Utopia for a CEO is growing faster than your industry and your peers. A thoughtful go-to-market strategy is imperative to enable this growth. Here’s the catch: Many CEOs have risen to the top through finance, operations, or product management. With little or no sales and marketing experience, these executives are liable to commit a series of mistakes during the design of this strategy. It’s not from lack of effort or intelligence. Simply put, it’s an information deficit. As a guide to the discussion, download our 10th annual workbook, How to Make Your Number in 2017. Turn to the corporate strategy section flip to the Go-to-Market phase on pages 86 – 97 of the PDF workbook.
CEOs are tasked with pointing the company’s resources at the right markets through the right channels. The go-to- market strategy addresses four major areas, each illustrated by a simple question:
- Coverage: Do I have sufficient coverage in my markets?
- Sales channels: Have I selected and optimized the right sales channels?
- Pricing: Have I priced my products and services correctly?
- Packaging: Do I have compelling packaging that also makes it easy for customers to buy my products and services?
This article addresses common CEO mistakes. It looks through a lens of execution to identify characteristic warning signs and share fixes for potential problem areas. The goal is to emulate behaviors of the top-growth–oriented CEOs we’ve studied.
Our use cases demonstrate emerging best practices, defined as processes or methodologies used by the top 22 percent of growth executives. Because they have not been adopted by the remaining 78 percent, these emerging best practices lead to accelerated revenue growth. Think of them as powerful differentiators.
The Macro Problem in a Go-to-Market Strategy
Clearly, if you don’t cover all of your addressable market, you’ll miss revenue opportunities. Traditional routes to market are being replaced with innovative ways to reach customers. Package your products and services just like your competitors, and customers will perceive commoditization that results in a race to the bottom. Price your products and services in a way that does not scale with customer growth and you’ll end up with revenue leakage. Make product pricing changes that are difficult for sales channels to explain to customers and watch your sales steadily decline.
After reading this macro statement, the first question to ask is whether you even have a problem with your go-to-market strategy. Read on to diagnose the most common mistakes and discover emerging best practices that will give you an edge in the marketplace.
Mistake #1: Coverage
The three most common coverage mistakes in a CEO’s go-to-market strategy are:
- Not having appropriate coverage across your addressable market
- Not balancing revenue growth rate and coverage growth rate
- Failing to direct your resources at the portion of the market with the highest growth potential and lowest penetration rate
To determine whether you have proper coverage across your addressable market, you must know the sizes of both your total available market and your sales-addressable market. Look at the delta between those two and note how you decided what part of the market to cover.
The next key is balancing your revenue growth rate and coverage growth rate. For example, if you want to grow 10 percent next year, are you planning to increase sales head count by 10 percent or expecting to generate the lift by getting more out of your existing sales force? For most CEOs, the answer is a mix. That is an acceptable answer but you must use a bottoms-up, rep-by-rep revenue plan to get there.
Secondly, determine the productivity lift you expect to get from the existing team, and decide how you plan to accomplish that. The math always looks good when CEOs say, “We can get 7 percent more per head next year.” To achieve that goal, CEOs push their sales leader on two levers: win rate and deal size. Nailing either of these requires an investment in performance conditions—for example, better segmentation, improved lead flow, more bundling, and attractive pricing.
The Fix: Adopt Detailed Account Segmentation
Top-growth CEOs implement detailed account segmentation. This emerging best practice enables executives to understand the following factors at the individual account level:
- Propensity to buy
- Potential to spend
- Match to ideal customer profile
- Cost to acquire
- Estimated customer lifetime value
The effort to implement detailed account segmentation will provide a level of clarity across the entire organization. Products and services can be more targeted by executing on a market-listening process. The marketing team can be more prescriptive as it allocates demand-generation dollars. The sales team can better sort its prospects and customers. This directly impacts productivity per rep, regardless of role. In turn, the customer success and service teams can think about how to overserve which customers and why.
Mistake #2: Sales Channels
Determining which channels to route your products and services to market is one of the most strategic decisions a CEO must make. The three most common sales channel mistakes in a CEO’s go-to-market strategy are:
Continuing to use traditional routes to market when innovative new routes are available
Failing to explore whether alternative channels would lower the cost of acquiring customers or increase customer lifetime value
Being unaware of changes in customer channel preferences and consequently, failing to respond
Today’s top CEOs adapt to ever-changing market conditions at a faster rate than the laggards. Very often, both have similar knowledge bases. The difference is that fast-growth CEOs are more responsive to a dynamic market and adjust their sales channel approach rapidly.
The launch of a new product or service is a great way to test how well your sales channel is working. It’s critical to capture beachhead/referenceable customers in year 1. Nonetheless, we often see CEOs using the existing sales force when launching new products.
Millions of dollars and untold hours that go into building a new product or service can be wasted when the wrong sales channel is chosen. Consider your last launch. Did you meet your year 1 launch goals and if so, how did you steer clear of pitfalls? The use of an existing channel is always the easiest choice, but very often, it is the least productive.
The Fix: Explore New Options
To emulate fast-growth CEOs in assessing sales channels, lay out all your available options—including channels you don’t currently use. Then ask yourself if you have a market expansion opportunity by exposing your products or services to an entirely new sales channel.
Consider whether pursuing a new channel would have a material impact on growth in the context of your industry and your competitors. To answer this question, the best CEOs stay on top of their competitors’ growth rate and are constantly measuring performance against these two important factors.
Mistake #3: Pricing
Correct pricing for products and services can mean the difference between success and failure. The three most common pricing mistakes in a CEO’s go-to-market strategy are:
- Relying on the wrong pricing metrics, which don’t:
- Align revenue and cost
- Synchronize payments with consumption
- Differentiate between customer segments
- Overcome buying constraints
- Align revenue and cost
- Failing to bypass psychological thresholds, with pricing metrics that are often disagreeable to customers at the moment of truth
- Lacking transparency, with pricing metrics that also don’t allow you to differentiate from competitors
Consider the following warning signs to assess whether you may be committing a pricing mistake. You and your sales leader spend time discussing a lot of late-stage discounting. The discounting usually happens late in the quarter. Because the wrong metrics were chosen and managed, you are unable to maintain the margins you deserve.
Sales reps are frustrated. Sales management feels at odds, with an “us versus them” mentality: Your CFO feels that sales is giving away too much, and sales feels as if corporate has no understanding of what the selling environment is really like.
The Fix: Conduct Robust Win-Loss Analysis
Top-quartile CEOs participate in an agile and robust win-loss analysis. This emerging best practice involves a weekly review that is sourced from won and lost deals. A neutral person, usually in product marketing or sales operations, conducts interviews using the sales process as the lens to review the sales campaign. In addition, customers are asked specific questions about how they evaluated pricing:
- Were you the most or least expensive?
- Was it easy to understand your pricing?
- Was your price worth the value?
- Was there transparency?
This approach maintains pricing integrity because it is entirely outward-in and market-driven. It provides frequent feedback that enables the CEO and functional leaders to make real-time pricing changes that reflect what customers want and are willing to pay for.
Mistake #4: Packaging
Awareness of your packaging strategy is as central to go-to-market success as deciding whether you compete on price, product, or customer experience. The three most common packaging mistakes in a CEO’s go-to-market strategy are:
- Not setting a baseline for packaging
- Not balancing simplicity and flexibility
- Not considering customer segmentation and differentiation from key competitors
There are five ways to set a baseline for your packaging. Consider which of the following approaches best suits your products and services:
- All you can eat (one offer with all products and features included)
- Category bundling (packages that combine a variety of product categories)
- Good/better/best (a lineup of packages with increasingly more feature functionality)
- Use cases (a variety of packages that are targeted at speci c types of usage scenarios)
- Bundling (bundled discounts)
To balance simplicity and flexibility, it’s important to capture the right customer expectations and market needs. For example:
- Do your customers prefer simplicity, and are they willing to live with little flexibility?
- Do your customers want a lot of flexibility, and are they willing to live with some complexity?
- Do you want to drive widespread adoption, and simplify when possible?
The following questions help guide packaging decisions to properly reflect customer segmentation and competitive distinctions. For example:
- Are you aware of the packaging approach your competitors use?
- Is your packaging approach the same or different for new customers and existing customers?
- Do some customer segments value certain benefits more than others?
The Fix: Design Adaptable Approaches
Software packaging is a prime example. Cloud and subscription services have completely altered the way customers buy software. Because of this disruption, CEOs have had to adjust their packaging approaches. Very often you will see and hear a CEO discuss completely different packaging and pricing for SMB, midmarket, and enterprise segments. Those who refuse to modify their packaging approach are left behind. Rapidly changing needs and customer demands make adaptability the source of competitive advantage.
You may be asking yourself if now is the time to modify your go-to-market strategy as CEO. Below are five triggers that your peers use as indicators. These telltale signs show that you may need a modification:
- Your industry and your competitors are growing revenues faster than you are.
- Your company is undervalued.
- Your markets have matured and you need to enter new growth markets.
- Your products are not persuading existing customers to buy more and they are not attracting new customers.
- Your competitive advantages over traditional competitors are eroding.
The process of building a go-to-market strategy never ends. Agility is the distinguishing characteristic we observe in the top quartile of growth-oriented CEOs. These executives are aware of potential pitfalls and adopt emerging best practices to avoid committing common mistakes. Most importantly, their willingness to rapidly iterate the go-to-market strategy separates the average from the best.
Outpacing your industry and competitors every month, quarter and year is difficult. Consider a visit to The Studio, SBI’s multimillion dollar, one-of-a-kind, state-of-the-art executive briefing center. A visit to The Studio increases the probability of making your number because the sessions are built on the proven strength and stability of SBI, the industry leader in B2B sales and marketing.