Crossing the Chasm: Marketing and Selling Disruptive Products to Mainstream Customers

by Geoffrey A. Moore

WHOLE PRODUCT: Can our company with the help of partners and allies field a complete solution to the target customer’s compelling reason to buy in the next three months such that we can be in the market by the end of next quarter and be dominating the market within twelve months thereafter? The clock is ticking. We need to cross now, which means we need a problem we can solve now. Any thread left hanging could be the one that trips us up.

COMPETITION: Has this problem already been addressed by another company such that they have crossed the chasm ahead of us and occupied the space we would be targeting? Dick Hackborn, the HP executive who led the move into laser printers, had a favorite saying: “Never attack a fortified hill.” Same with beachheads. If some other company got there before you, all the market dynamics that you are seeking to make work in your favor are already working in its favor. Don’t go there.

PARTNERS AND ALLIES: Do we already have relationships begun with the other companies needed to fulfill the whole product? If you do, it is typically from a single early-market project, or else you are just lucky. Pulling together this partnership is a major challenge for the whole product manager.

DISTRIBUTION: Do we have a sales channel in place that can call on the target customer and fulfill the whole product requirements put on distribution?

PRICING: Is the price of the whole product consistent with the target customer’s budget and with the value gained by fixing the broken process? Do all the partners, including the distribution channel, get compensated sufficiently to keep their attention and loyalty?

POSITIONING: Is the company credible as a provider of products and services to the target niche?

NEXT TARGET CUSTOMER: If we are successful in dominating this niche, does it have good “bowling pin” potential? That is, will these customers and partners facilitate our entry into adjacent niches?

To secure that monopoly, you need to understand 1) what a whole product consists of and 2) how to organize a marketplace to provide a whole product incorporating your company’s offering.

1. Generic product: This is what is shipped in the box and what is covered by the purchasing contract. 2. Expected product: This is the product that the consumer thought she was buying when she bought the generic product. It is the minimum configuration of products and services necessary to have any chance of achieving the buying objective. For example, when you buy a tablet, you need to have either a Wi-Fi network at home or a cellular connection for it to work, but either one is likely to have to be purchased separately. 3. Augmented product: This is the product fleshed out to provide the maximum chance of achieving the buying objective. In the case of a tablet, this would include email, a browser, a calendar, a personal directory, a search engine, and an app store, for example. 4. Potential product: This represents the product’s room for growth as more and more ancillary products come on the market and as customer-specific enhancements to the system are made. The fact that for the Apple iPad there are, at the time of this writing, some 374,090 apps on its App Store that I can buy to extend its reach and value is one of its key selling points.

target a market segment that is big enough to matter, small enough to lead, and a good fit with your crown jewels.

Aruba created an advisory board from its leading university customers,

Finally, at no point did they try to make the story or the value proposition about themselves. It was always an effort in service to the world and to the industry, so people could buy in based on their own self-interest, not just in order to get a “good deal.”

Recap: Tips on Whole Product Management 1. Use the doughnut diagram to define—and then to communicate—the whole product. Shade in all the areas for which you intend your company to take primary responsibility. The remaining areas must be filled either by the customer or by partners or allies. 2. Review the whole product to ensure it has been reduced to its minimal set. This is the KISS philosophy (Keep It Simple, Stupid). It is hard enough to manage a whole product without burdening it with unnecessary bells and whistles. 3. Review the whole product from each participant’s point of view. Make sure each vendor wins, and that no vendor gets an unfair share of the pie. Inequities here, particularly when they favor you, will instantly defeat the whole product effort—companies are naturally suspicious of each other anyway, and given any encouragement, will interpret your entire scheme as a rip-off. 4. Develop the whole product relationships slowly, working from existing instances of cooperation toward a more formalized program. Do not try to institutionalize cooperation in advance of credible examples that everyone can benefit from it—not the least of whom should be the customers. Also, do not recruit directly competing partners to serve the same need in the same segment—this will only discourage them from making a full commitment to your program. 5. With large partners, try to work from the bottom up; with small ones, from the top down. The goal in either case is to ...

This is what we mean by defining the battle. The fundamental rule of engagement is that any force can defeat any other force—if it can define the battle. If we get to set the turf, if we get to set the competitive criteria for winning, why would we ever lose?

In our experience to date with developing an early market, competition has not come from competitive products so much as from alternative modes of operation. Resistance has been a function of inertia growing out of commitment to the status quo, fear of risk, or lack of a compelling reason to buy.

In the pragmatist’s domain, competition is defined by comparative evaluations of products and vendors within a common category.

In sum, the pragmatists are loath to buy until they can compare. Competition, therefore, becomes a fundamental condition for purchase.

Competitive Positioning Compass. That model is designed to create a value profile of target customers anywhere in the Technology Adoption Life Cycle, identify what to them would appear to be the most reasonable competitive set, develop comparative rankings within that set on the value attributes with the highest ranking in their profile, and then build our positioning strategy development around those comparative rankings.

There are four domains of value in high-tech marketing: technology, product, market, and company.

As products move through the Technology Adoption Life Cycle, the domain of greatest value to the customer changes. In the early market, where decisions are dominated by technology enthusiasts and visionaries, the key value domains are technology and product. In the mainstream, where decisions are dominated by pragmatists and conservatives, the key domains are market and company. Crossing the chasm, in this context, represents a transition from product-based to market-based values.

Thus easy to buy becomes easy to sell. The goal of positioning, therefore, is to create a space inside the target customer’s head called “best buy for this type of situation” and to attain sole, undisputed occupancy of that space.

Who for and what for. Customers will not buy something until they know who is going to use it and for what purpose. This is the minimum extension to positioning needed to make the product easy to buy for the visionary.

The key idea here is to focus on the So what? and the Who cares? part of the value proposition. If the who has the clout and the budget, and the what is a big enough reward, then the risk of sponsoring an early market purchase is worth taking.

Here is a proven formula for getting all this down into two short sentences. Try it out on your own company and one of its key products. Just fill in the blanks: • For (target customers—beachhead segment only) • Who are dissatisfied with (the current market alternative) • Our product is a (product category) • That provides (compelling reason to buy). • Unlike (the product alternative), • We have assembled (key whole product features for your specific application).

In sum, to the pragmatist buyer, the most powerful evidence of leadership and likelihood of competitive victory is market share. In the absence of definitive numbers here, pragmatists will look to the quality and number of partners and allies you have assembled in your camp, and their degree of demonstrable commitment to your cause.

Recap: The Competitive Positioning Checklist To define the battle effectively so that you win the business of a pragmatist buyer, you must: 1. Focus the competition within the market segment established by your must-have value proposition—that is, that combination of target customer, product offering, and compelling reason to buy that establishes your primary reason for being. 2. Create the competition around what, for a pragmatist buyer, represents a reasonable and reasonably comprehensive set of alternative ways of achieving this value proposition. Do not tamper with this set by artificially excluding a reasonable competitor—nothing is more likely to alienate your pragmatist buyer. 3. Focus your communications by reducing your fundamental competitive claim to a two-sentence formula and then managing every piece of company communication to ensure that it always stays within the bounds set out by that formula. In particular, always be sure to reinforce the second sentence of this claim, the one that identifies your primary competition and how you are differentiated from it. 4. Demonstrate the validity of your competitive claim through the quality of your whole product solution and the quality of your partners and allies, so that the pragmatist buyer will conclude you are, or must shortly become, the indisputable leader of this competitive set.

If we put all these perspectives together and look at them in a crossing-the-chasm context, the fundamental pricing goal should be as follows: Set pricing at the market leader price point, thereby reinforcing your claims to market leadership (or at least not undercutting them), and build a disproportionately high reward for the channel into the price margin, a reward that will be phased out as the product becomes truly established in the mainstream, and competition for the right to distribute it increases.

All investment is a bet on performance against competition within time.

How long will it take before I can achieve a reasonably predictable ROI from an acceptably large mainstream market? The simple answer to this question is, as long as it takes to create and install a sustainable whole product. The chasm model asserts that no mainstream market can occur until the whole product is in place.

Nonetheless, once you have crossed the chasm, these people can become a potential liability. Their fundamental interest is to innovate, not administrate. Things like industry standards and common interfaces and adaptations to installed solutions, especially when these solutions are clearly technically inferior, are all foreign and repugnant to the high-tech pioneers. So as the market infrastructure begins to close in around them, they are already looking for less crowded country. In the meantime, they are not likely to cooperate in the compromises needed and can be highly disruptive to groups that are seeking to carry this agenda out. It is critical, therefore, that as the enterprise shifts from the product-centric world of the early market to the market-centric world of the mainstream, pioneer technologists be transferred elsewhere—either to another, more futuristic project within the enterprise, or if that is not an option, to another company where their talents can be better utilized.

pioneer to settler culture

Enlisting the faithful involves “hyper-engaging” with a small but vocal minority of consumers who have already demonstrated a propensity to evangelize and proselytize on your behalf. They do this because they believe in you and what you are doing so much they have made it part of their own identity.