. For instance, if your best customers are marketing agencies with 20-100 employees, these tools can help you find other agencies within that range.
2. Search Parameters: Input relevant search parameters such as:
• Industry: Focus on retail, consulting, and logistics.
• Employee Count: Target companies with 20-100 employees.
• Location: Filter by EMEA countries to keep your focus relevant.
3. Sample Output: You may generate a new list of potential clients that looks like this:

 

Step 3: Verify the Information

Not all data collected will be perfect, so it’s essential to manually verify the information you’ve gathered.

1. Research Each Company: Visit their websites and confirm details such as:
• Number of employees
• Industry classification
• Contact information
2. Qualitative Check: Evaluate if these companies align with your ideal customer profile. For example, if a company claims to be a consultancy but primarily offers non-relevant services, it may not be a good fit.

Step 4: Segment Your TAM List

After creating your TAM list, you should segment it to focus your marketing efforts.

1. Tiered Segmentation: Group companies into tiers based on their potential value and alignment with your product. You might segment like this:
• Tier 1: High-Value Targets (200+ employees, €1M+ revenue)
• Tier 2: Mid-Market Companies (50-200 employees, €500K-€1M revenue)
• Tier 3: Small Businesses (under 50 employees, less than €500K revenue)
2. Targeted Marketing Strategies: Use different marketing approaches for each tier:
• Tier 1: Consider high-touch outreach, personalized emails, and executive webinars.
• Tier 2: Use automated email marketing campaigns and targeted ads.
• Tier 3: Focus on cost-effective digital ads and social media outreach.

Step 5: Align Your TAM with Your Marketing Strategy

Once your TAM list is segmented, use it to inform your marketing strategy.

1. Upload to CRM: Import your TAM list into your Customer Relationship Management (CRM) system. This allows your sales and marketing teams to have easy access to the data.
2. Targeted Advertising: Use the segmented list for targeted ad campaigns. For instance, on LinkedIn, you can upload your Tier 1 list and run ads specifically for those companies, increasing the likelihood of engagement.
3. Tailor Messaging: Craft messaging that resonates with each segment. For Tier 1 companies, highlight advanced features that solve complex problems. For Tier 3, emphasize ease of use and affordability.

How to Implement Your TAM List in Action

Once your TAM list is ready and segmented, you can leverage it in your advertising campaigns across various platforms. For instance, in Google Ads, you can create specific ad groups targeting keywords that resonate with your identified segments. For example, if you’re targeting Tier 1 companies (larger SMEs), you might use keywords like “advanced financial management tools for businesses” to attract high-value clients actively searching for comprehensive solutions.

On LinkedIn, you can upload your Tier 1 list to run targeted ads specifically aimed at decision-makers within those companies. This could include personalized InMail messages promoting a free demo of EasyFinance, highlighting features tailored to larger enterprises, like multi-user access and advanced reporting. This targeted approach increases the chances of engagement and leads.

In Meta Ads (formerly Facebook), you can utilize tools like Clearbit or Metadata to create custom audiences based on your TAM list. For instance, you might design a campaign showcasing user testimonials and case studies from similar-sized companies in your TAM. By showcasing how your product has successfully helped other SMEs, you can create a sense of trust and relevance, driving higher conversion rates. For example, running a campaign targeting companies in the retail sector and featuring a success story from an SME retail client can greatly enhance your ad effectiveness.

By effectively implementing your TAM across these platforms, you can ensure your advertising efforts are focused, efficient, and more likely to convert, ultimately leading to increased sales and a stronger market presence.

 

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Conclusion: Build Your TAM to Build Your Success

Understanding and effectively utilizing your Total Addressable Market is crucial for any SaaS company, especially one targeting SMEs. By building a focused TAM list, you can streamline your marketing efforts, ensuring that your budget is spent on the right audience.

This process might take time and effort, but the rewards are significant. When you know exactly who your ideal customers are, your marketing becomes more effective, leading to better conversion rates and higher customer satisfaction. So, take the time to understand your TAM, and you’ll find that your marketing efforts become much more targeted and successful.