This is part 1 of a blog series on building a sound go-to-market strategy. Keep an eye out for part 2, which will be published next week.
Assembling a go-to-market strategy and building a channel infrastructure is a critical process for multinationals to get right. It is especially important in emerging markets where local business practices are unfamiliar, data is scarce, and customer needs are often opaque. A sound go-to-market strategy minimizes the risks involved in serving a market segment in an emerging market because it establishes a clear path for growth, alignment on the direction for the company, and a cohesive action plan for the system of people and processes tasked with delivering goods, services, or information to customers.
Unfortunately, there are considerable obstacles to getting this right. Not only is determining inputs like customer profiles, competitor activities, ideal routes to market, and partner capabilities a complex task on its own, integrating these inputs into a strategy that fully captures the market opportunity can be even more challenging. Furthermore, the stakes are high: when companies get this wrong, they can experience missed performance targets, margin erosion, or painful partner transitions that can result in litigation, or lost sales and market share.
Executives often experience these pitfalls when trying to set up successful go-to-market strategies in emerging markets given the inherent complexities and moving pieces in these geographies. This post will outline some of the key elements in building a sound go-to-market strategy and explore ways in which leading companies deal with common pitfalls. In particular, this post seeks to explore the following questions, which every executive should answer when devising a go-to-market strategy:
- What information do I need to inform my strategy?
- What is the best model for each customer segment I seek to serve?
- How do I build the infrastructure to realize my selected go-to-market model?
Developing a fact base to inform your strategy
Best-in-class multinationals always begin by establishing internal alignment around the facts that will shape their channel strategy. Building a fact base about the market is the critical first step. It is key that executives gather as much information about the market as possible, including: the customer segment they are targeting, the operating environment in the market, the competitive landscape, the regulatory environment, and the partner landscape. Each of these elements can frame decisions about channel design, and so it is critical that executives have all of this information before building out their channel infrastructure.
When executives do not start with a fundamental set of facts about their target customers, they can fail to achieve commercial success. For example, if a furniture company has not done its due diligence to determine that key customers in a particular market prefer to make purchases after an in-person visit to a showroom, the executives might develop a sales strategy that is missing important information about their customers’ preferred buying experience.
When executives do the work to gather and align around a market fact base, they are armed with critical assumptions required to develop a sound channel strategy. Additionally, when management teams are on the same page, they can better evolve with their customer base over time. As such, creating alignment around the target customer is one of the keys to building out a successful channel strategy.
Selecting the optimal model for each customer segment-geographic pair
After building a robust fact base about the market to inform go-to-market strategy, the next critical step for executives is to select the optimal channel model for each customer segment-geographic pair. In other words, the best practice for building a sound go-to-market strategy is to then select the channel model that best addresses the need for the customer and the market. Often, the characteristics of many emerging markets requires that companies use channel partners to realize their go-to-market strategy, so the practice of working with distributors becomes fundamental to their commercial effectiveness. In fact, in a recent analysis conducted by FSG, we found that indirect sales through third-party channel partners represent 41%–72% of emerging market revenues for most MNCs. In general, there are three standard approaches to selling that executives deploy in emerging markets: a direct model, an indirect model, and a hybrid model.
In part 2 of this blog series, we will cover each of the three general distribution approaches in detail, and conclude with how to build the infrastructure to execute the model you’ve selected.