What is a GTM strategy and how startups can use it?

What is a GTM strategy about? Here is a quote from Larry Friedman, a thought leader on go-to-market strategy:

“…the only people who have a clue what customers will actually buy and how they will buy it – the customers themselves – are not in the meeting. They weren’t invited.”

Many articles and guides on developing your marketing strategy set off with the words: hire a business analyst, do competitors’ research, market research… Customers are often mentioned last if at all. When a freelance marketer does anything for a business – they often find the closest competitors and replicate them with a twist. And this is the first step done wrong, which basically makes all other steps useless.

A GTM strategy is a sobering reminder that you start with deep customer knowledge. Here, we’ll outline the key commandments (as the author calls them) of a go-to-market strategy, and how a startup can use each one.

What is a Go-to-market strategy?

A GTM strategy is a set of tools and techniques for selling your solutions to the target audience in the right place at the right time. Larry Friedman lays its foundation with the 10 universal truths or commandments. They encompass actions starting with defining the target audience, to determining channels, and up to distribution strategies. These 10 universal rules come from the book by Lawrence Friedman titled “Go to market strategy”

They are discussed one-by-one below specifically in the context of digital startups.

Rule 1: The Go-To-Market Strategy Starts with the User

Interestingly, the first commandment seems a little too obvious: strategy should start with the customer. Yet, if you skim through Internet articles, they advise starting with ‘research your competitors’ or ‘find holes in what other market players aren’t offering’. 

The ugly truth is that very few companies and startups have good knowledge of customers. Unfortunately, the situation is even harder for digital startups. 

The focus should be on customer interviews and customer research. 

Jason Giles, a former Microsoft UX Lead, shared his experience of how rarely companies include customers in their product development. From start to end, it is often led by specialists who work in the industry rather than an average consumer. When a project team sat in the conference room trying to name a feature, he offered to:

•  just go outside, 
• grab a few people, 
• show them the prototype, 
• Ask them to click it, and 
• then say how they would name the target feature.

Often, startups try to do user-centric solutions without the users. 

So, having deep customer knowledge translates into:

• The right product. You give what customers ask and are willing to pay for. 
• The right channels. Having defined the customer, you can determine how they want to receive your solution. 
• The right value proposition. Why do your customers want and need and are willing to pay for this product? 
• The right markets. Are these the markets where you have fewer competitors? No, these are the markets where customers have signaled about their needs and wants and willingness to pay for the product.

Everything just boils down to customer knowledge. With the right Startup Services, you can successfully dive into customer research and get your startup off the ground in the shortest time. 

But what about competitors’ research for your go-to-market strategy?

Competitors’ research is often secondary and complementary. Focusing on customers’ signaling about their needs and wants is much more fertile ground. Startups create the most successful strategies based on customer pain points and not on competitors’ faults and misses or trying to replicate their pros. However, looking at competitors’ research later can help fine-tune your strategy. And do the benchmarking.

Rule 2: The Cost of Sales is Central to GTM Strategy

Again, many startups fail by burning through cash spent on fancy campaigns. While looking at the balance sheets of even the most successful companies: it is the cost of sales that eat up the most of revenue. Especially for digital startups.

Here is one way to determine what your cost of sales should be. However, other ways also exist. 

In this example, the churn rate is one of the metrics that you need your competitors’ research for to benchmark against. So, basically, you take your revenue per unit you sell. Then, you subtract discounts, costs, and G&A (general and administrative expenses). After that, you take your profit margin that’s left and divide it by the church rate you set. Your cost of sales or customer acquisition cost should be roughly 3-to-1.

Rule 3: Product-Channel Fit

It would probably be a super weird situation seeing a kids’ entertainment app being advertised on X (Twitter) or LinkedIn. By the same token, enterprise-grade SaaS or IoT solutions will have little luck with advertising on TikTok or Instagram. A good GTM strategy considers the cost of sales but pays even more attention to the product-channel fit. 

There are some clear-cut solutions as well as those that may or may not pan out. For instance, a B2B SaaS solution is best sold through professional networks, distributing White Papers, email marketing, and LinkedIn targeted ads. With a new gaming app, you want to opt for Reddit’s gaming-focused threads, Discord communities, or Twitch. 

Niche digital startups are those who may not find exactly clear-cut solutions. You may experience as much luck on TikTok as some specialized forums or LinkedIn depending on how you package your message.

Rule 4: Trade-Off between Exposure and Control

You can get wide exposure through app stores, marketplaces or third parties like influences or affiliate marketers. However, with these options, you have little control over branding and customer relationship management. 

In contrast, developing dedicated landing pages might grant you more control but it can be higher in costs.  It depends on how central branding is to your digital startup. 

Startups with purely digital services, innovative startups

Then, there is also something really important about digital startups whose services are purely digital and innovative. Those startups who do not have e-commerce marketplaces or platforms trying to connect a service provider with a client. But those whose services are purely digital like cloud services, digital tools for marketing, media creation or editing, etc.. They do have to opt for greater control and address the following points with their marketing:

1. Ease the sense of uncertainty about purely digital products and services; (here is where widely recognized platforms might help)
2. Overcome impersonality; (this is where influencer marketing is essential or UGC0like content)
3. Work with the customer’s sense of intangibility; (include storytelling, emphasize outcomes)
4. Turn the sense of novelty into a desirable quality or mitigate; 
5. Unfamiliarity of startup per se.

Rule 5: Not Every GTM Strategy Must Be Digital

Surely, when we talk about digital startups, this is almost a default mode to think about digital marketing. However, there are quite a few exceptions. This concerns especially the IoT segment when your solution has a hardware part. Medical IoT in particular might require in-person demonstrations and partnerships with healthcare providers. Other expensive IoT solutions might benefit from marketing at trade shows or via a stand at specialty stores. With luxury solutions, consumers also might prefer an in-store experience. Sophisticated B2B solutions also require a personal meeting. Niche digital startups targeting local communities may well benefit from being marketed at local events and word-of-mouth. 

Overall, digital startups should not consider solely digital marketing as the only default way. There can be quite a few cases where including traditional marketing might bring great benefits. 

Rule 6: Prioritize Channel Synergy over Channel Conflict

GTM strategy of many startups often includes multiple channels:

• Paid ads,
• In-video promotion,
• SEO – organic traffic,
• Paid social media marketing,
• Influencer marketing,
• Affiliate marketing,
• Marketplace listings,
• Marketing through content creation,
• And quite a few more.

When you engage multiple channels, the common conflicts include:

• overlap in the target audience, 
• bid for the same keywords driving the cost up,
• paid ads augment the organic traffic for the keywords, 
• reseller or affiliates undermine direct purchases,
• email campaign of exclusive offers overlaps with social media campaigns, etc.

Naturally, there can be more conflicting situations between the channels.

The point of this GTM strategy rule is that you should work towards cooperation rather than avoidance of conflict. 

For instance:

1. When doing search engine marketing and affiliate marketing – distribute keywords to reduce bidding wars. In addition, there is an affiliate toolkit to recognize unique conversions. However, both channels should market the same solution;
2. Paid ads should target high-converting short keywords. Organic traffic can focus on long-tail keywords. Yet again, they should combine efforts rather than division such as services marketed through ads versus services marketed through organic traffic.
3. When partnering with influencers or other platforms, create for them a unique toolkit or offer.
4. Another strategy can be to market best sellers with in-house marketing and reserve less popular offers for affiliates. 
5. Overall, when you use affiliates and third parties for marketing, you can co-create campaigns with them and work on unique promotions.

Rule 7: Narrow Down Channels with the Highest ROI

This applies both to the target audience and the channel. For digital startups, especially those who follow an MVP path, it is essential to correctly select early adopters. Even if your product might cover the needs of a wider audience. Here the essence of this rule lies in getting the most impact. You precisely focus on early adopters, and get the most value out of these in terms of profits and feedback. Then, you iterate and target a different audience with an improved and more valuable offering. 

Let’s take a SaaS solution that can address the needs of small businesses as well as some enterprises and maybe freelancers. Even though all of them can be your target audience, you still need to focus on one category first. You might want to think that you get to cross two hurdles with one leap, but the statistics say that you are likely to dig two holes with one shovel – holes for your budgets to fall through. 

Plus, don’t underestimate the task of MVP iterations acting on feedback of your customers. The task is effort-intensive as is for one target audience. Trying to meet growing demands and changing preferences of two or more target audiences is likely to exhaust your startup and result in a ‘stuck-in-the-middle’ offering that is neither here nor there. 

To sum up, narrow down the audience, and choose the most impactful channels for that audience.

Rule 8: The GTM Strategy is not a Replacement for a Sound Business Model

One of the key advantages of following the MVP route for digital startups is to validate its business model. The startups get to see that their solution generates value for the customer and is profitable for the business. If that isn’t present, a GTM strategy cannot really be a fix.

One sure sign that your business model is sound is actually the Cost of Sales or CAC as discussed above. Without achieving good CAC, any marketing strategy will fail to generate positive ROI.

But here, it is also vital to consider the scalability of your business model. It is another indicator of a sound business model. Your startup should be able to grow without disproportionate increase of operations complexity or costs. 

You can read more about varieties of business models in our article “Top 10 Business Models & Revenue Models to consider for your startup”.

Rule 9: Reap the Reward with Consistent Effort

The major issue with MVP development is that startups go through a cycle of developing an app from scratch to launch and then stop. A single iteration is not really the iterative MVP development. It is the same situation with marketing channels.

You’ve narrowed down the audience, selected channels, and developed great messaging based on deep customer knowledge… and then you need time to fine-tune. It is not likely to just work from the first go at it. It might work at some level, but it requires experimentation to reach its full productivity. There is also an audience awareness curve and network effects. Social startups counting on network effects or community-driven startups will experience slow and hard launches till they gain critical mass. You just have to apply consistent quality effort and give it time.

Rule 10: Differentiation through Innovation is Key to Winning Big

This rule principally relies on Rule 1 – you will not win big if you base your strategy on competitors’ research. You need to develop something new and memorable for your target audience. Also, as in Rule 9, it can take consistent effort and patience to refine your unique unconventional GTM strategy to build a genuine emotional connection with your customer base.

For instance, a fitness app traditionally launches with a ‘lose weight – set a goal’ boring cliche. A video of a struggling person trying to lose weight. How about launching an app with a social media challenge? Or AR/VR Easter Egg-like gamified adventure unlocking after completing workouts launched? Fitness experience tailored to mood?

Final Words

A GTM strategy focuses on things that work economically. They help to filter out inefficient activities and focus on what’s really important. A GTM strategy is well-suited for digital startups, especially those following the MVP development path. The iterative effort, targeting early adopters, and expanding your reach step-by-step lends itself well to a go-to-market strategy.

FAQ: Go-To-Market (GTM) Strategy for Startups