Executing a strong go-to-market strategy that reduces cost and risk is essential for a company that wants to achieve a successful product launch. Key elements include aligning with customer needs, defining the right market segments and refining value propositions.
Consider the president of Company A, a start-up medical device company that is ready to launch its first product. Here’s a recap of the first 90 days of the launch.
- Day 1: I have this really cool product. It blows the socks off of the competition. All I need to do is give it to our sales team and watch as the money rolls in.
- Day 30: The sales team is worried. They’ve been having problems demoing the product. Even when they get an appointment, most customers aren’t that interested.
- Day 60: Sales are mediocre. Heck, the product should sell itself. Who hired these people? Don’t they know how to sell?
- Day 90: Half of our sales team quit. The board of directors is worried. Investors are getting nervous.
Sound familiar? What went wrong? This company just spent millions of dollars to develop a whiz-bang product, but they failed to invest the money and time to develop a go-to-market (GTM) strategy that defines the markets and customers they are targeting, and how their solutions differentiate from the competition in ways that really matter to those customers.
The Core of a Viable Go-to-Market Strategy
Many companies think that a go-to-market strategy is just about selling the product. This is important, but GTM is much more than that. At its core, a GTM strategy is the way a company aligns to the needs of its customers. It is the game plan that drives the actions of the marketing, sales, and support teams. It integrates voice of the customer, product features and benefits, competitive analysis, pricing, value proposition, competitive landscape, sales training, marketing collateral and many other factors in a comprehensive, integrated action plan. A well-defined plan can take 6 to 24 months to develop and implement, even before the first sales call is made. GTM planning may be shorter for a company that is selling an add-on product to the same market segment and customer that buys their other products. However, for start-ups or companies entering a new market segment, more time, effort, and investment are required.
At a minimum, an effective GTM plan needs to address the following questions:
- What features matter to our customers (e.g. price, quality, speed)?
- What markets do we pursue? Which customers do we target?
- Do we have the distribution channels to reach the target market? Do we have the right types of salespeople? Are they trained? How do we know?
- What is our unique value proposition to each target customer in each market segment? Does our messaging convey our value proposition? How do we know?
- How will our competitors respond? Do we have countermeasures in place?
- Do we have the type of after-sales support that our customers need?
We often hear that customers want everything. They want the best product for the cheapest price. But do they? Do all customers want that? If so, why is there such a strong market for luxury watches? My mobile phone tells time better than my watch. I have a watch for different reasons than I have for a phone. Over the past few weeks, we’ve discussed VOC, market segmentation and conjoint analysis. All three are critical steps to take to understand what product features your customer values.
Define the Right Market Segments
Going after the right customer segment is one of the most important elements in your GTM strategy. For many businesses, companies should consider three key elements in defining market segments: geography, customer type, and customer size.
As an example, consider a start-up diagnostic company with an innovative point of care test for the Flu virus. They can sell this product throughout the world (e.g. in the United States, Europe, China). Some of the potential target customers in each region include hospitals, physicians, and nursing homes. Within each segment, customers vary by facility size and number of patients seen. In this simple model, the company would have up to 18 different market segment combinations. There also may be different competitors in each of these segments.
A successful product launch requires presenting differentiating value proposition in each of the segments. Clearly, there are too many markets to profitably compete for a start-up company. How will this company decide?
Determine the Best Distribution Channel
The first step is to consider the distribution channel – or the way they will sell the product to the customer. A direct sales force, distributors, inside sales team, and the internet are the most common ways to access customers today. Each approach has a unique set of challenges and approaches.
Let’s use our last example. The company selling the Flu test decided to focus on the U.S. market. But they know that there are approximately 5,400 hospitals, 15,000 nursing facilities and 100,000 physician office labs.[1] A direct sales force would be too expensive for all of these segments, so they could elect one or more of the following channels: a direct sales team, distributors, and/or a website.
A key factor to consider in deciding on a channel is how best to get your message to the customer. Some products require a lot of “touch.” For example, labs evaluating a new Flu test may want to try the product first. Therefore, a sales person meeting face-to-face with a customer may be a more effective way to promote the product than marketing the product on a website.
Refine Your Value Proposition
Many companies do not spend enough time defining, testing, and refining their value proposition. Back to our Flu example, depending on the situation, a salesperson may be selling to the CEO, the CFO, the head of purchasing, the head of the lab, or a nurse in a doctor’s office. Each type of customer may make their decision based on different values. For example, the CEO or CFO may want a product that provides a good result at lower cost, while the nurse just wants a good test that is easy to perform. Thus, the value proposition messaging needs to be tailored to each intended audience.
A common mistake is that marketing teams develop their messaging in a corporate vacuum.
They fail to get customer feedback to their messaging and are surprised when they get a poor response. The lesson is that you must engage your customers in a dialogue to understand what truly resonates with them. Like many endeavors, it helps to “trystorm,” which involves rapid cycles of real-time experimentation. In plain language this means try it out! Test your value proposition with real customers and improve the language and delivery of your value proposition. It is critical to collect quantitative proof that can be verified.
Account for the Response of Competitors
How will your competition respond to your new product? Can you imagine them just sitting still and watching you take their customers? Understanding how your competitors will respond to your actions should be a critical component of the GTM strategy.[2] This seems obvious. Yet in a survey conducted by David B. Montgomery, Marian Chapman Moore and Joel E. Urbany,[3] fewer than one in 10 managers recalled having done so, and fewer than one in five expected to in the future. Some of the questions to consider include:
- Which competitors does our strategy pit us against?
- Will the competitors react at all?
- What options will the competitor actively consider?
- What kinds of actions has it always countered?
The key is to focus on understanding how a competitor will respond to your new product. This information can give you a good idea of what your competitor is likely to do and what you should do to countermeasure effectively. Isn’t that what strategy is all about?
Develop and Implement an Effective Action Plan
Finally, don’t forget one last step in the go-to-market strategy. This especially is critical for regulated products to ensure a company complies with all regulations. Developing and implementing an action plan for after-sales support is the way for the customer to gain the most benefits from their purchase. It should enable the customer to make the best use of the product, solve their needs or problems efficiently, and enhance the customer experience. An effective after-sales support process also enables the company to respond quickly to issues that arise.
Executing a strong GTM strategy is key to a winning product launch. Some of the benefits include reducing the time to market, reducing the costs associated with failed launch attempts, reducing reputation risk, reducing the risk of product failure, increasing adoption rate, ensuring regulatory compliance, improving the response rate to customer issues, and enhancing the customer experience. A comprehensive GTM strategy will provide a wealth of knowledge about your company, its markets and customers, and will have a material impact on your results.
[1] American Hospital Association, 2016; Kalorama Physician Office Laboratory Markets, 3rd Edition, 2014.
[2] K. Coyne and J. Horn, Predicting Your Competitor’s Reaction, Marketing Science Vol. 24, No. 1 (Winter, 2005), pp. 138-140.
[3] Harvard Business Review, April 2009.
