Crossing the Chasm
Recently I re-read Geoffrey Moore's classic “Crossing the Chasm”, a great technology marketing book that came out in the 90s. It’s about marketing and selling disruptive technology products to mainstream customers. Although some of the case studies naturally date the book, it remains just as instructive now in 2009 as it did over a decade ago.
There are a few key sections worth highlighting (excerpts below): identifying the chasm, moving from early market to mainstream, niche segmenting, and creating a whole product. Food for thought...
What is the Chasm?...
“We have enough high-tech marketing history now to see where our model has gone wrong and how to fix it. To be specific, the point of greatest peril in the development of a high-tech market lies in making the transition from an early market dominated by a few visionary customers to a mainstream market dominated by a large block of customers who are predominantly pragmatists in orientation. The gap between these two markets, heretofore ignored, is in fact so significant as to warrant being called a chasm, and crossing this chasm must be the primary focus of any long-term high-tech marketing plan. A successful crossing is how high-tech fortunes are made...” [p.5]
“Every truly innovative high-tech product starts out as a fad – something with no known market value or purpose but with “great properties” that generate a lot of enthusiasm within an “in crowd.” That’s the early market. Then comes a period during which the rest of the world watches to see if anything can be made of this; that is the chasm. If in fact something does come out of it – if a value proposition is discovered that can predictably be delivered to a targetable set of customers at a reasonable price – then a new mainstream market forms, typically with a rapidity that allows its initial leaders to become very, very successful.” [p.6]
“One of the most important lessons about crossing the chasm is that the task ultimately requires achieving an unusual degree of company unity during the crossing period.” [p.7]
On the Early Market...
Technology enthusiasts “are the ones who first appreciate the architecture of your product and why it therefore has a competitive advantage over the current crop of products established in the marketplace. They are the ones who will spend hours trying to get products to work that, in all conscience, never should have shipped in the first place. They will forgive ghastly documentation, horrendously slow performance, ludicrous omissions in functionality, and bizarrely obtuse methods of invoking some needed function – all in the name of moving technology forward. They make great critics because they truly care. ... They pose fewer requirements than any other group in the adoption profile.” [p.31]
Visionaries “are not looking for an improvement; they are looking for a fundamental breakthrough. Technology is important only insomuch as it promises to deliver this dream... From the strategic leap forward it enables.” ... “Visionaries are easy to sell but very hard to please.” [p.34]
“Crossing the chasm requires moving from an environment of support among the visionaries back into one of skepticism among pragmatists. It means moving from familiar ground of product-oriented issues to the unfamiliar ground of market-oriented ones, and from the familiar audience of like-minded specialists to the unfamiliar audience of essentially uninterested generalists.” [p.137]
On segment-targeting...
“A market is: a set of actual or potential customers; for a given set of products or services; who have a common set of needs or wants; and who reference each other when making a buying decision.” [p.28]
“...The claim is made that, although niche strategy is generally best, we do not have time – or we cannot afford – to implement it now. This is a ruse, of course, the true answer being much simpler: We do not have, nor are we willing to adopt, any discipline that would ever require us to stop pursuing any sale at any time for any reason. We are, in other words, not a market-driven company; we are a sales-driven company. Now, how bad can this really be? I mean, sales are good, right? Surely things can just work themselves out, and we will discover our market, albeit retroactively, led to it by our customers, yes? The true answers to the previous questions are: (1) disastrous, (2) not always, and (3) never in a million years.
The consequences of being sales-driven during the chasm period are, to put it simply, fatal. Here’s why: The sole goal of the company during this stage of market development must be to secure a beachhead in a mainstream market – that is, to create a pragmatist customer base that is referenceable, people who can, in turn, provide us access to other mainstream prospects. To capture this reference base, we must ensure that our first set of customers completely satisfy their buying objectives. [p.68]
“The segment-targeting company can expect word-of-mouth leverage early in its crossing-the-chasm marketing effort, whereas the sales-driven company will get it much later, if at all. This lack of word of mouth, in turn, makes selling the product that much harder, thereby adding to the cost and unpredictability of sales. ... So, if we want market leadership early on – and we do, since we know pragmatists tend to buy from market leaders, and our number one marketing goal is to achieve a pragmatist installed base that can be referenced – the only right strategy is to take a “big fish, small pond” approach. Segment. Segment. Segment.” ... “Make a total commitment to the niche, and then do your best to meet everyone else’s needs with whatever resources you have left over.” [p.69]
“Winning the beachhead, knocking over the head pin, creates a dynamic of follow-on adoption, opening up new opportunities, in part from leveraging a solution from one niche to another, in part from word of mouth interaction between customers in adjacent niches.” ... “The fundamental principle for crossing the chasm is to target a specific niche market as your point of attack and focus all your resources on achieving the dominant leadership position in that segment.” [p.77]
“Can’t we go after more than one target? The simple answer is no... You cannot cross the chasm in two places.” Move into adjacent niches after you’ve conquered the first one. [p.99]
Direct sales is the best channel for crossing the chasm in high-tech. ... “It gives us maximum control over our own destiny.” ... “The retail system works optimally when its job is to fulfill demand rather than create it. ... Because it does not create demand, and because it does not help develop whole products, retail distribution is structurally unsuited to solving the chasm problem.” [p.169]
On the Whole Product Concept...
Generic product – what is shipped in the box
Expected product – what the consumer thinks they are buying
Augmented product – accessories, plug-ins, extras, technical support, etc.
Potential product – the product’s room for growth and enhancement
“At the introduction of any new type of product, the marketing battle takes place at the level of the generic product – the product itself. The hero in the battle for the early market. But as marketplaces develop, as we enter the mainstream market, products in the center (1) become more and more alike, and the battle shifts increasingly to the outer circles (4).” [p.110]
The single most important difference between early markets and mainstream markets is that the former are willing to take responsibility for piecing together the whole product (in return for getting the jump on their competition), whereas the latter are not. Failure to recognize this principle has been the downfall of many a high-tech enterprise. Too often companies throw their products into the market as if they were tossing bales of hay off the back of a truck. There is no planning for the whole product – just the hope that their product will be so wonderful that customers will rise up in legions to demand that third parties rally about it.” [p.112]
Lots of other good stuff - and interesting how one of the pivotal challenges in all of marketing ultimately boils down to transitioning from specialist to generalist appeal, and doing so with niche segmenting and a whole product. Again, a great book, well worth dusting off and scanning through again.