Welcome to Entrepreneurship, Preparing for Launch. This is the start of the second MOOC in our two-part series. In the first lesson in this module, I'm going to discuss go-to-market strategies, particularly as they relate to startup businesses. "Sales" is at the center of the word cloud for this lesson. Your go-to-market strategy describes how you'll use direct or indirect marketing, sales, and distribution channels to deliver your solution to your target customers. The ultimate goal of your go-to-market strategy is to generate sales as efficiently, effectively, and profitably as possible. A go-to-market strategy is an action plan for making sales. I really do want you to think of it as an action plan. A good strategy describes the specific steps that your team is going to take to get customers to purchase your products or services. It describes the types of customers you'll pursue, the value proposition you'll offer, the channels you will use for marketing, sales, and delivery, and the metrics you'll use to monitor your effectiveness. Like the rest of your business model, it should be something that you're constantly evaluating and improving as you learn more about your customers and eventually move beyond your early adopter markets. A good go-to-market strategy is based on answers to these questions: Who are the target customers? Which customer needs will the company try to solve? What relationship does the company need to have with its customers to be successful, and how will customers purchase and take delivery of the company's product or service? I'll come back to this topic later in this lesson. But before we go too far, I think you should recognize that the go-to-market strategy for a startup business is likely to be much different from what it would be if the company were more established. For one thing, the go-to-market strategy for a startup company must be focused on securing early adopters instead of majority market customers. Customers may not even know that a startup company exists, so the strategy must start with building market awareness. Because startup companies usually have a lot less money to spend on sales or marketing, they may have to use channels that are different from the ones that would be available if they had more resources. A go-to-market strategy starts with an understanding of the target customers. Are they businesses or consumers? Is the buyer the same as the end user? If the customer is a business, what are the job titles or positions of the buyer and the end user? Can the sale be made at the department or functional level in the business or does top management have to approve it? Will anyone else be involved in or influence the purchase decision? The answer to these and other questions about your customers will help you determine what your go-to-market strategy should look like. As I mentioned earlier, the sales process for a startup has to start by generating awareness that you and your solution exist. Startups usually don't have enough money to buy ads during the Super Bowl, and that might not be the most effective strategy even if they did. Fortunately, there are less expensive options available, even for a startup. It doesn't take a ton of time or money to build a website. At first, it may be nothing more than a landing page where potential customers can request more information. Your initial outreach will probably be through your personal networks, but you should try to grow these networks as quickly as you can by asking for referrals and keeping track of people that are visiting your website. The goal of any marketing program is to create leads. Sales is about converting those leads into customers. Marketing has traditionally been outbound, meaning that the company is reaching out to potential customers to build awareness and generate demand. Outbound marketing channels include paid advertising, public relations, direct mail, telemarketing, email campaigns, and in-person sales calls. These can all be effective, but they can also be expensive, too expensive for a lot of startup companies. Inbound marketing is different. Inbound marketing is not about broadcasting your message to potential customers. It's about taking steps to ensure that potential customers who are actively seeking a solution will find you. It can be much less expensive and much more effective than traditional outbound marketing. Inbound strategies include word of mouth marketing, in which you encourage your existing customers to refer new prospects to you. Search engine optimization involves designing your website and using keywords so that customers who are likely to be seeking a solution will be able to find you. Blogging and other types of content creation also make it more likely that customers will learn about you when they're researching a specific topic. All of these are potentially effective ways for you to be in the right place at the right time with your message, to drive traffic to your website, and ultimately grow your sales pipeline. A big part of an inbound marketing strategy involves positioning yourself, as a trusted authority or an expert. This will not just make it easier for you to be found. It will add weight to your message and make it more credible. Blogging and publishing newsletters or white papers, can help to establish you as an expert. The content that you publish, should be something that's valuable to your prospects. It should be more than just an advertisement or a sales pitch. That way, even if prospects are not ready to buy immediately, they will be likely to return when they are. Content is really important. Don't just put ads out there. If you can position yourself as a trusted authority, it will lead to a much smoother sales process. As Guy Kawasaki says, ''If you have more money than brains, you should focus on outbound marketing. If you have more brains than money, you should focus on inbound marketing.'' There are plenty of books, blogs, and websites out there for you to learn more, about effective inbound marketing. Let's talk about sales channels now. At first, you may be closing most of your sales through direct selling, and you may be your company's best or only salesperson. It's very difficult to scale a business that way though. A sales channel is simply a way for you to put your products or services in front of potential customers, so that they can make the decision to purchase it. Direct selling is a physical channel. So are independent sales reps, distributors, system integrators, value-added resellers, retailers, and mass merchandisers. Sales channels can also be online. The most direct online sales channel is e-commerce that you conduct on your own company's website. You can also sell online through online stores like Amazon, or through aggregators like Chewy.com for pet products, and Zappos for shoes. If you're selling a digital product like an app, your channels could include app stores, like the Apple Store or Google Play. You can also sell through flash sales channels, like Groupon and HotelTonight, or through marketplaces like eBay and Etsy. With so many available, how should you go about selecting the right sales channel for your startup business? The first question you have to answer for yourself, is about the type of relationship you need to have with your customers to be successful. For example, will your customers buy your product once, and then you won't need to interact with them again for a very long time? Or is it more likely that you'll need to have an ongoing relationship with them? Is the product that you're selling like a printer, or is it more like paper and ink? While an ongoing customer relationship might be limited to just repeat purchases, it could also involve customer training and support. Do you need to have a lot of feedback from them on how they use the product? If so, the channel that you sell through must be one that allows you to stay close to the customer. You might want to sell directly, rather than through a distributor. Think also about the relationship that the customer wants to have with you. Do they see you as one of their important partners, or are you just a vendor to them? Along those lines, you should also consider your customers' expectations and preferences. In their eyes, are you offering a standalone product, or is it really just part of a broader solution that they're buying? Some customers will try to avoid dealing with lots of small vendors. They might prefer to purchase your product as part of a bundled solution from a systems integrator. Or they might prefer to purchase many products like yours from a single distributor, or an aggregator, like Granger for industrial products, or Cisco for food service products. You also have to think about the kinds of sales channels that you can afford. Your channel partners need to make money too. Are your customers willing to pay a high enough price, so that everyone in the channel, including you, can make money? Finally, can you really rely on your channel partners to earn their money? For example, if your product is technical or complex, they may not be able to adequately sell it without your help. If you have to step into close every sale, you might be better off trying to sell directly. Your strategy should include metrics that you can track to determine whether your go-to market strategy is as effective as you need it to be. There's an old saying in marketing, ''I know that half the money I spend on marketing is wasted. I just don't know which half.'' Without the right metrics, you can spend a lot of money without getting the information you need, to tell what's working and what's not. Here are some of the metrics that you should be tracking. Revenue per dollar of sales expense is the ratio you get when you divide your total sales and marketing expenses by the revenue that you've recognized as a result. If you spend two dollars on sales and marketing, for every one dollar in revenue that you receive, you've got a problem. On the other hand, if you're spending only 10 cents for every dollar in revenue, you might want to consider spending more to grow your sales more quickly. This ratio can be distorted if you have a long sales cycle, meaning that the money that you spend on sales and marketing this month won't result in revenue until several months from now. Another important metric is your sales closing your conversion rate. If your sales people are making 50 sales calls for every sale that they close, they're probably talking to the wrong customers, or they're not communicating very well. The same is true for online sales. If you've got thousands of visitors to your website, but very few of them are clicking on the "Buy Now" button, you're probably reaching the wrong audience, or your website isn't making the case for you. You should also be keeping a close watch on your sales cycle. This is the average length of time that it takes to close a sale, from first contact with the customer until they sign on the bottom line. In some industries, sales cycles can be very long and there's not much that can be done about it. If your sales cycle is significantly longer than it is for others in your industry, then something's wrong. It may mean that you're talking to the wrong customers or the wrong people within your customer's organizations. Ultimately, your goal should be to get a handle on your customer acquisition cost. That's the average amount of money that it costs you to acquire a new customer. We'll talk more about this metric in a future lesson. There are a lot of metrics that companies track that really don't matter as much as the ones we just discussed. They are sometimes referred to as vanity metrics because they can make you feel good about the results you're getting, but they really don't give you much actionable information or create much value for your business. Vanity metrics include things like the number of likes you're getting on Facebook or the number of followers you have on Twitter. They also include website traffic, unless it leads directly to revenue. The number of visitors, page views, and so on are only important if you can connect them directly to paying customers. You can look at email open rates, and free product downloads the same way. What you really want are email responses and product trials that lead to sales revenue. A problem I see in many startups is that their go to market strategies seem to be designed more for a growth company than a startup. Entrepreneurs can talk about the customers they're going to target and the channel strategy they're going to use after the company has been up and running for awhile, but they have a hard time explaining how they're going to get their first customers who are early adopters. Growing your existing customer base is much different from getting your first customers. Startups usually don't have as much money as they'd like to spend on marketing and sales, and they have to find customers who are willing to buy, even though the product is new and possibly unfinished. So I want to encourage you to think about your startup go-to market strategy. Who are the early adopter customers that you're targeting? What do you plan to use for an MVP? Will you have to do all you're selling yourself, or are there other channels that are available to you as a startup? As I've said several times in this course, a startup is not a business. It's not really a business until you've found a viable business model which has to be based on a product market fit. Depending on the nature of your product or service, you may need to find one, 100 or 1000 early adopter customers to confirm that you have a product market fit. So what's your strategy for selling to those early adopters? When you've accomplished that, you'll probably be able to raise more money to expand your sales and marketing efforts through other channels. If-you-build-it-they-will-come is not a go-to market strategy. I hope that your takeaway from this lesson is that your odds at success will be much higher if you study your market, your customers' needs, and how they make their purchase decisions, and craft a strategy for getting your products into their hands as effectively and profitably as you can.
