What does go-to-market mean?
The term “go-to-market” (often abbreviated GTM) is an umbrella term used to describe the combination of tactics a company uses to monetize their products or services.
The go-to-market organization typically encompasses marketing, sales, product, and customer success.
No two companies have the same combination of tactics. However, several well-understood go-to-market models provide approximations to illustrate how sales, marketing, and product organizations interact in different permutations to generate revenue. Specifically, go-to-market models help describe and differentiate the various ways that a company can attract, acquire, and grow customers.
Most critically, the go-to-market model that a company adopts determines the resources required for different functional groups within the go-to-market organization.
This guide will explore and compare the most common go-to-market models.
Go-to-market models compared
A direct sales GTM emphasizes the use of salespeople to guide prospective buyers to a sale.
Sales-led models are ubiquitous and are well-suited for the following cases:
- The product is complex. Sales teams are beneficial when a potential customer must be educated about the product to derive value from it. (Ex: enterprise software, manufacturing equipment, pharmaceuticals)
- The product is expensive. Products that sell for over five figures typically require a salesperson to clearly articulate the value that the product delivers in exchange for this high price. (Ex: houses, cars)
- The product is purchased repeatedly or in large quantities. Sometimes called “relationship selling,” repeat purchases can benefit from sales teams as human interaction can build confidence and loyalty over the customer’s lifetime. (Ex: construction materials, advertising)
Inside and field sales
Sales teams can be described as either “field sales” or “inside sales.” This distinction is pervasive in B2B companies.
The primary difference between these two types of sales teams is the ratio of the number of prospective customers to the number of salespeople.
Field sales (sometimes called enterprise sales) focusses on selling to a smaller number of potential customers. Because of the low customer-to-sales ratio, field sales teams can focus more on building longterm relationships with customers and grow revenue by selling additional products (up-sell) or a wider variety of product types (cross-sell) to existing customers.
Traditionally, field sales teams travel to their customers (in “the field”).
By contrast, inside sales focus on selling to an ever-growing number of customers. Inside sales teams prioritize a higher volume of transactions over the development of longterm customer relationships. The high customer-to-sales ratio means that inside sales are better suited to transactions that require less time and effort on the part of the salesperson.
Inside sales teams almost exclusively communicate with customers remotely via phone, email, or video conference.
In both cases, the benefits of direct sales are:
- Direct access to the end customer
- Full control over the sales process
However, the disadvantages are:
- Increased costs and overhead associated with maintaining an internal team
- Longer time-to-revenue as in-house teams need to be hired and trained before generating revenue
In contrast to direct sales, “channel sales” refers to the use of third-party sales teams to generate revenue. The most common types of channel sales include:
- Resellers. Sometimes called value-added resellers (VARs), resellers operate as an independent company on behalf of a client whose product they sell to customers. Companies often contract resellers with a limited in-house sales capacity or ability to reach a group of potential customers (for example, a company with no sales team in Asia may contract a local reseller to facilitate the sales of their product in that region).
- Retailers and distributors. Common in B2C, retailers and distributors are third-party companies that sell a company’s products to an end customer in exchange for a share of the revenue. For companies whose products are commoditized or undifferentiated, the cost of a direct sales motion often exceeds the revenue they produce.
- OEM Partners. Original Equipment Manufacturer partners sell a company’s product within or as a part of their proprietary products. Originating in manufacturing, OEM sales are now widespread in software where a company sell their product to an OEM partner which then builds additional software around the product to create a second, distinct product of their own.
The advantages of channel sales are:
- Short time-to-revenue as new channel partners can be contracted and deployed quickly
- Expanded reach into different groups of potential customers
However, the disadvantages are:
- Decreased margins (each channel partner typically keeps a portion of the sale as a fee)
- Less control over the sales process
- Limited access to the end customer
The widespread availability of the internet has allowed companies that traditionally relied on costly direct or indirect sales to sell products directly to customers online.
In some cases, such as in apparel and consumer packaged goods (CPGs), e-commerce has overtaken traditional retail sales as the products’ low prices and relative simplicity are a better fit for low-touch transactions.
As discussed in the previous sections, the primary benefit that sales teams provide is to articulate a product’s value to a potential customer. When this can be achieved effectively online, e-commerce typically results in a lower cost to acquire a customer (CAC) and is more economically sound.
The costs associated with brick-and-mortar stores and a workforce of salespeople outweighs the costs of selling the same products online with no significant impact to the customer experience.
Currently, e-commerce is best suited for the following cases:
- The product is simple. Products that serve straightforward purposes and need little to no customization for each buyer can be sold online with limited marketing. (Ex: household goods)
- The product is inexpensive. Low-cost products present little perceived risk to a potential customer and are a fit for e-commerce where a buyer is less able to evaluate the product before purchasing. E-commerce companies have further reduced this perceived risk by offering free returns if a customer is dissatisfied. (Ex: clothing)
- The product is niche. Products that appeal to a relatively small number of potential customers can be effectively sold online as a lower number of providers can serve a near-global market. By contrast, speciality brick-and-mortar retailers tend to see success only in areas with dense populations.
In contrast to models that emphasize investment in sales and marketing, product-led GTM models use the product itself as a primary driver of acquisition and conversion.
Freemium and free trials
The most common product-led GTM models allow prospective customers to use and interact with the product at no cost either for a limited period (free trial) or with limited functionality (freemium).
Rather than learning about a product’s value through sales and marketing, prospective customers discover the value themselves as they interact with and evaluate the product directly.
While not always thought of as a go-to-market model, open-source is an option unique to software where the underlying product is either entirely or partially freely available and modifiable. Open-source software eliminates many of the barriers to entry of closed-source software. However, what an open-source model can achieve for the adoption of software, companies can struggle to monetize the product without thoughtful strategies for feature segmentation and licensing.
Summary: Common GTM models compared
|GTM Model||B2B or B2C?||Marketing investment||Sales/Success investment||Product investment||Time-to-value||Product price|
|Direct sales||Both||Higher||Very high||-||Higher||$$$|
|Channel sales||Both||Higher||Very high||-||-||$$|
|E-commerce||B2C (Primarily)||Very high||-||Higher||Lower||$|
|Free trial||Both||Higher||-||Very high||Lower||$$|