top of page

Challenges in Establishing Go-to-Market Fit

(This post originally appeared on LinkedIn here)

Once an Offering has gained Product-Market-Fit (PMF) a vendor must build Go-to-Market Fit (GMF) to drive adoption at scale. For this we need to define the Ideal Customer Profile (ICP), a message that resonates, and the channel to address the resulting target market segment.

Mistake 1: Not validating the sales channel

The first mistake vendors often make is to continue with the channel used for winning early-market customers also as the channel for GMF without proper analysis. In B2B Innovators are usually won in a direct sales setup where the vendor talks directly to the Economic Buyer.

This is required to achieve PMF, but doesn’t imply it is the appropriate channel for GMF, especially when looking at Customer Acquisition Costs (CAC). The intense discussion between vendor and Early Market customers, often involving even vendor executives, doesn’t scale and is way too costly to be used as the standard engagement model.

To prevent this mistake the vendor must take a conscious decision on the channel when moving from PMF to GMF based on an in-depth analysis of customer preferences, Customer Lifetime Value (CLV), and CAC.

Mistake 2: Staying on the sales channel while changing ICP

The next mistake is to stay exclusively on one sales channel when the ICP definition was expanded, e.g. starting to address enterprise accounts only with a self-service platform without a field sales organization.

While a self-service, pay-as-you-go engagement model works well for startup-type and small organizations, it doesn't meet the expectations of enterprise accounts for integrating them into their procurement, finance, and operations processes.

Whenever we modify the ICP we must re-assess the channel to achieve GMF for the new target market segment.

Mistake: 3: Not adapting the pricing model to new target market segments

Our offering can meet all the technical requirements of a target market, but miss out in legal and commercial terms.

A great example for this is a pricing model requesting a buyer to sign up with a credit card to consume the offering. This works fine for startups where bias for action trumps any governance, but is impractical and even prohibited in large, mature organizations.

Another one is basing pricing on a parameter that is hard to forecast and thereby results in a budget risk for the buyer, e.g. the size of a server for an application the customer has yet to develop.

To prevent this we must re-assess our pricing model every time we change the ICP definition to achieve GMF for the new market segment.

Mistake 4: Entering new target market segments without ensuring GMF for it

We must always look at PMF and GMF in combination. A successful Go-to-Market motion for one target market segment based on the respective PMF does imply neither PMF nor GMF for another target market segment.

I learned this the hard way myself when I was hired into a start-up to lead the expansion of the direct salesforce into the US after some initial success in Germany. After burning through quite a chunk of the financing round we had to realize that our Offering didn’t work over there because all discretionary budget for our use case was exclusively allocated with entities in China. So even though there was demand for our solution in the US there was no GMF, actually not even PMF.

We should have learned about this with much less effort and faster via a market study or by entering the market with an indirect sales approach where risk and effort was allocated with channel partners rather than ourselves.

Mistake 5: Scaling the sales organization before GMF was achieved

This is by far the most common and most damaging mistake I have seen again and again and, to make it even worse, extremely costly to correct.

Most sales managers grew up and were promoted in one sales model and have hardly seen another one from the inside. As a result, they apply the same model for every Go-to-Market without proper analysis.

For example, when a sales manager with a low-value, high-volume sales background joins a company they will apply this approach also to high-value, low volume engagement models.

When they only know to sell directly they will apply a direct sales approach to every target market segment, also those where an indirect approach would serve customers better.

When they grew up with an incentive model geared for maximizing Total Contract Value (TCV) they will also apply it to pay-as-you-go, consumption-based pricing models and, as a result, drive the wrong sales behavior.

If they only ever sold on Product level convincing buyers by bombarding them with feature, function, benefits, they will not design the sales organization for building non-traditional value propositions on Solution level.

Building the wrong sales organization will result in low win-rates, reduced growth, low customer retention, and a high churn rate in sales.

To prevent this sales management must be selected for the Go-to-Market model AFTER it was defined rather than the other way around.

7 views0 comments


bottom of page