Total Addressable Market: Part 2 (Groupon, RentTheRunway, Airbnb)
Groupon
Their market is the total ecommerce market on the internet. Because of how simple it is to comparison shop on the internet, people are always looking for the best price on goods and services. The term “coupon” has about 3.2 million monthly searches, according to Google.
In addition, Groupon is a marketing platform for businesses. Rather than a business putting up a website and paying Google for traffic, they go with Groupon, and they only pay when Groupon sells it’s vouchers to its already engaged platform.
Plated
Plated’s market are urban professionals that are busy, but health conscious.
Airbnb
Airbnb can take on all of hospitality. From the small Bed and Breakfasts to Hostels to International Hotels.
Rent the Runway
Their market are young, fashion conscious females in urban areas. Since Rent the Runway engages them from a younger age, they build goodwill early on that they can cash in on when they have real spending power.
Takeaways
None of the companies that we feature are proud enough to say that their TAM is everyone. This is for several reasons. First, it might not be cost effective to price your offering low enough for everyone to have access to it. Luxury goods brands are a great example of this. Their prices exclude the masses and that exclusivity is what drives the higher prices. A virtuous circle.
TAM is also not the immediate market, but the market that would be in a few iterations from now.
Exercise
- What is your TAM?
- Is it targeting a certain group? If so, why start with this group? Do they already have something similar and you are creating a competing product?
- What is your customer avatar? If your customer had a name, what would it be? What would be their hopes and fears? How is your product handling them?
Experience with past Citadines Group clients
We had a client that repaired mens and womens shoes. Initially they believed that their customers were regular people. After running the numbers, they realized that it was not economical to focus on regular consumers and shifted their focus to businesses. Through customer development, they discovered that online consignment stores turn away 75% of shoes that they receive. By partnering with these companies, they can fix up all the “unsellable” shoes, resulting in these consignment stores being able to make money on shoes they previously were not able to. With these sorts of relationships, they were able to cut to cost of acquisition, and increase overall revenues.
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