Go-to-Market Models

When entering a new market, you need to review your go-to-market model. Will your current approach work in your new market?

This post looks at the different approaches you can take.  

There are fundamentally 4 go-to-market models. Outlined below is the likely use case for each of them. While many companies mix models, in reality one of them is likely to be the most appropriate to start with in your new market.

 Online

If your product is simple to sell, easily to install or hosted with no (or limited) configuration then selling internationally online is a good option. This is typically a low price, high volume model, highly dependent on automated customer acquisition, qualification, purchase, fulfilment and support. Partners may also sell the product and receive a 10%-15% referral fee. However, their involvement would be limited – most likely a tick box to include this product in a larger sale. Your online strategy should consider placing your product in third party and platform vendor’s stores – such as Microsoft’s Appsource – as this will rapidly increase reach and credibility.

Distribution

 If your product needs a partner channel for sales, installation and support and you need to achieve a broad reach in a fragmented market then a go-to-market using a three tier model is an appropriate go-to-market strategy. The distributor will make your product available to a partner channel which sells it to end user customers. Most distributors operate on small margins from high volume vendors such as Microsoft, so their scope to be an added value partner in your value chain is limited. To make a three tier model work as a new market entrant, you will need to be prepared to offer up to a 60% discount to list price which is split between the distributor and reselling partners. This model works for simple, low cost, high volume products where a distributor’s brand, reach and supply chain efficiency are the added value.

 Partner Channel

A two tier partner channel is an excellent go-to-market model when your solution is not too complex, has a sales process of 9 months or less, but still requires technical and business consulting services that could not be easily automated on-line. Partners take a 30%-50% margin on licenses, 20%-40% on subscriptions, and typically deliver the professional services themselves. Partners provide sales, marketing and first level support. Partners also enable your company to scale out through their people, activities, infrastructure and existing client base.

You will need to budget for sales and technical resource to recruit and support your partners in the first two years. 

Direct

If your solution is complex, with a long sales process and requires extensive technical and business consulting expertise to configure and integrate to the specific needs of each customer, then a direct model may be the best approach. A major benefit of the direct model is that you can choose your own people and have them dedicated to selling your product - even through long and complex sales processes that channel partners would find unattractive. Also, you keep the entire margin on licenses, subscriptions and services.

Building a self-sufficient and pro-active in-direct partner channel is what the majority of small to medium sized ISVs choose for their market entry.

If you are going to change your go-to-market model to enter the new market (for example, by changing from direct to partner based sales) there is value in hiring in some external consultancy to ensure you have considered all the issues involved in that change.