I’ve been fortunate to work in a number of SaaS businesses in my career.
Some of them, like InVision and SafetyCulture, seemed to just grow naturally without any help. Sure adding sales & marketing help fuel the growth, but these business were growing pretty rapidly before they injected the sales & marketing rocket fuel.
In others however, growth has seem like a slog. We had great sales & marketing teams and growth definitely did happen, but it just seemed a lot more difficult.
So what’s the difference between these companies? And more importantly, how do you become one of the ones that grows naturally rather than one of the ones where growth is a slog?
Obviously Product/Market fit is a big factor here, but assuming you have a relative level of Product Market fit, I think the next thing key factor is having the right Go To Market model.
In this post, I’ll outline what a Go To Market model is, what the different elements of a model are, and how to define the right one for your business.
What is a Go To Market model?
In the case of a B2B SaaS company, your Go To Market model outlines the way in which you acquire customers. It’s not the specific marketing tactics you use, but more the high-level description of how you acquire customers.
The best way to illustrate what I mean is by examples, and I’ve used the email marketing software category to illustrate some of the different models taken by different companies in the space.
- MailChimp (Touchless acquisition) – MailChimp is an email marketing tool that uses a touchless acquisition model to acquire customers. They target small business owners and offer their product on a freemium model. It’s free to send less than 2000 emails per month, with paid pricing plans going up from there. They use marketing tactics like search engine optimization & virality to attract people to their website, where a portion of them will then signup and start using the product. AFter using the product for a while, these users typically hit some sort of limitation of the free plan (Usually having too many subscribers or wanting to use some of the Advanced features like Automation) and will ultimately become paying customers, all without ever talking to a human.
- MyEmma (Inside Sales) – MyEmma is an email marketing tool that uses an Inside Sales model to acquire customers. They target professional marketers at medium-sized companies and sell their product for an average of $300 per month ($3,600 Annual Contract Value). They use tactics like social media, search engine optimisation and paid advertising to attract prospects to their website, and then use demo requests, gated eBooks, webinars, etc to convert visitors into leads. These leads care then passed over to an Inside Sales team who work those leads and close the deal.
- Responsys (Enterprise Sales) – Responsys is an email marketing tool that predominantly uses an Enterprise Sales model. They are focused on acquiring large enterprise businesses and sell their product for several thousand dollars per month (meaning the Annual Contract Value is likely north of $50,000). Their marketing team may be using Account Based Marketing tactics to generate some leads, but majority of business is won by the Sales team prospecting, outreaching and closing deals and marketing plays more of a supporting function.
- Campaign Monitor (Channel) – Campaign Monitor is an email marketing tool that leverages a Channel model acquire customers. The end users of their software are marketers at SMB companies and they sell their product for around $100 per month (Meaning the Annual Contact Value is around $1000). Instead of targeting their Marketers directly however, they use tactics like SEO, Paid Advertising & Event Sponsorships to target Creative and Web Design agencies, who then resell it to their clients.
As you can see, there are a couple of key elements to a Go To Market model:
- Target customers – A description of who the target customer is, usually containing specific industries or job functions (but not always).
- Channels – A description of the kind of channels that will be used to reach potential customers and generate interest in the product.
- Offer – A description of the kind of offer you’ll make to convert interested prospects into leads/signups. If you’re taking a touchless acquisition model, common options are a free version of the product or a free trial to allow people to try the product out. If you’re taking a sales-lead approach, then offers like demo requests, free consultations, etc are common.
- Engagement model – A description of how the business engages with these leads and covnerts them into paying customers. For an Inside Sales business, it’s common to hand them over to a Sales Development Representative who qualifies them and passes the best ones on to an Account Executives. For touchless acquisition businesses, this would leverage a combination of product flows and one to many training initiatives to help them get started and see the value the product provides.
- Revenue Model – A description of how the company generates revenue. For a SaaS business, this is often via paid subscriptions to the software but could also come from things like payments revenue (Like Square for instance), partnership deals, etc.
Factors to consider
So now that you understand what a Go To Market model is and the importance of it, let’s look at some of the key factors that should be considered when defining your Go To Market model.
Who is the target market for your product? And how big is that market? If your product is targeted at small businesses, then the number of potential customers is likely huge and a touchless acquisition strategy is going to make the most sense. On the other hand, if your target market is the Fortune 500 then your market size is much smaller, and an inside sales process may make more sense.
How easy is it for people to use your product? Is it the kind of product that someone can sign up and start using without needing dedicated training? If so, then it may be possible to adopt a touchless acquisition strategy. If, on the other hand, your product requires extensive training to start using, then it’s more likely you’ll need to employ a sales-based or channel strategy as you’ll need people to train your customers on using the product (and you’ll need to be able to do this without increasing the cost of acquisition beyond the amount of revenue you generate from these customers).
Does your product have the necessary features and capabilities to serve the Enterprise? What about the appropriate security certificates and practices? In my experience, at a minimum you need to have features like single sign on, permissions and user roles, advanced analytics, etc. before you can successfully sell to the enterprise, so if your product lacks those features you may be best off targeting small to medium business on a touchless acquisition model until you can build those features out.
How do users typically adopt your product? Is it the kind of product where one employee starts using it, sees the value, and adoption organically expands out from there (like InVision for example)? Or is it the kind of product that needs to be sold into the top-level and then pushed down to the rest of the organisation from there (Like HR software for example)? If it’s the former, touchless acquisition can work well and can even fuel an Inside Sales model if you have higher end customers coming through, but if it’s the later then you’re likely going to need sales people straight away.
At what price point will you be selling your product? Is the annual contract value going to be in the hundreds of dollars? Or are customers going to be on $100,000 annual contracts? If it’s a low price point, then you’re likely going to need to employ a touchless acquisition model. Alternatively, if you’re going to be selling your product at a price point that is in the tens of thousands of dollars annually, then it’s likely you’ll need to adopt an Inside Sales model as very few people will buy a piece of software at that price point without talking to someone.
Availability of resellers
Is there an industry or segment of businesses who could potentially sell your product to end users? If so, then Channel could be a viable option for you. Xero, a company that makes cloud accounting software targeted at small businesses, recognized that nearly every small business uses an accountant to help with their taxes and accounting, so they leveraged accountants to generate Channel sales. Similarly, in the early days Campaign Monitor recognized that many small businesses turned to their web design agency to create and send email campaigns, so they built features that allowed these agencies to resell the product to their clients and opened up Channel sales.
Who are the competitors in the market? Who are they targeting? And what Go To Market model are they using?
If your competition is selling to large businesses using an Enterprise Sales model with high annual contract values and you’re planning on selling similar software to small businesses on a touchless acquisition model with a price point of $20, then it’d be worth thinking hard about this. Have you identified an opportunity that your competitors haven’t that allows you to take a different Go To Market model than they traditionally have? Or could it be that they’ve identified some barriers to the touchless acquisition model that you haven’t realised yet?
Zenefits is a great example of business model innovation. While all of their competitors were busy selling HR software to small businesses for $50+ per month, Zenefits started offering their software for free and made money by selling insurance to the users of the software.
So have a look at your main competitors Go To Market strategy (including their target customers, price point, product complexity, etc), and see what you can learn from it.
If you’re planning on taking the same approach they are, think about if there’s an opportunity to innovate and change your Go To Market model.
If you’re planning on taking a different approach, it’s worth double checking whether you’re not missing something, particularly in well established markets with multiple competitors.
What kind of resources do you have available in the business? Do you have the revenue or funding to sustain the costs of building a sales team? And what about the costs of supporting a sales team (I.e. a marketing person to generate leads, customer service people to support customers, etc.)? Atlassian, who is famous for their no-salespeople go-to market strategy, attribute that decision mainly to the fact they didn’t have any money to build a sales team and so had to find a different way to acquire customers if they were going to build a business.
What kind of company do you want to build? And what’s the goal?
As Christoph Janz points out in this great Infographic, if you’re goal is to build a billion dollar company then you’re going to need to get to around $100 million in revenue. If you’re product is mainly used by small businesses then you’re going to need to acquire over 100,000 of them at somewhere around $100 per signup. To do this, you’re going to need to utilise a touchless acquisition model and invest in heavily in scalable marketing tactics like content marketing, virality, etc in order to get the kind of volume you need at an appropriate cost per signup.
However, if you’re goal is to simply build a lifestyle business then you may be able to take a different approach. With Shaperbase (a SaaS product I founded and run on the side), my goal is simply to build a passive side income, so therefore I can afford to adopt an Inside Sales approach as I’m happy to put some time into working with customers during the initial sale and adoption phases, as scaling the company is not something I’m hugely interested in.
Is your product something that people inherently use to share or broadcast something? Is it like MailChimp, who’s users predominantly use the product to create email campaigns and send to them to thousands of people? Or is it more like Xero, where your users don’t naturally share anything through their organic use of your product?
If it’s the earlier, then you might have an opportunity to drive customer acquisition through virality (I.e. people using the product naturally attract others to it). Virality is one of the strongest drivers of customer acquisition you can have, as it has the ability to scale almost infinitely at next to no cost.
If you have a viral opportunity, it can be worth structuring your Go To Market model to make the most of it. Adopting a freemium, touchless acquisition model can ensure that you get the maximum number of people using your product, and that they then send as many ‘invites’ to the product as possible, and that those ‘invited’ users can then start using the product and sending out more invites.
How to select the right Go To Market model for your SaaS product
What’s interesting about this list of factors that help determine your ideal Go-To Market strategy is how interlinked they are.
For instance, if you want to target small businesses but have a complicated product that requires hands-on training and is adopted top down (like a Point of Sale system for example), then it’s going to be tough as you’ll need to invest a reasonable amount in acquiring new customers and training them, but given they’re small business who don’t have a lot of money you can’t set your price point too high.
Similarly, if you’re creating a product that is fairly complex and targeted at Fortune 500 companies, but don’t have the desire or resources to hire sales or support people, then you’ll likely have a lot of trouble acquiring customers as these companies have lengthy buying processes that will require a sales person to work with them through.
So the key to finding the right Go To Market model for your SaaS business is aligning the factors as they apply to your business.
For example, let’s look at Shaperbase as an example.
Small to medium sized surfboard shapers, of which my research suggests there are 1000-2000 globally. These businesses are typically doing between 50-100 board orders per month at an average of $500 per board, so they’re likely doing around $300,000 in revenue. By all measures, they’d be considered small businesses. We target the owners of these businesses as they typically only have 1-2 employees.
The product is quite easy to get started with. There’s really no setup involved (there are a few things you can customise, but it’s not necessary to get started with the product). Majority of users simply create an account and enter the first order that comes in.
The product isn’t really built for the larger surfboard shapers. It doesn’t have any real user permission system, there’s no analytics, and it lacks a few specific features large surfboard shapers would want. The product is definitely much more suited to the small-medium sized shaper who has simpler requirements and wants a simple, easy to use system.
The pricing is based on the number of boards being managed by the system, and starts at $20 per month and goes up to $100 per month.
Availability of Resellers
There isn’t really any obvious resellers here.
There are 2 other players in the surfboard production management space. They both have quite complex products targeted at the ‘Enterprise’ segment of the market (the board shapers doing 500-1000 orders per month).
Virtually none. I run it as a side business to my day job, so have very little time to spend on it.
My goal is simply to build a fairly passive side income.
The product is used to manage internal production of surfboards, so doesn’t have any organic virality.
Based on the above factors and their relevance to Shaperbase, the Go To Market model that I decided to employ was a purely touchless acquisition model.
Based on the product and the problems it solves, the target market is primarily small businesses doing less than $300,000 in revenue. A touchless acquisition model makes sense here as they have limited budget to spend on software and likely wouldn’t spend more than $100 per month, meaning the annual contract value (ACV) is $1,200 at best. At this kind of ACV, you can’t afford to be paying sales people to close deals as the cost of the sales person would exceed the revenue from the customer they close.
The product is quite simple to understand and get started, which lends itself nicely to a touchless acquisition model. The target market is easily able to sign up, start using the product and become a paying customer without needing to speak to a sales person.
Given that the product isn’t really suited to the ‘Enterprise’ end of the market, that means we’re better off targeting the small-medium sized shapers with a price point of around $50-$100. At that ACV, a touchless acquisition model is the best bet.
These businesses are small and relatively cash-strapped as it is, therefore selling the product at anything more than $100 per month would price majority of them out. If I was targeting the enterprise end of the market (those doing 1000 boards per month) then I could likely charge a lot more, but that wasn’t who I wanted to help.
Availability of resellers
There really wasn’t any obvious resellers in the market. All surfboard shapers have suppliers (like foam manufacturers, fibreglass, etc) but these companies are busy creating and selling their own products, and the time it would have taken to convince them to sell the product, train them on it, etc. was better used trying to go direct to the market.
There are 2 other players in the space, and both have far more sophisticated products targeted at the ‘Enterprise’ end of the market. They adopt an Inside Sales model and sell their product for annual contract values of $5000 – $10,000 per year.
Given the size of the market at the enterprise level (there are probably 20 surfboard shapers in the Enterprise segment), it doesn’t make much sense to go after them as it’s pretty much saturated. However, the SMB end of the market is largely underserved by these other competitors, so it made sense to go there.
Given that I was running this as a side business and had very limited resources to hire sales people, it made sense to adopt a touchless acquisition strategy.
Further to this, my background is marketing, so I’m able to use my skills to excel at the marketing side of things and drive customers through a marketing-lead touchless acquisition model.
Given that my goal for starting Shaperbase was to create a passive side income and I still have a full-time job, I didn’t have a huge amount of desire to be spending hundreds of hours doing demos, following up prospects, etc. Therefore, a touchless acquisition model fit my desire for the company best.
After product/market fit, defining a Go To Market model that matches the unique attributes of your product and your market is the next biggest thing that will determine the overall success of your business.
So spend some time really deeply thinking through some of the factors outlined above and determine the Go To Market model for your business, as once you’ve knuckled that down the next steps in terms of marketing tactics, hiring, etc all become pretty clear.