Go-to-Market Tactics for Category-Defining Startups
Thinking beyond traditional approaches towards growth
You’re a tech founder with a vision of building a product that will establish and dominate a brand-new category. You have an initial product, and maybe even raised capital. You are ready to launch and thinking about the right go-to-market strategies that will lead to quick and scalable growth — a critical juncture of your venture’s life cycle, as a majority of startups have only one chance to make a strong first impression.
Devising an effective go-to-market strategy requires thinking beyond traditional approaches towards growth, which are often not optimal for category-defining startups. Here are 6 tactical guidelines drawn from my work with 15+ global tech upstarts in D2C, B2B marketplaces, SaaS for SMBs, logistics, cybersecurity, and digital health over the last decade:
1. Winning big often means starting small. Focus on early adopters
“Every powerful brand derives its strength from an even deeper and more powerful force: the emotion and energy of superconsumers. These tremendously insightful and influential consumers will pay more, explore more and advocate more.”— Eddie Yoon’ Superconsumers
In virtually every market, there is a subset of customers whose pain is the most pronounced, who will be your most important supporters on the zero-to-one journey. These early adopters play a critical role, helping you sharpen your value proposition and spread the word. How to find them? Take time to thoughtfully create your aspirational customer profile. If you are a problem insider, interview people from your personal network and ask these open questions among others:
- How much time and/or money are they are losing due to existing inefficiencies?
- What is their current approach towards solving the problem? Why the solutions they use suck? How much do they pay for them?
Ultimate goal here is to determine customer fit hence quality over quantity matters. WhatsApp is a good example of such approach: as a text messaging company, its founders homed in on consumers who were paying the highest rates to text — immigrant groups, such as Russians and South Asians in the Bay Area, who frequently communicated with people in their countries of origin (for more on this, see Anu Hariharan’s concept of irregular network topology for demographics).
2. Recruit customers manually and design low-scale strategies to launch
Once you’ve identified your early adopters, devise and execute personalized, high-touch strategies to bring these customers on and establish strong brand loyalty. Airbnb is a classic example of this technique: founders went door-to-door in New York, recruiting new users and helping existing ones improve their listing. You can even go one level deeper and focus on particular ZIP codes where your aspirational customers are concentrated. Another example is Stone, a Brazilian fin-tech unicorn started in 2012, which disrupted the incumbents’ sales strategy by creating a hub-and-spoke model that deployed a passionate salesforce of “Stone Warriors” throughout the country.
3. Test and prioritize customer acquisition channels to get to virtuous cycles of profitable growth
Not every channel is equal: focus on those that give you better control over unit economics instead of just spending money on traditional advertising and digital media. Test different channels, with the ultimate goal of finding one on which to focus — a tactic that cultivates discipline and helps avoid a ‘growth at all costs’ mentality. Attempt to integrate channels that are not controlled by FAANG, as it will give you more control over your unit economics.
A good example of a clever customer acquisition strategy is Zapier, which created three tiers of landing pages to capture a broad range of search intent: a landing page for every app; another for every app-to-app integration; and a final page for every app-to-app workflow. Zapier encouraged partners to write the content for these landing pages and link to them once published, and allows users to immediately set up a functioning integration.
4. Know your specific measurable metrics and growth drivers
Think through what metrics matter in determining your company’s success. One size does not fit all here, and your performance indicators will vary widely depending on your industry. For example, for social apps like Snap, content creation drives engagement, which is measured by the number of snaps sent per day; whereas for market places like Airbnb, strong network effects drives higher margins and pricing power. In general, for SaaS businesses, you want to pay attention to:
- Monthly Recurring Revenue (MRR) and how quickly it’s growing; successful companies grow at 20%++ MoM
- Net retention on both the customer and revenue side
- Quick ratio, which is new MRR/MRR lost (should be >4)
- Classic LTV / CAC ration (should be >3)
- Gross margins (the higher the better, but depends on the industry)
- Customer payback period (should be well below 12 months)
- NPS or analog (to understand how satisfied your customers are)
- Engagement metrics
5. Sales team? What sales team?
The truth is, very often you need far less money and people than one would think to build a scalable, profitable business. One example is VINEBOX / Usual Wines, my portfolio company started in 2016 as a premium wine subscription service and became multimillion-dollar, category-defining platform for wine and ready-to-drink brands for millenials and Gen Z, that comprised a team of only three people until last year (when they expanded to a team of 10). Staying very small and lean was an intentional decision that allowed them to implement customer-centric product development, be profitable on the first order, and even come up with proprietary metric: hyper-loyal customer.
6. Barriers to exit
While it makes perfect sense to think about barriers to entry as a competitive advantage, preemptively designing barriers to exit impacts one of the most important metrics for SaaS companies: retention rate. Companies like Facebook, Apple, and Carta mastered this tactic by becoming a system of records for their customers.
7. Study consumer psychology and behavioral economics
The importance of understanding the consumer’s decision-making process is immeasurable, as it allows founders to develop a value proposition from the customer’s perspective and optimize their marketing strategies. Question your operating assumptions and consider mitigating the difficulty of instilling new habits by integrating your product or service directly into customers’ existing routines.
Putting it all together
Quality beats quantity when it comes to launching. Focus and discipline from the get-go enable you to forgo ineffective and cost-intensive strategies based on mass outreach in favor of developing a strong initial customer base from which to expand. Be precise and concentrate on identifying a committed group of first customers with whom you can grow, gaining a deep understanding of the core issues that your product addresses for them and their rationale for buying, and then designing your marketing strategy around their needs.
Starting small and focused — on both the customer side and the internal side — will elevate your chances of success in achieving scalable product/market fit.
