Don’t Start ABM Without Knowing your Total Addressable Market (TAM)

by | Feb 28, 2018 | Blog

Calculating TAM just makes sense

In the middle of 2017, SiriusDecisions unveiled their latest waterfall model: the Demand Unit Waterfall, which starts with Target Demand — defined as a target market containing potential “demand units”. As SiriusDecisions’ Senior Research Director, Kerry Cunningham, explained when unveiling the model, “These are the fundamental units of demand that we really need to go out and identify, attract, engage and qualify if we want to sell anything.”

SiriusDecisions Demand Unit Waterfall
[Photo credit: SiriusDecisions]

In a traditional lead funnel model, defining target markets and groups of potential buyers looking to address a challenge within their organizations (as SiriusDecisions defines “demand units”) used to be done somewhat arbitrarily…working conversion numbers backwards from target revenue up to a large number of leads at the top of the funnel — leads that marketing would be required to fulfill.

As marketing thought leader Matt Heinz noted: “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.”

Enter ABM and the new Demand Waterfall.


Potential pitfalls to effective marketing planning

“If you fail to plan, you plan to fail”
-Ben Franklin

How can you think about moving to account-based marketing without first knowing how many accounts and people (the true buyers) are potentially a good fit? Without sizing your total audience, you’re flying blind:

  1. What if there are only a handful of “perfect” target accounts?
  2. What if you over-estimate (too many accounts & contacts with too broad a definition)? You could bite off more than you can execute against, your conversions are lower than expected, you waste budget, your ABM/demand gen programs start off on the wrong foot, and you miss revenue targets.
  3. What if you under-estimate (too few accounts & contacts)? You may under budget, your programs aren’t large enough to fill the funnel, your sales organization criticizes the limited lead flow, and again, you miss revenue targets.


Marketing + Sales alignment is key (not just for ABM)

Beyond helping to scope your ABM budget and right-size your ABM programs, working with Sales to define your ideal customer profile (ICP), calculate TAM, and jointly plan for ABM campaign execution — this is the formula we’re seen really helps drive alignment between Marketing & Sales. This is how successful, modern companies drive revenue. After all, if everyone in the boat has planned for the journey and is rowing in unison, you can conquer the high seas and avoid getting caught in the shoals.

While the 2012 SiriusDecisions Demand Waterfall included specific stages defined for Marketing and Sales, the new model emphasizes a cohesive revenue-driving team “We”:

  • We Target
  • We Suspect
  • We Connect
  • We Evaluate
  • We Know
  • We Expect
  • We Won!
SiriusDecisions Demand Unit Waterfall Stages

[Photo credit: SiriusDecisions]

Working together to define and agree on the ICP — which drives your TAM calculation — helps eliminate time-wasting fingerpointing and the budget-wasting false starts that can occur when marketing & sales aren’t aligned around demand targets. Once you agree on the Demand Units you’re looking for, how do you determine who may actually be in-market for what you are trying to sell?


Beyond your addressable market…who’s in market: intent

In addition to the new Target Demand stage, which reflects the increasing number of people involved in today’s B2B buying teams, (An avg. of 6.8 people in 2017 compared with only 5.4 in 2016, according to Harvard Business Review), the latest SiriusDecisions Waterfall also added Active Demand.

This stage encourages demand gen marketers to take advantage of powerful new martech tools for social listening and determining intent, from vendors such as The Big Willow, which can help marketing and sales teams catch people earlier in the buying cycle.

As Cunningham noted, “predictive analytics and intent monitoring are helping us…[identify] companies that are currently in the market or should be in the market for solutions. We’re now able to identify, target and engage with these buyers very early in the process.” Enriching intent data with fresh and complete contact data makes for a very powerful, actionable combination for marketing and sales teams.


Case study: TAM analysis in action

When clients are working on their demand generation strategy and planning, performing a total audience measurement is a critical component. Recently, a Marketing Manager at a SaaS company was working his quarterly marketing plan with the company’s CMO and Sales team. He needed to determine how many companies and contacts were available in their target market–for two products that addressed two different market segments–in order to define campaigns, create a budget, craft appropriately personalized messaging, and determine an email cadence for each product line.

The Marketing Manager knew which companies to target by size, industry, and technologies. He used DealSignal to generate an initial list of approximately 1000 companies per product line from our database of approximately 5 million companies, and then refreshed the firmographics of those companies in real-time. He then ran an on-demand account discovery job to scour over 30 third-party data sources and the web to ensure he had a complete list. With account discovery, his lists increased to around 1500 companies per product line.

He had a large set of criteria for contacts to target. We conducted a collaborative 45-minute workshop to refine his contact criteria into three key target personas. Contacts that fit a digital transformation leader persona would be the most relevant, most likely to convert, and top priority. IT contacts with 4-6 key skills related to software development and testing would be very relevant and a high priority. The third persona consisted of leaders of product and operations teams with a customer experience focus, who would be important, but the least relevant and least likely to convert.

We ran real-time lead discovery and found 1000s of contacts that met each persona, using the fine-grained criteria to rank contacts by relevance. He was able to craft much more personalized messaging by persona, launched his email campaigns on a weekly basis, and experienced responses and opportunity conversions within days. We were able to correlate the likelihood of response and conversion to the relevance score. Seems simple, but knowing your TAM, crafting good campaigns, and focusing on consistent execution with the most relevant leads yielded fantastic conversion metrics.

The results? As the Marketing Manager notes:

“DealSignal gave us clarity around our complete, total addressable market and helped us identify key themes that led to the creation of a number of key personas within our audience. That then allowed us to create highly-targeted marketing campaigns, which not only improved the quality of our conversations, but had a positive effect on every subsequent step of our sales process.”

Read the full case study


Beyond ABM: detailed personas help drive marketing/sales conversions

As was noted several times in presentations at the recent B2BMX conference, people buy from people. Therefore, you need more than just faceless data on potential audience size or a blind list of accounts to drive conversions. You need the actual names, titles, and full contact details of the people who are likely in-market for what you sell, and you need to be micro-targeted about using the insights you gain to know who is a good fit for your product or service, and why.

Sure, many [title types] at [x size companies] in the [x industry] need [widget you sell], but to successfully convert prospects, your team must be prepared to tailor its approach to address each specific prospect’s pains, as well as the current dynamics within their company, to explain why the buyer needs your widget. Fine-grained ideal customer personas with enriched contacts can provide your team with the insights they need to personalize their approaches and drive more revenue.

Rob Weedn is Founder & CEO of DealSignal. Having worked in B2B marketing and sales for many years, Rob is passionate about helping revenue generating teams meet their goals by providing them with the immaculate contact and account data they need to target, engage, and convert prospects effectively. Follow Rob on Twitter @robweedn.

How big is your potential target audience? Find out with a free TAM analysis!