What a Go-To-Market Strategy for Startups Should Look Like
Jason Quey
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“Scaling growth before having product/market fit is the fastest way to kill your startup.” - Sean Ellis, regarded as the father of “growth hacking” and former head of growth at Dropbox, Eventbrite, & LogMeIn.
Early-stage products are in a vicious catch-22.
Whether you have a new product, growth has stalled, you’re entering a new market, or you bought a startup, sometimes it feels like there are two options:
It’s like you’re stuck between a rock and a hard place, it appears to be a lose-lose situation. Scaling growth before product-market fit is like pouring water into a leaky bucket. If you’re one of the lucky few, the bucket will hold enough water to stop the immediate threat of death. But this is terrible for sustainable growth.
How did they grow from idea to scale?
Simply put: you need to invest in a go-to-market strategy.
In this article, you’ll see the go-to-market framework we use at Growth Ramp. By partnering with companies that have early-stage products, we see patterns the average founder or marketer does not. There’s a lot to unpack today.
While you can go through this article without diving deeper, there are some basics you should understand:
You should also look at the five items above after reading this article if you haven’t fleshed out those elements of your GTM strategy.
Okay, enough prep work. It’s time to get down to business! Let’s take a peak behind the curtains to see:
We’ve got a lot of exciting things ahead, are you ready to do this?
First, let’s define our terms:
A go-to-market strategy is all about crafting a custom growth plan that works for you to get new customers at scale.
With 72% of products failing to hit their revenue goals, the odds are not in your favor. It’s a high cost of failure too, as companies wasted $260 billion in the United States alone. The right go-to-market plan will help you navigate these choppy waters, get predictable growth, and avoid expensive mistakes.
Most companies create their go-to-market strategy when:
In other words, the primary emphasis of an effective go-to-market strategy is about making strategic decisions before reaching product-market fit.
Once you reach product-market fit, customer acquisition becomes easier. Why? Customers use your product longer. They refer other people to your product. And they will gladly pay you a premium.
Until you hit product-market fit, you should invest in a proper go-to-market strategy to get the confidence you need to know where to best invest your time and money to increase your ROI.
One of the most common errors I see startups make is they fail to get the fundamentals right (or they never revisit them).
At this stage, you should have:
Here’s how to create a go-to-market strategy, step-by-step.
An efficient go-to-market strategy should answer the following questions:
There’s a temptation to take every customer you can get when starting out.
But not every type of customer receives the same value for your solution. And some customers will hijack your product and do more harm than good.
Justin.tv was built for people to livestream their lives. Within a year, it was used to stream copyrighted content. Needless to say, these were not the right customers.
Start by focusing on the one customer type you believe will receive the most value from your solution.
The exception is if you are a two (or more) sided marketplace. In which case, you should choose only one customer persona for each side of the market.
It’s likely the hypothesis of who your best customer persona actually is will change as you grow. That’s a natural part of the process for early-stage startups.
Podia began by targeting coaches. Once Spencer Fry reached 100 customers, he learned his best customers were content creators, not coaches.
Justin.tv later discovered their best customers were video game players.
Yes, you may “lose out” by missing your target customer in the beginning. But focusing on one customer will help you from changing your positioning, marketing strategy, and product roadmap with each new persona you come across.
After picking who you will target, you will want to decide what acquisition channel will most likely produce the highest ROI.
The best channel will depend on:
To start, you should consider each channel. What would success look like?
Once you have each channel mapped out, you will want to prioritize which channel you believe to be the most effective.
To prioritize your channels, score each channel from 1 to 5 in these three areas:
This prioritization is known as the “ICE” framework.
Once you’ve given a score, add up the numbers and rank your channels. In the event of a tie, prioritize the test with the highest Ease score. It’s better to attempt more tests because you don’t know if a test will be a success and by how much until complete.
While multi-million dollar businesses have come from 1-2 of these channels, there’s debate about the scalability of each channel.
Virality only works if there’s a broad enough appeal to your product.
Network effects also needs broad appeal. It also needs a mechanism that increases value with each participant in the network.
SEO has a limited number of keywords to target. There’s also a saturation of the number of listings in Google for a keyword.
Paid ads & PPC also has a limited number of profitable adspace.
M&A has the scalability of whatever channels it has, but there may be maintenance necessary for each business.
Sales is only scalable because the potential revenue per client is high and thus you can hire more sales reps.
Business development/partnerships is like sales, though you’re limited by the number of partnerships and how fast they grow.
And of course each channel can only scale to the demand of your market.
Once you have an established system, these seven channels require very little added effort to continue scaling. For example, once you have a business partner, they can potentially send you each new customer they get.
Those channels are:
These seven channels require either one of the first seven scalable channels, or hiring a larger team to make it scalable.
For example you can scale content through paid ads or SEO. You can also promote your content on Reddit or Youtube, which occasionally goes viral to create enough ongoing traffic on its own. But by itself, content doesn’t do you any good.
A network effect is the phenomenon that happens when the value of a user increases by the number of other users using the product.
What was the value of the first fax machine or first user on Facebook? The value is almost nothing until others join the network.
This is where Metcalfe’s law comes into play: the value of a network is equal to the square of the number of connected users in the system. So while 12 = 1 and 22 = 4, the value starts ramping up fast even going from five users (52 = 25) to 10 users (102 = 100).
While it’s hard to get working, a network effect is incredibly powerful when in functional.
SEO is the process of improving the ranking of your content for keyword phrases your customers search for using search engines.
The three largest search engines people focus on are Google, Youtube, and Amazon. Although there are similar principles when using each platform, there are different distinctions for finding success.
People love SEO because once you have a successful flywheel, it often requires very little time or money to get ongoing results. Something you wrote five years ago can still give you new customers, while after you spend money on ads, that’s all you get. SEO also uses content, allowing you to educate your audience to become better customers and build your brand.
That said, it is challenging and often time-consuming to get the SEO flywheel spinning. Most SEO agencies say it takes 6-12 months before you get results. While SEO takes time, we’ve helped clients get traffic in 2-4 weeks on new sites and paying customers in 3-6 months, so it’s worth asking what an SEO company means by “results.”
Again, the real value is sticking with SEO. Growing from 0 to 25,000 visitors per month might bring you ~60,000 total people in a year. Then if growth stays flat at 25,000 visitors/month, you’d get 300,000 people coming every year!
Paid advertising is one of the largest traction channels with companies paying hundreds of millions of dollars every year. This is because *if* you know what ads lead to what results, you can create a near endless growth loop. Imagine putting $1 into a machine and getting $3 back. You’d do this daily, right?
Of course, that’s a big *if.* If you don’t know the ROI of your ads, they can get real expensive, real quick.
Paid advertising includes search ads, social media ads, banner/display ads, and native ads. If you branch into offline channels, this includes billboards, (satellite) radio ads, TV ads, print ads, and mailers.
Successfully scaling a growth channel can be hard if you don’t know your go-to-market strategy. Yet if you buy a company with customers and established growth channels, then you can skip much of the marketing or sales headache!
Mergers & acquisitions (M&A) is all about buying and selling a business or growth channel to get customers at scale.
After your go-to-market strategy, you could better identify what websites bring in the traffic you want. If you have a sales CRM, you might try to buy a website with content that ranks for “best sales CRM” in Google.
You could also buy a business who has your customers and cross-sell your product. If you have an AI copywriting creation tool, you could buy landing page software as you need copywriting on your landing page.
This channel can be expensive when starting out, but it doesn’t have to be. While you can buy businesses essentially for free such as with seller financing, usually there are other costs. For example in seller financing, you may pay an extra 20% every month.
Still, this is quite a powerful investment if you do it right! Private equity firms built a multi-trillion dollar industry around buying, fixing, and selling companies.
Virality isn’t just when your cat video hits the front page of Reddit or Youtube. It’s about optimizing the time it takes a customer to invite or refer more friends to your product. This is called a viral loop.
Viral loops are common when the marketing campaign focuses on products with broad and high interest. This is one reason they're common in network effect products like Facebook, Uber, and LinkedIn, which have broad appeal and increase in value with each new user added.
Sometimes you need to hand-hold a potential customer to make money, which is often done through sales. The sales process includes generating leads, qualifying them, and turning them into customers.
As a go-to-market strategy, sales is one of the fastest paths to getting new customers. And it’s not uncommon for startups to use sales in addition to another acquisition channel.
Sales often requires you to sell high-ticket products so your profit margin works out. Usually the average value of the product should be no less than $3,000 a year. Here’s the math:
Let’s say you pay a salesman or woman $80,000-$100,000 a year after bonuses. With a 3:1 lifetime value (LTV) to the cost of acquiring a customer (CAC), that means you need $240,000 to $300,000 in sales a year. At 100 sales a year, that’s about $3,000 in annual contract value (ACV). Or $299/month for a monthly subscription when you account for churn.
You may find it best to start by doing sales first, then switch to another acquisition channel once you hire someone else. This is because it’s one of the easiest and fastest ways to get traction and scale if your product is value high enough.
This channel is occasionally called “direct sales” to avoid confusion with making revenue or making a sale.
Business development is focused on exchanging value through partnerships. This includes influencer marketing, affiliate marketing, and integrating your product with other products that promote you to their customers.
Business development is like sales, but focused on a partnership rather than selling directly to your customer.
From traditional press releases, to PR stunts and working with blogs, press can help you get potential customers, improve your social status, and increase awareness.
What gets a reporter’s attention? Here are four of the most common opportunities for startups:
This means you need to provide their readers with:
The more you can combine together, the more attractive your story. For example, if you do a PR stunt which helps you get your first 10,000 customers, this becomes a new attractive story. Add some original data where those 10,000 customers came from and you have a more powerful story to share.
If you want new customers through press, you will usually do better with relevant niche publications than large publications.
To scale press, most pair it with SEO and occasionally with ads. You can also keep creating more press-worthy stories.
Do you have a team of engineers? You can leverage their skills by building tools and resources that reach your customers.
Some common tools include calculators, WordPress plugins, and educational microsites. You can then collect leads through these tools and get people to buy your product. Sometimes a side project becomes successful enough to be a main product.
Engineering as marketing is often a major competitive advantage because you’re giving something free that your competitors might charge for. That said, this approach requires you to market the new tool too.
There’s never been a product that serves everyone. But social media giants like Facebook, YouTube, and Instagram are as close as you can to reaching everyone. Even smaller sites like Reddit can help you reach thousands (if not millions) of customers with a single post.
Many social media sites have a low organic reach until you’ve built a larger brand. This is why most startups focus on paid ads and community marketing. But don’t overlook the connections you already have on those sites.
Keep in mind that while it would be great to “go viral,” the odds are stacked against you. You have a much better shot of creating constant wins, or using platforms that scale through SEO.
Community building involves investing in direct connections with your customers and potential customers. Developing deeper customer relationships can result in increased activation, retention, and referrals.
But if you don’t have customers, you can become a prominent member of another community. Forums, Facebook groups, and Reddit communities (called subreddits) are some of the fastest ways to build relationships in your industry.
Building your own community is difficult, but the rewards can be massive. Reddit, Wikipedia, and Stack Exchange are largely built on the community they’ve created. This is also one of the few ways to scale community marketing.
Email marketing is often declared to have the highest ROI. Not only can you use it to find new customers, you can also use it to engage (activation), retain, upsell (revenue), and generate referrals.
Because messages from your company are right beside updates from friends and family, email often feels very personal. When done wrong, email will also make people feel angry, damage your brand, and decrease future email deliverability rates.
Keep in mind it’s also difficult to get a large enough email list to acquire customers. By itself, email marketing cannot grow unless you have some mechanism for others to share and join your newsletter.
But it is possible to start just by emailing a few interested friends. Newsletters like The Hustle, Startup Digest, and Product Hunt all began as emails sent to friends, which now have thousands of customers.
Email marketing is also easier to automate. Many email marketing tools like MailChimp, ConvertKit, and Active Campaign allow you to build automation email sequences.
Typically email marketing is paired with SEO or content marketing to build a list.
Almost every industry has numerous trade shows and events. And since everything is in-person, you have a rare opportunity to meet journalists, industry influencers and bloggers, customers, vendors, competitors, and partners in one place.
Simply setting up a booth will get you some results. But to get the maximum leverage, you need to be proactive. Set up meetings in advance, host networking dinners, and determine your strategy to get people to come to your booth.
Becoming an event speaker is also an excellent opportunity to generate new customers. Not only will this increase your brand, select people are paid to speak. And if you want to go all-in on this channel, you can host your own event.
Trade shows mix well with sales as you can generate leads, qualify, demo your product, and close customers all in one trip.
When was the last time you read an article online? How about the last time you heard a podcast? Or perhaps watched a video?
Content marketing is everywhere. From articles like the one you’re reading to infographics, videos, and podcasts, content marketing spans a wide range of the acquisition channels.
When done right, content can help you educate the market, build an email list of exciting prospects, land publicity, build relationships, and much more. It’s also one of the best ways to increase your brand. Popular venture capitalists like Mark Suster, Paul Graham, and James Currier are so well-known because of their blogs.
Unfortunately, content marketing often requires knowledge of another channel to become successful. As such, it’s often slower than other acquisition channels.
SEO and social media tend to be the two most common ways of getting traffic to your content. Email marketing is also common to get people to become repeat visitors to your content. But you can also create a paid content funnel using ads, an article, and premium content to get an email address.
“Strategy is about making choices, trade-offs; it's about deliberately choosing to be different.” -Michael Porter, regarded as the father of modern business strategy.
There is more than one way to strike it rich when digging for new customers. While it’s not easy for me to tell you what’s the best marketing plan, here are 5 items I think about when consulting with our clients:
At this stage, it’s okay if your acquisition channel isn’t immediately profitable. You may make $3 an hour. Or you may lose more money than you gain. The road to becoming a million dollar startup has many potholes when you begin.
The goal of a go-to-market strategy is to start getting a better idea of who your ideal customers are, what they value, and discovering what it takes to make your growth more profitable.
Right now you don’t need to worry about how profitable it is to scale your marketing. But it is worth taking a few minutes to think through what it would take to make it work.
Let’s say you plan on spending 30 minutes a day on Reddit for the next 90 days, not including Sundays. That’s 77 days, or 38.5 hours. You estimate you could hire someone to take over this procedure at $15 an hour after taxes and benefits. So this experiment if successful will cost you about $577.50.
If you want a 3:1 lifetime value (LTV) to the cost of acquiring a customer (CAC), that means you need $1,732.50 worth in new customers. If you estimate the average LTV is $300, that means you need six customers.
How will you track the success of this campaign? Unless you are only running one campaign at a time, you need some way to track your metrics. You can set up a promo code for people to use to track their purchase. That said, I do not recommend discounting your product, unless you want to become the low-price leader of your market because it lowers your brand value.
Again, it’s fine if you’re cost of acquiring a customer isn’t profitable right now. This step is to help you decide if it’s worth scaling once you hit product-market fit.
Every channel will take time before you find success. And with so many options you can mix-and-match, it’s tempting to lose focus and chase after every shiny marketing object that comes your way.
But not every channel is equal. Different products, skills, and resources will lead to different results. What works for one startup may not for another. As PayPal founder Peter Thiel once said,
“It is very likely that one channel is optimal. Most businesses actually get zero distribution channels to work. Poor distribution - not product - is the number one cause of failure. If you can get even a single distribution channel to work, you can have a great business. If you try for several but don’t nail one, you’re finished. So it’s worth thinking really hard about finding the single best distribution channel.” (Source)
There’s a balance you need to strike between spending too many resources on a bad channel and not enough resources on a lucrative channel.
To start, I recommend investing three months at no more than $500/month for testing each approach.
At this stage you are not trying to get a lot of traction. Instead you’re looking for data to tell you how much the channel could move the needle.
Because tests often take time to run after they’re set up, you can run many experiments at the same time.
Unless you are running an experiment by yourself, it’s helpful to map out:
At this stage, it should not be elaborate. Keep it simple. The more moving parts, the more you increase your odds of failure.
Think of what’s the least amount of steps to see results. Or if you prefer hijacking lean startup lingo, what’s your minimum viable marketing experiment?
Once your experiment is successful, then add extra layers of complexity. In addition to reducing the odds of failure, you can measure the effectiveness of each new step.
Let’s recap what should be in your go-to-market strategy.
If you want to take this all on yourself, or you have the right marketing team to fully support you, the best next step is to create your go-to-market strategy and execute on it to scale your growth. Test the channels and see what’s working for you.
But if this feels like a job you want to delegate, partner with Growth Ramp and let us do the heavy lifting for you.
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