GTM Strategy: One Framework to Rule Them All
Go to Market Strategy Part 1 of 2
Hello, and welcome to the essay #1 on go-to-market.
Last month, I wrote about the topic positioning a product and concluded it with an online session at the month end.
To receive this newsletter weekly in your email, consider subscribing 👇
If you aren’t familiar with the newsletter and online sessions, you can read about it here
Let’s start with the definition
A go-to-market strategy (GTM strategy) is a plan to reach target customers. GTM strategy provides a blueprint for delivering a product to the end customer. It takes into account many factors such as positioning, pricing and distribution.
Thinking about go-to-market (GTM) strategy is overwhelming. So many options and things to do, so less time and resources.
Which is why, it’s important to study and understand all the factors that can affect GTM. This will ensure you can evaluate all options before deploying your time and resources.
For the scope of this post, we will only cover software products. The framework can be applied to hardware products as well.
If you are a beginner to GTM, there is no better way to start other than McCarthy’s 4 Ps of marketing. The 4 Ps are product, pricing, place and promotion.
Product — what you are selling to the end consumer is the product.
Pricing model — Pricing model is defined by the way you charge and how much you charge? Some of the pricing models are freemium, ads, transactional, free trial etc.
Place — Place is how your business gets its products in front of interested consumers. It can be brick and mortar or digital. Place for software products is an app/website.
Promotion — Promotion is sharing relevant product information to consumers to make a sell. Promotion includes advertising, PR, social media marketing, email marketing, search engine marketing etc.
Let’s take a product line such as education tech products to understand it better. Some of the notable products in this domain are Udacity, Coursera, Simplilearn, upGrad. Each one is different from the other. So I will pick Udacity to explain 4 Ps.
Here is how home page of Udacity looks like.
Here is how 4 Ps can be defined:
Product : Online professional courses along with career support and mentorship.
Pricing Model : Hybrid of freemium and subscription model. Some smaller courses are free. To earn a degree or specialisation, you need to pay $150-200 per month for a specialisation. You can finish the specialisation in 4-5 months. So the fee per course is ~$ 1,000
Promotion : Udacity sells its courses through digitals ads (FB, Google, LinkedIn) to the B2C segment. For B2B, it has a enterprise sales team. In the digital age, promotion is often referred as Channel.
Place : All courses of Udacity are available through its website and app, udacity.com.
Please note that there are other modified frameworks like 7 Ps, but I have found the 4 Ps to be effective enough.
Now that you have understood 4 Ps well, let’s make it even more effective.
Making 4 Ps More Effective
There are two key add-ons which make the 4 Ps more effective
Your market : 4 Ps have to be done keeping market in mind. Market is so fundamental that we omit it in our discussions.
Going back to the example of Udacity, Udacity operates in both B2C as well as B2B market. In B2C segment, the TG is students/ professionals looking to skill-up. In B2B, it’s companies looking for learning and development of their employees
The fit between 5 factors : When you study the fit between these 5 factors, it helps you weed out bad ideas around GTM very quickly. Let me explain this.
Fit between Factors
There are different ways/methods/alternatives to the factors listed above. To take an example, promotion can happen through FB advertising, SEM, linkedIn ads, offline banners, cold calls, on ground sales etc.
Evaluating fit between factors helps us eliminate the suboptimal options and narrow down to the right ones.
For software products, the place becomes irrelevant because all software products are sold through a single place (website/app). So we will ignore place while discussing the fit as there isn’t any option to eliminate. If there are multiple options to place, please feel free to include that (like discussed at the end of this post for hardware products).
So let’s study the fit between product, pricing model, promotion, and market. The diagram is inspired by Brian Balfour’s 4 fits of growth, who wrote about it while at Hubspot as VP of Marketing. While brian discusses the 4 relationships, I believe there are 6 relationships.
Let’s determine the viability of the current strategy of Udacity.
Product - Market Fit : P/MF is the most important one as already covered here. Without it, there is no point going after growth. Here is a question to ask for determining P/MF in case of Udacity
Is there a need of online courses (product) for working professionals/students (market)? The answer is a resounding yes because of two reasons. One, it is easier to learn online if you have mentorship and doubt resolution support. It’s available to you at the comfort of your home and time, especially if you are a working professional. Two, it is cheaper than a university education. How much cheaper? ~100x cheaper.
Product - Promotion Fit : You should ask “Where can you find the people looking for this product?”
We know that most of the professionals search Google for all their life dilemmas ;) So search engine is one channel to find these people. LinkedIn is another such place. And thanks to high penetration of social media, you can find the TG on social media as well.
Product - Pricing Model Fit : You should ask “Does the product justifies the pricing model? ”
This is where the perceived value of product compared to alternatives comes into picture. The user will always compare your pricing to alternatives. Positioning a product well helps you answer this very well.
A competitor to Udacity like Coursera charges $40 per month to do a specialisation. The key differentiator for Udacity are the extra services — mentorship and career support. You have to answer if users will pay $100 extra every month for mentorship and career support.
Market - Pricing Model Fit : To determine this one, the questions to ask are —Will the TG actually pay this much? Will you be able to capture enough market with the pricing model to build a sustainable business?
In other words, % of market you can capture * market size * ARPU = revenue potential. The revenue potential should be large enough to warrant a sustainable business.
For Udacity, we can look at the market research to see how many people would be interested in learning online? Further, what % of them would be comfortable paying $150-200 per month? This takes a little bit of market research and sizing, and also needs to be adjusted YoY as the market grows.
Pricing Model - Promotion Fit : Will this pricing model work with the chosen promotion channel? For example, can you sell a product worth $100,000 through Facebook ads? The answer is a resounding no.
In case of Udacity, the pricing model is a blend of freemium and subscription. Will the users be coming to the website, pay $150 per month upfront? Maybe Not. To solve this gap, Udacity gives smaller courses for free so that you can get more confident about the teaching methods and effectiveness. Over time, Udacity nudges you to pay premium price for a degree/specialisation plus mentorship, degree and career support. Brilliant, right?
Market - Promotion Fit : Is the TG available on chosen promotion channels?
In case of Udacity, all these working professionals are using available on FB, Google, LinkedIn etc.
I will leave it on you to study and understand the business models of other companies - Coursera, upGrad and Simplilearn.
In the next posts, we will delve deeper into the kind of channels and models available for both B2B and B2C software products.
In case of hardware products like Smartphones, the place could be a supermarket, an electronics shop, a standalone service centre, or an e-commerce website. It is a good idea to include place in this framework and evaluate its fit with other factors. It will look something like this. Complex? I know :)
A notable blog series which inspired this post is Brian Balfour’s series on growth framework. You can check it here
Thank you Priya for reviewing this patiently. 🙏
Feedback link - https://sdeepakgg.typeform.com/to/yJas0x