Week 3 Update
- Week 2 Recap
- Go To Market Strategy
- Building Your Company’s Brand
- Business Models
- Additional Resources
Week 2 Recap
Last week, we worked on making sure your problem definition is sound, your knowledge of your market and customer is rock solid, and your problem-solution fit is well established and validated through primary market research. We provided lots of templates which are linked from the program landing page.
We reminded everyone to accumulate at least 50 interviews by the midpoint of the program (July 13, 2023). We also provided guidelines on establishing or upgrading your basic marketing presence and your due diligence package. We also reminded everyone to connect with your mentors and engaging with them according to DEC’s mentor guidelines.
Go To Market Strategy
Go to market (GTM) is an umbrella term that includes all the activities you will take to bring your product or service to market.
As with almost any concept in business, GTM starts with identifying the people we need to work with. Who are the stakeholders or decision making unit (DMU) in the buying process? Review the full list of stakeholders from our Week 2 update. Then think about who you might need to interview to answer the following questions.
- How does your economic buyer come aware of their unmet need?
- When and how do they look for options?
- Who are your competitors in the minds of your economic buyers? (Remember, “doing nothing” is always an option for the customer.)
- What are the selection criteria that they use for assessing options?
- Who influences their thought process?
Designing A Sales Process That Matches The Customer’s Mental Model
With that, you are ready to design a sales process that generates opportunities for the potential customer to come aware of your product or service at a time when they are looking for options.
This starts with understanding the customer journey map for buying your product, also known as their Decision Making Process (where they come aware of a need, explore options, choose one, try and buy). This is another reason why customer discovery research is so important – knowing how your paying customer explores options is the first step to coming up with a sales process that meets them every step of the way.
Building Awareness With Your Customers
Your knowledge about how your customer views their problem and looks for solutions will help you create a lead generation strategy that feeds leads into your sales pipeline. Does your customer search for solutions on Google? Then Google Ads could capture them. Does your customer go to trade shows? Then attending them and scheduling meeting with them during these trade shows could create helpful touch points.
Generally you will need multiple touch points for the customer to come aware of your solution and remember enough about it to further explore next steps. Each touch point does not have to be manual – if you have captured their email, you can do a great deal of customer cultivation through automated emails – just be sure to deliver value in these emails rather than just send them sales emails.
For B2C, and increasingly, B2B sales processes, digital marketing is a key piece of the puzzle. Spend some time understanding the different ways you can generate and nurture leads via digital marketing techniques which will yield valuable data that can help you hack your sales funnel to maximize growth and speed up your customer acquisition process.
Choose Sales Channels
The last step in designing your GTM strategy is to choose one or more sales channels to distribute your solution. Sales channels can be direct (meaning that your customers contact your company to buy your solution – for example, you may sell product directly on your company’s website) and indirect (meaning that your customers contact a third party reseller / distribution partner to buy your solution – for example, you may sell product on Amazon who serves as your online e-tailer).
Generally, direct sales gives you more data to work with in the early days of selling to customers. As non-scalable as it is, it is worth doing for data collection. Over time, you will need to consider the suitability of the channel according to your venture type, business model and price point – all topics that we will cover in the next post.
Building Your Company’s Brand
Creating or upgrading your marketing presence
Your marketing presence is one way your venture gets to showcase your brand. For new ventures, we recommend you create the following.
- A well defined “why” for your venture. Why are you in business? What do you stand for? Start here and do not proceed until you can explain your “why” in one sentence.
- A logo. You should have a logo that is legible and iconic at a variety of resolutions, from the favicon (the icon in a browser tab) to a horizontal or vertical treatment of the logo, to a square logo for social media (and also swag: T-shirts, hats, and coffee mugs).
- A style guide. What thoughts and feelings should your brand evoke – and therefore, what is the look and feel you should strive for? The style guide executes this look and feel by defining the design language, font, color palette, logo usage guidelines and more.
- A website. You should have a website hosted on your own domain. When you are starting out, a landing page is enough. Many ventures start on WYSIWYG platforms like Wix, then graduate to more powerful Content Management Systems (CMS) such as Drupal or WordPress.
- Social Media presence. Depending on the type of venture you are building, you will need to build your presence on different social media platforms. Generally, a LinkedIn Company Page is good for enterprise-level credibility, Instagram / TikTok are good for B2C consumer-facing solutions targeting young people, and YouTube is applicable to all kinds of ventures.
- Professional headshots. Professional headshots and clean and crisp team pictures help people relate to your venture. Highly recommended.
Right-sizing brand building
Building your brand can be an exciting and exhilarating activity. That said, know that most new ventures will change their name at least once (necessitating a rebranding exercise).
Our recommendation is to do one quick pass to get to a baseline of marketing presence that puts you at parity with your competitors in your industries. Then get back to the basics and build out your business fundamentals. Once you have more progress on building out your business, circle back and make a second pass.
Depending on the type of venture you are building, company-level brand building may not have an immediate effect on the much more mission-critical task of generating leads and building a sales pipeline that generates revenue. Make sure you focus on your business fundamentals at the same time you build your brand awareness.
Points to ponder
Business model development boils down to a few key questions you need to pose for your venture.
- How does your customer pay you for your solution?
- How much do they pay and how often do they pay?
- How long do they keep paying you?
- How much did you spend to acquire them?
- What should you set your price at?
- How do you test the price?
Why build a revenue model?
Some first time entrepreneurs are reluctant to talk about money.
- Startup entrepreneurs might say: “Facebook did not start with a revenue model. We are going to do the same. We will raise money to build a huge user base without charging them, and we will figure out how to make money later.”
- Social entrepreneurs might say: “We are a non-profit. We don’t spend much money and we don’t charge for services. We don’t need to understand money.”
- Creative or performing arts entrepreneurs might say: “We are artists. We do not understand how to make money.”
For startup entrepreneurs looking to raise money from VCs: Remember that Facebook was founded in 2004. The world has changed since then. The bar is much higher for aspiring entrepreneurs to raise money and build a business. The barrier to entry, especially for software ventures, is so low that even seed stage investors expect to see revenue and sustained month-over-month growth before taking that first meeting with an entrepreneur.
For social entrepreneurs or creative / performing arts entrepreneurs: While talking about money may feel alien and uncomfortable, understand that cash is oxygen. Cash enables you to hire people, implement programs, make grants where you can fund other people to fulfill their dreams. Without cash, your reach and impact will be compromised.
Cash needs to be raised or earned
For a new venture, unless you self-fund it from savings, you do not typically start with a lot of cash. You cannot save your way towards having cash. Cash needs to be raised, or earned.
Raising money from angels or VCs (for startup entrepreneurs), philanthropists (for non-profits) or applying for grants (which can apply to both) is a long, slow process that you have limited control over. With earned revenue, your venture is getting compensated for the value that you deliver. You have far better control. Therefore, earned revenue is a really excellent source of cash.
Types of revenue models
- Transactional (your customer pays you for the product or service)
- Subscription (your customer pays a fixed fee every month/year)
- Usage based (your customer only pays for what they use)
When your end user is not the paying customer
It is important to note that the paying customer is frequently not always the end user of the product or service. In fact, in enterprise sales, sometimes they are not even from the same company.
This is especially true for social enterprises where the beneficiaries are often in a financially disadvantaged situation. In these situations there often can still be an economic buyer – they are often corporations with a social mission that is aligned with the services you provide. Look back on the Stakeholder Mapping discussion from Week 5, and get creative about brainstorming possible sources of revenue and possible paying customers.
The “Unit” in “Unit Economics”
The revenue model is where you determine how your customer pays and how often they do so. This is the architecture of your revenue model. For your business to be sustainable, there is a new concept to consider: “Unit Economics”.
Unit economics is concerned with the analysis of the money you make / lose per each sale to an acquired customer. The “Unit” is where we look at what constitutes a paying customer.
For example, if you are selling an educational intervention, you can sell directly to consumers (business to consumer – B2C or direct to consumer – DTC). In that case, the “unit” is a family, and what you charge is a lower annual fee that family pays every year.
If, instead, you sell this intervention to a school, you will become a business to business (B2B) business, selling to schools. Your “unit” is the school, and you typically can charge a far higher fee per school than you can charge each family.
Life Time Value (LTV) versus Customer Acquisition Cost (CAC)
In the simplest terms, the LTV refers to the total amount of money you will make off of each acquired customer. It depends on how much you charge them, and if there is additional payments to come over time, how much and how often, and for how many years. The larger the LTV the better off you are as a business.
The CAC refers to the total amount of money you will spend to acquire one customer on average. Rather than do a bottom-up analysis where you attempt to find each expense tied to each customer, the better way is to sum up all the sales and marketing expenses over, say, a year, then divide that amount by the total number of customers acquired during that same year. It always comes up higher when you do it this way, but for a new venture this is more conservative and helps to keep you honest.
Steady state LTV:CAC needs to be 3:1 or better
When you first start selling your product or service, you are not well known in the market and your CAC will typically be very high. Most of the time it is higher than the projected LTV (i.e. losing money for each sale). You are doing evangelical sales. You will do all sorts of non scalable things to learn from the customer and to build traction. This is ok.
As your business matures, however, eventually you do need to develop strategies to drive down CAC and drive up LTV. A healthy ratio of LTV : CAC is 3:1 or better. This will not be achievable in the beginning, but it is important for you to think about how you would get there in a few years. The assumptions and strategies will drive what you will do in the next 1-3 years to put your business on track to become a profitable enterprise in years 3-5.
Here are additional resources that might help you get started:
- Self-Guided Learning Center, Module 4: This module provides additional readings and videos on Go To Market Strategy.
- Also check out the Knowledgebase section on Marketing and Sales.
- Self-Guided Learning Center, Module 5: This module covers revenue generation, considerations around LTV/CAC, pricing strategy and price testing.
- Knowledgebase section on Business model and pricing: This section of our searchable knowledgebase provides answers to the same topics.