Apr 15
Decentralized Business Go-To-Market Strategy
In the previous post, I talked about how blockchain enables distributed ledger and distributed ledger is a characteristics of decentralized business. Today, I’m going to talk about the Go-To-Marketing strategy of such business.
You have probably used some of those ride-sharing or food delivery or parking apps. Or in a corporate setting, used a purchasing app to order a new computer or an expense app to record expenses in a company trip. Quite a few of those apps are provided by companies established during the last decade providing a specific functionality as a Software-as-a-Service (SaaS). You may wonder how those companies get their services at your disposal and become adopted. This is the “cold start problem” each of those companies face initially: How does one get started from nothing? How does one acquire customers? How does one create network effects — where the product or service becomes more valuable to its users as more people use it — that create incentives for even more customers to sign up?
A go-to-market strategy (GTM) is crucial in tackling the above questions. It is the plan for targeting a customer pain point with the right sales and marketing process, so you can grow your business at the optimum pace. You can create a GTM strategy for a new business and for a new feature, a brand or for a location. At the same time, you would construct a funnel to qualify and measure all the prospects into leads, into opportunities and into sales eventually. On average only 3% of the original prospects would convert into a successful sale. In other words, every company needs a highly efficient sales and marketing team to execute a “go to market” plan and convince potential customers to spend their money, time, and attention on your product or service.
Most organizations tackled the “cold start problem” by investing significantly in sales and marketing teams as part of a traditional GTM strategy that focuses on generating leads, acquiring, and retaining customers. It is no wonder that a significant portion of the marketing spend is concentrated on a few large centralized products/services like Amazon, Linkedin, Google, Facebook, and Twitter, in which the vast majority of value accrues to the platform itself rather than to the users. The next step would be to turn these leads generated from the big platforms into sales. For example for a SaaS B2B start-up, to achieve a $100k monthly recurring revenue target requires at least 5–10 sales rep making at least $10k product sales each month. That would equate to 100 net new customers for an average of $1k per sale. With a 3% conversion ratio, that would require at least 3400 leads that need to be generated. To add to the complexity, most sales organization would have sales development reps qualifying leads, account executives closing deals, account managers taking care of renewals and upselling, and customer success managers ensuring customer satisfaction. Imagine the number of campaigns and ad spend that need to be run to capture this number of leads and the resources devoted to sales and sales operations to convert these leads into sales.
But in recent years, a decentralized model of organizing corporate activities has emerged. Instead of having a centralized leadership making all decisions about the product or service in a top-down corporation, a decentralized model involves its customers and stakeholders as soon as possible at the start a project. The new model leverages decentralized technologies and allows its users to play both the role of owners and customers through the digital primitive known as tokens.
This new model, known as web3, offers a different idea of GTM. While some traditional customer acquisition frameworks are still relevant, the introduction of tokens and novel organizational structures such as decentralized autonomous organizations (DAOs) opens up a variety of go-to-market approaches.
Of particular interest is how the traditional role of a vendor, customer, investor or sales/marketing team become not as cleanly defined. A user can play a single or multiple roles at the same time. Rather than allocating a lot of funds on marketing to entice and acquire potential customers, core business and development teams can use tokens to attract early users, who will then be rewarded for their early contributions when network effects hasn’t started or obvious yet. Those early users, apart from being early investors, also become evangelists who bring more people into the network, this essentially makes early users in web3 more powerful than the traditional sales development reps or account executives in web2.
This is not to say that web3 is by all means superior to web2 companies. There are industries that the web3 model is easier to take hold and industries in which only a particular business process can be supplemented with the web3 model. The fundamental differences are: Web2 organizations would start with a product or service that can address a customer’s business pain points and employ the traditional GTM funnel strategy that seeks to churn out sales continuously (Come for the tools, remain in the network for compatibility). Web3 organizations starts with the purpose, attracts like-minded users for early adoption and forms a community. Any value-added as the network efforts takes hold will accrue back to the network (Join the network, reap more benefits as the network grows). It means having a strong community — not just being “community-led” or “community-first,” but also being community-owned — blurring the distinction between owner, investors, and users.
Let’s come up with a scenario as close to reality as possible.
gmgn supply [1] is a DAO with the purpose of creating healthier and more sustainable consumer packaged goods. The first endeavor would be the gm cereal.
Gm cereal would need to distinguish itself from conventional products in its qualities and how it’s being marketed and distributed.
It sources only sustainable and non-GMO cereal raw materials. The processing of raw materials into the final product will be handled in local facilities that agree to rent out some of their manufacturing and processing capabilities. Some of those local facilities [2] will also be “tokenized” and partially owned by gmgn supply.
The product development team also believes in the traditional chinese yin-and-yang well-being concept and seeks to introduce beneficial ingredients into the gm cereals. With the help of a local superfood powder manufacturer, natrihealth, [3] which shares the same concept and have years of knowhows, the team come up with the final recipe for the gm cereal that will give you a morning boost everyday.
The team understands that starting from nothing in GTM would be extremely costly. It partners with a local supplement provider, HerbaLand, [4] for marketing. Some of HerbaLand customers likes the concept and want to be early adopter of the product and also be participants of the project and token community.
At the same time, it will also rely on the web2 GTM strategy and exposes itself in the different social media. Instead of the vendor gmgn supply, natrihealth, HerbaLand each contributing to Ad Spend, the overall spending will be much less since each of the vendor will be sharing the cost and will also be doing referrals within the community provided the customer agrees to getting cross-sell. In fact, in the web3 model, customers will be rewarded if they agree to being referred within the network.
What was just mentioned isn’t something new and has traditionally been tackled by affiliates marketing and partnerships. Affiliates get awards by bringing traffic into a vendor. You can see tons of Ad on web2 social media where affiliates advertise on the vendor’s behalf and then route the traffic through their own landing page to the vendor’s. Again, Web3 does not mean the exclusion of existing participants in the web2 ecosystem. It just enables and facilitates better how the monetary benefits are being shared across the decentralized participants in the ecosystem. The point-to-point partnership network gives rise to web-like community network in web3.
When a sale is made, all participants in the community benefit. This is where the web3 smart contract shines. It codifies how much HerbaLand, natrihealth gets, usually in the form of a token, when a sale of gm cereal is made. The early adopters also benefit because the more the tokens are being transacted among the network, the more utility value the token has.
FYI:
Identity provider is a unique feature in a decentralized ecosystem. It put privacy back in the hands of consumers and allows for compensation on the use of privacy data from vendors. It is still evolving but a likely scenario would be a one-time Know-Your-Customer (KYC) verification (to satisfy regulatory demand) and then being given a non-fungible-token (NFT) to represent the user. Further interactions with Web 3 website would just interact with this Identity NFT. The Identity NFT also contains specifically which user privacy data is allowed to be accessed by the vendor. It can also be associated with a wallet for rewards to be deposited. An example of an Identity provider would be: 1) Galaxy https://galaxy.eco 2) Ask https://permission.io/
Conclusion:
As you can see, the smart contract and the token is what enables the interactions between the different stakeholders within the community, the next series will focus on the innerworkings of a token, how it is priced initially and how ensuring its utility is very crucial.
[1] gmgn supply. No affiliation whatsoever. Just saw online about how to set up a DAO and this DAO was presented
[2] pura. An example of how manufacturing lines for specific products can be outsourced.
[3] natrihealth. Local manufacturer of superfood powder.
[4] HerbaLand. Local manufacturer of supplements products.
In my opinion, web3 makes it possible to create a Global Community while producing local. The purchase is global. The team is global. The sourcing and production is local.
