5 Factors to Defining Your Total Addressable Market (TAM) in the Water Industry
The water industry is fragmented — there’s a need to address over 70,000 water & wastewater investment decisions driven by factors ranging from aging infrastructure, regulations, cost savings and population growth. To always be in front of your most ideal customers it’s important you have a strong understanding of what utilities you should target- in other words, to define your Total Addressable Market (TAM).
A lot of time can be burned chasing water utility prospects that aren’t strong customers, or won’t ever be customers. A Total Addressable Market is the market of customers that need and can buy your product or solution. There are five important factors to define in your TAM which will ensure your sales team is targeting the right municipal utilities.
1. What are your customers pain points that your technology can uniquely address?
Every water technology company has a specific pain point they cater to. The more targeted the pain point, the more likely you are to get their attention. For example, if your product targets water loss customers, look for utilities that have a water loss greater than 15% rather than a utility that just talks about conservation. Another example is looking at a utility that will have to meet new nitrogen and phosphorous permit limits in the next 3 years. They need to install specific equipment to be able to meet those limits such as Biological Nutrient Removal (BNR). This will increase the likelihood of securing meetings with the utility.
2. What regions have drivers that encourage utilities to buy your product?
Ensuring that the states you are looking at have projects for your specific product is important in converting sales. Since the drought in California, the state has mandated that every single household needs to be metered. This means an obvious target for metering companies is the state of California. Hurricanes and natural disasters will always be a problem for Texas and Florida. Cities want to be more prepared and always have to fix damaged equipment, which leads to an opportunity for many different types of water technology companies. Another hotspot for water technology company products is in areas of intense population growth, which leads to investments in water/wastewater infrastructure — specifically around Dallas, Houston & Austin.
3. What policies inhibit or accelerate the purchase of your technology in certain states?
Some states can have policies that make your water technology more favourable or that will change the way you sell your product. For example, selling biosolids technology in Connecticut differs from other states because the state doesn’t have land application permits. To optimize your work with WatrHub, it can be best to focus on states you already sell in and then expand the scope based on research.
4. What sizes of utilities do you have the most success with?
Look at your previous sales wins and losses and try to find some common patterns in which size of utilities you most often convert to your sales pipeline. Size criteria can be anything from population served, number of service connections or flow rate (MGD). Clients find that they can have more success with smaller utility customers because bigger utilities can have ties to certain companies beforehand and there can be more competition with larger cities when bidding in an RFP. Larger cities also have longer sales cycles because of more bureaucracy to go through. Smaller to medium sized utilities can be better targets because there are more of them and its harder for sales representatives to keep track of their activities. They also have faster sales cycles.
5. What regions have strong data availability?
Some states have more information than others on their water utility websites. Since WatrHub collects information from utilities, we cannot access information that is not available or posted. Therefore, it becomes more difficult to identify whether those utilities meet your TAM criteria. Gulf states like Mississippi, Louisiana, and Alabama tend to have a very low digital presence.
Knowing your TAM inside and out is your first step to success in building a winning sales strategy. It ensures you don’t waste time on prospects that don’t make sense, or that can’t use your product. Clients that work with WatrHub see that up to 94% of their prospects meet their TAM criteria, which leads to a fast sales cycle. To have the best results, remember to examine where you have had the most success, why utilities buy your product, and to focus on your most promising targets. When clients first sign-on with WatrHub, they are often surprised at what the data says about their market and what utilities to target, so it’s important to keep an open mind.
For example, WatrHub worked with FATHOM, a water billing solutions company, to develop 24 distinct criteria including the size, growth rate, and water loss to define their total addressable market. This narrowed down the universe of 50K water utilities into a few thousand utilities so the sales team could focus their energy and accelerate their sales pipeline. Ultimately, it resulted in a 3X acceleration in Sales Pipeline conversion after 18 months.
