The number 1 startup killer is the cost of customer acquisition (CAC). An understanding of consumer choice behavior and GTM underpins CAC.
GTM is something that happens inside a startup, becomes its secret sauce, and is less spoken about. In hindsight, it is easier to build products and convince investors. But convincing customers in a market to grow fast is probably the most formidable challenge of an entrepreneur.
In essence, GTM is a test of deploying limited resources to launch and engage with the consumer before scaling.
Often in startup pitches to Angels, an understated refrain is that cash of the earlier raise has been burnt pursuing a failed marketing strategy, but we now know better. This is when the difference between sales and marketing is realized. I am uneasy about entrepreneurs who show a pie-chart with 40% of capital allocated to ‘marketing’ without an assessment of how capital will be used and how productive it is expected to be and the basis of the assumptions. The startup world is filled with ‘paid’ marketing stories to show customer acquisition metrics underplaying ‘churn’ assuming that ‘things will work out.’
Entrepreneurs (even CEOs of larger companies) take time to realize that sales (personally selling) to understand consumers precedes marketing and branding. And that branding and marketing is not a substitute or driver for poor sales. Imagine spending time and money branding and then discovering that no one understands your imagined value proposition. Mantra is - ‘Reality Before the Brand.’ The critical entrepreneurial decision is when to sell and when to market. One wrong step and capital disappears. Marketing professionals who experience working in large CPG or media companies have a vastly different mindset of an entrepreneur of a cash-scarce boot-strapped startup.
The starting point of creating a GTM is when entrepreneurs personally sell, even if it is a $ 2 juice. The learning discovered from selling to unknown customers is invaluable. (Careers in global CPG giants start in sales). This helps reinforce the belief that customers are always ready to guide and help you succeed.
How engaging with customers helps.
Identify the language of the marketing message that resonates with consumers.
Identify goals and metrics to assess/understand if sales/marketing is working.
Discovering price by testing the value of the product by pricing and selling to different consumers. Freemium is a way of extracting value, not a strategy. The price-value equation needs discovery.
Interpret launch metrics. They are often false positives based on attention to something new and may not reflect a readiness to ‘pay’ and ‘buy.
Practice low cost (lean) GTM by running experiments with customers.
GTM is also when an entrepreneur chooses between speed as a strategy versus acceleration based on a growth marketing engine.
The following quote of Paul Graham sums the importance of creating a GTM ‘machine’ to grow.
“A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of “exit.” The only essential thing is growth. Everything else we associate with startups follows from growth.” Paul Graham