Say you launch a product in City A and it has a total addressable market of $20m. Then assume cities B, C, and D are next, and they all have the same population as City A. I know that it wouldn't be $80m - there would be some sort of network effect, and maybe the TAM would be $90m.
How do you come up with the multiplier to account for this network effect? Is it just a total swag? If so, any clue on typical value ranges?
Or, am I wrong, and this doesn't apply to TAM calculations, only revenue projections?
Thanks so much. A bit of an urgent ask if anyone sees this and happens to know the answer.
Just bump my shit up fam
I would use a range (i.e. value sensitivity) of multipliers for product adoption across the various markets in the revenue projections. I have done something like this for modeling an early stage subscriber-based technology that was launching across various markets over a period of time. In my experience, TAM typically isn't something you flex unless it is something like a health plan where you are looking at demographic growth in medicare populations.
For a more theoretical approach on product adoption, I recommend referencing the Bass Diffusion Model which is a differential equation that can be used to map out adoption over a period of time. This is probably way too theoretical and time consuming for what you are looking for.
Maybe some of our MBB friends have better answers?
The Bass Forecasting Model is awesome, but unfortunately I don't have the time for a crash course in this theoretical and intense of statistics. When I get some time... this looks cool. Thanks for the info. The range is a good call.
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