GTMF Nuances by Strategy

This guide may well be positioned as a toolkit, but by now it’s hopefully clear that there is no single recipe for developing strong GTMF. But there are certain nuances depending on the GTM strategy you prioritise which exhibit common patterns.

A sales-led GTM strategy was de rigueur for SaaS companies for many years, but product-led and community-led GTM strategies are common today, either on a standalone basis or in combination with a traditional sales team. 

 

We believe all strategies have a role in the future of SaaS, and that every company’s individual strategy is likely to combine elements of these archetypes.

Section 4 - GTM Strategies.png
 

Sales-led growth: Outbound sales

Outbound sales involves sales representatives reaching out to potential clients directly to drive demand. Often businesses have demand-gen focussed reps (BDRs or SDRs) focussed on creating pipeline through cold calling, direct outreach, etc. and ‘closers’ called Account Executives (AEs) who manage the sales process and land the deal. 

 

Generally AEs can be ‘field’ reps, who focus on larger enterprise accounts, and ‘inside’ reps, who focus on mid-market accounts. 

 

In enterprise or field sales, AEs use direct sales conversations to land contracts generally in the $50k ASP+ range, whilst mid-market or inside reps are often operating in the $15-50k ASP range. 

 

Account managers or customer success reps look to upsell these accounts, with ARPA increasing substantially over time.

Top tips for how to get there:

  • Hire great functional salespeople appropriate to your stage – Enterprise focussed businesses should recruit reps with the skills to navigate large, complex organisations and stakeholder groups, whilst mid-market businesses should focus on reps with better administrative skills who will thrive in a higher volume, lower touch environment

  • But remember it takes a village to hunt an elephant – Don’t forget about the 'glue functions' like product marketers, sales engineers and implementation experts.

  • Resist bespoke product development – It’s a fine line between using customer feedback to further develop your product and building one-off product features. As you approach GTM fit, avoid the latter.

  • Incentivise upsell – As soon as you have initial proof of identifiable, repeatable upsell levels, add specialised commercial reps (AMs or CSMs) tasked with finding expansion ARR.

  • Trust the GTM accelerators - With longer sales cycles and fewer customers, cohort-based retention analysis might not tell you much quickly, so measure what you can and trust the process.

  • Scale your culture when you scale your team – As the sales team grows, a commercial team culture will emerge that needs to mesh with the engineering team culture that created the product-market fit.

  • Bet on your expansion levers – Companies often achieve local GTMF earlier with this model, so to prove you could become a category leader, choose a focused strategy to expand beyond your core (geography, share of wallet, industry, etc.)

Common mistakes to avoid:

1. Pricing and selling your features, not the experience: Your customer will pay for the guarantee that you will fix their problem. Make sure you include the full value in your price and sell the solution, not just the features.

2. Hiring too junior salespeople: We frequently see a startup saving money in the short-term by hiring individuals who have never previously closed relevant sized deals, and discovering one year later that recruiting a hire who is a poor fit is a false economy.

KPI CHEAT SHEET: SALES-LED GROWTH, ENTERPRISE SALES

SAAS METRIC TARGETS

Gross retention: >90%

Net retention: >120% (bonus points for >130%)

Gross margins: 70%+

Sales cycles: <6 months enterprise, <3 months inside

CAC payback: 12-24 months

KPIs TO FOCUS ON

AE ramp time:

No longer than your sales cycles, typically 3-6 months

AE quota attainment:

80%, but don't lower absolute quota numbers to improve attainment. Quotas tend to be $750k-$1m / year for enterprise

AE failure rate:

20% or below

 

Sales-led growth: Inbound sales

In an inbound sales approach, data-driven commercial execution shines from early on. An efficient commercial machine quickly converts a high volume of leads to new customers at an ASP generally ~$15k or below.

Top tips for how to get there:

  • The data-driven bird gets the worm – Hire commercial leadership with the analytical chops to optimise your funnel, channel per channel, stage per stage and segment per segment.

  • Don’t forget about retention – Focusing on efficient acquisition makes it easy to forget about retention in this GTM model, but finding strong upsell levers can make your net revenue retention stand out among peers.

  • Raise prices as you add product complexity - Products with inbound GTM models tend to face significant competitive alternatives, so you must counteract this by continuing to invest in your product.

  • Efficient recruiting and onboarding – Your commercial team grows quickly in this model, so invest in an efficient recruiting machine..

A tip from an investor's perspective: if you’re coming from a smaller European geography,  proving you can scale to another is a promising sign that your product can expand internationally, without the larger risks associated with a US expansion.

To go or not to go upmarket:

 

Inbound B2B sales models tend to pair with lower ARPA products, especially for the initial sale. Before you have achieved GTMF, you’ll likely further refine your GTM model. In a market with uniformly smaller customers or a market where the needs of the equivalent buyer at a larger customer are fundamentally different from that of a smaller customer, your ARPA will likely stay relatively consistent. 

 

In a market where there’s a gap among larger customers for a product like yours, you might get pulled upmarket, and your initial sales prices will increase. In either case, adjust your lead generation strategy accordingly. And if enterprise customers are pulling you significantly upmarket, it might make sense to productise security features and hire outbound reps to manage a sales process with different velocity and expectations.

KPI CHEAT SHEET: SALES-LED GROWTH, INBOUND-SALES SALES

SAAS METRIC TARGETS

Gross retention: >90%

Net retention: 95-100%, >100% upon achieving GTMF

Gross margins: 80%+

Sales cycles: Generally 3 months or less

CAC payback: <12 months

KPIs TO FOCUS ON

Pipeline velocity

Payback period per acquisition channel

Stage-by-stage-pipeline conversation rates

 

Product-led growth

This approach takes the best from the B2C playbook. In PLG businesses, customers can discover, test and buy the product directly, without necessarily requiring direct input from your team, therefore making the product itself a source and driver of revenue.

Top tips for how to get there:

  • Think carefully about the roles of product, marketing and growth teams - how they interact, what their KPIs and responsibilities are. Generating ARR in a PLG business is very much a team sport!

 

  • Put the end user, not the buyer, first -  It's absolutely necessary for product managers and designers to focus on the end user, to create a product that’s intuitive and simple to use.

  • Consider organic and viral acquisition - Because the ARR of each individual new account is generally low in this GTM model, implement strategies to foster word-of-mouth acquisition.

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  • Deliver value before payment - Free trials and freemium are common in this GTM model for a reason. Users who appreciate the value of a product are more likely to buy, use, renew and buy more of a product.

  • Sales has a role, eventually! - PLG inside sales teams shine in identifying and upselling high-growth potential accounts within the customer base, but avoid layering this on too early. Also note that certain buyer groups (such as developers) are often resistant to heavy-touch sales processes and prefer exploring themselves.

 

  • Ditch some of the classic SaaS metrics -  When CAC is artificially low because it doesn’t incorporate R&D resourcing, you need different metrics to understand the efficiency of your GTM motion.

 

Is PLG right for your company?

 

PLG has become very popular in the past few years, but is it right for all companies? 

 

We believe all companies can benefit from core elements of the PLG philosophy: remove manual steps in the buying process, design the product for the end-user, and share responsibility with product for growth targets.

 

But fully adopting a user-led acquisition, conversion and retention strategy isn’t for all companies, and that’s okay. We commonly see three cases where it’s particularly hard:

 

  1. Companies selling into industries that have scarcely begun to adopt SaaS as a business model.

  2. Companies defining a new product category without any comparables.

  3. Companies whose products' core value can’t be appreciated if adopted only at an individual user or team level.

 

What about the traditional SaaS metrics?

 

Because of the presence of R&D team costs in ‘customer acquisition’ activity, many of the traditional SaaS metrics that rely on S&M costs now under-reflect the true cost of revenue generating activities.

 

Just as the optimal PLG team structure and interaction between product, marketing and growth is currently being discovered, there’s also no clear consensus on the next generation of standardised SaaS metrics that are as pervasive as LTV/CAC and CAC payback, for example. 

 

Some similarities are present compared with a traditional analysis. Cohort analysis is still important, as are funnel conversion metrics (with Product Qualified Leads or PQLs). Also, user engagement has increased in importance as it's no longer just a measure of customer health but core to driving revenue. 

 

But some new metrics such as natural rate of growth (from OpenView) and ROIIC (from Insight Partners) are emerging, and some traditional metrics are resurfacing in importance, such as burn multiples.

Whilst these metrics and benchmarks are being developed, we encourage detailed tracking of everything around 3 key areas:

 

  1. Discovery – including PQLs, funnel conversion rates, activation rates, time to value

  2. Conversion – from free to paid, including initial revenue per customer/user and classic engagement statistics

  3. Expansion – net revenue retention, user/team expansion, NPS and customer satisfaction

KPI CHEAT SHEET: PRODUCT-LED GROWTH

 

There isn't yet consensus on the perfect metrics for this GTM approach, but we encourage tracking metrics from each of the below three categories.

FIND AND DISCOVER

Your 'North Star' metric is often number of signups, as well as secondary measures around PQLs, time to value, activation rate

TRY AND BUY

Free-to-paid conversion is your 'North Star' here, with product engagement, average landing revenue per customer or user also relevant

USE AND EXPAND

Net Revenue Retention (NRR) is the key metric here, underpinned by NPS, attach-rates and customer satisfaction

 

Community-led growth

In this approach, your community drives new users and buying decisions. In a community-led model, the community acts as a force multiplier on top of product-led growth, turning your users into champions and your competitive moat. 

 

The way you build your community depends on the product proposition and industry you’re in. The eventual goal is to ‘operate the town-square’ of your focus area and thereby own the distribution channel. The role of a community evangelist / Head of Community becomes crucial as you scale up these efforts.

 

Community-led growth is particularly crucial in Open Source Software (OSS) where ecosystem contributors can become powerful advocates and product evangelists.

Top tips for how to get there:

  • Start with the ‘core’ - Identify an ICP for your community members.

  • Identify the right channel - Don’t assume your community must center around your owned assets, and explore the appropriate third party digital platforms.

  • Create co-branded content - Leverage your stakeholders/end-users to create educative articles, interviews, podcasts, thought pieces, tutorials, templates and so on.

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  • Build reward mechanism - Acknowledge the value your community members create, and reward engagement accordingly. Rewards can, but don’t have to be, monetary.

Oxx Playbook Illustration - Community Lead Growth.png

KPI CHEAT SHEET: COMMUNITY-LED GROWTH

In addition to measuring your SaaS metrics, it's important to measure and show community metrics. In an Open-Source developer community-led model, here's what we see matters. 

SAAS METRIC TARGETS

Star

Forks

Watchers

Downloads

KPIs TO FOCUS ON

Contributors >50 / month is an excellent second order metrics indicative of Go-To-Market Fit. We define contributors as developers who created a GitHub Issue / Added a Comment / Logged a Pull Request / Added a Commit.