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

by Geoffrey A. Moore

Instead, a model we have been calling the Four Gears has proved more useful for digital entrepreneurs building consumer businesses.

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.

Because early adopters do not rely on well-established references in making these buying decisions, preferring instead to rely on their own intuition and vision, they are core to opening up any high-tech market segment.

Whereas people in the early majority are comfortable with their ability to handle a technology product, should they finally decide to purchase it, members of the late majority are not.

the key to getting beyond the enthusiasts and winning over a visionary is to show that the new technology enables some strategic leap forward, something never before possible, which has an intrinsic value and appeal to the nontechnologist.

As a class, visionaries tend to be recent entrants to the executive ranks, highly motivated, and driven by a “dream.” The core of the dream is a business goal, not a technology goal, and it involves taking a quantum leap forward in how business is conducted in their industry or by their customers. It also involves a high degree of personal recognition and reward. Understand their dream, and you will understand how to market to them.

The key point is that, in contrast with the technology enthusiast, a visionary focuses on value not from a system’s technology per se but rather from the strategic leap forward such technology can enable. Visionaries drive the high-tech industry because they see the potential for an “order-of-magnitude” return on investment and willingly take high risks to pursue that goal.

Because they see such vast potential for the technology they have in mind, they are the least price-sensitive of any segment of the technology adoption profile. They

First, visionaries like a project orientation. They want to start out with a pilot project, which makes sense because they are “going where no man has gone before,” and you are going there with them. This is followed by more project work, conducted in phases, with milestones, and the like. The visionaries’ idea is to be able to stay very close to the development train to make sure it is going in the right direction and to be able to get off if they discover it is not going where they thought.

While reasonable from the customer’s point of view, this project orientation is usually at odds with the intentions of entrepreneurial vendors who are trying to create a more universally applicable product around which they can build a multi-customer business. This is potentially a lose-lose situation threatening both the quality of the vendor’s work and the fabric of the relationship, and it requires careful account management including frequent contact at the executive level. The winning strategy is built around the entrepreneur being able to “productize” the deliverables from each phase of the visionary project. That is, whereas for the visionary the deliverables of phase one are only of marginal interest—proof of concept with some productivity improvement gained, but not “the vision”—these same deliverables, repackaged, can be a whole product to someone with less ambitious goals.

The other key quality of visionaries is that they are in a hurry. They see the future in terms of windows of opportunity, and they see those windows closing. As a result, they tend to exert deadline pressures—the carrot of a big payment or the stick of a penalty clause—to drive the project faster. This plays into the classic weaknesses of entrepreneurs—lust after the big score and overconfidence in their ability to execute within any given time frame. Here again, account management and executive restraint are crucial. The goal should be to package each of the phases such that each phase: 1. is accomplishable by mere mortals working in earth time 2. provides the vendor with a marketable product 3. provides the customer with a concrete return on investment that can be celebrated as a major step forward.

typically you don’t find them, they find you. The way they find you, interestingly enough, is by maintaining relationships with technology enthusiasts. That is one of the reasons why it is so important to capture the technology enthusiast segment.

Overall, to market to pragmatists, you must be patient. You need to be conversant with the issues that dominate their particular business. You need to show up at the industry-specific conferences and trade shows they attend. You need to be mentioned in articles that run in the newsletters and blogs they read. You need to be installed in other companies in their industry. You need to have developed applications for your product that are specific to their industry. You need to have partnerships and alliances with the other vendors who serve their industry. You need to have earned a reputation for quality and service. In short, you need to make yourself over into the obvious supplier of choice.

The fact that the United States has all but conceded great hunks of this market to the Far East is testimony not so much to the cost advantages of offshore manufacturing as to the failure of onshore product planning and marketing imagination.

Indeed, making the marketing and communications transition between any two adoption segments is normally excruciatingly awkward because you must adopt new strategies just at the time you have become most comfortable with the old ones.

Or the company may be saying “state-of-the-art” when the pragmatist wants to hear “industry standard.”

The D-Day strategy prevents this mistake. It has the ability to galvanize an entire enterprise by focusing it on a highly specific goal that is 1) readily achievable and 2) capable of being directly leveraged into long-term success.

Numerous studies have shown that in the high-tech buying process, word of mouth is the number-one source of information that buyers reference, both at the beginning of the sales cycle, to establish their “long lists,” and at the end, when they are paring down their short ones.

Pragmatist customers want to buy from market leaders. Their motive is simple: Whole products grow up around the market-leading products and not around the others.

the only right strategy is to take a “big fish, small pond” approach. Segment. Segment. Segment.

The size of the first pin is not the issue, but the economic value of the problem it fixes is. The more serious the problem, the faster the target niche will pull you out of the chasm.

A key lesson to learn here is that you want to target a beachhead segment that is: • Big enough to matter • Small enough to win, and a • Good fit with your crown jewels.

The critical attitude to maintain in all four of these challenges is that chasm crossing represents a unique time in your enterprise’s history. It is a far cry both from your past, where selling to visionaries was the key to success, and your future, which will be focused on either niche or mass-market expansion programs.

That’s when you hear them saying things like “It will be a billion-dollar market in 2016. If we only get five percent of that market . . .” When you hear that sort of stuff, exit gracefully, holding on to your wallet.

We need to work with something that gives more clues about how to proceed in the presence of real people with complex motives. However, since we do not have real live customers as yet—or at least, not very many of them—we are just going to have to make them up. Then, once we have their images in mind, we can let them guide us to developing a truly responsive approach to their needs. Target customer characterization is a formal process for making up these images, getting them out of individual heads and in front of a market development decision-making group. The idea is to create as many characterizations as possible, one for each different type of customer and application for the product. (It turns out that, as these start to accumulate, they begin to resemble one another so that, somewhere between twenty and fifty, you realize you are just repeating the same formulas with minor tweaks, and that in fact you have outlined eight to ten distinct alternatives.) Once we have built a basic library of possible target customer profiles, we can then apply a set of techniques to reduce these “data” into a prioritized list of desirable target market segment opportunities. The quotation marks around data are key, of course, because we are still operating in a low-data situation. We just have a better set of material to work with.

Charlie

Scene or situation: Focus on the moment of frustration. What is going on? What is the user about to attempt? • Desired outcome: What is the user trying to accomplish? Why is this important? • Attempted approach: Without the new product, how does the user go about the task? • Interfering factors: What goes wrong? How and why does it go wrong? • Economic consequences: So what? What is the impact of the user failing to accomplish the task productively?

This list consists of a set of issues around which go-to-market plans are built, each of which incorporates a chasm-crossing factor, as follows: • Target customer • Compelling reason to buy • Whole product • Partners and allies • Distribution • Pricing • Competition • Positioning • Next target customer

The same logic holds for why pragmatists prefer ARM’s smartphone microprocessors to Intel’s Atom, Google Search to Microsoft’s Bing, Apple’s iPhone to RIM’s BlackBerry, HP printers to Epson’s, Cisco routers to Huawei’s. In every case, there is a risk that they are preferring an inferior product—if you look only at the generic product. But in every case, they are preferring the superior product if you look at the whole product. To net this out: Pragmatists evaluate and buy whole products. The generic product, the product you ship, is a key part of the whole product, make no mistake. But once there are more than one or two comparable products in the marketplace, then investing in additional R&D at the generic level has a decreasing return, whereas there is an increasing return from marketing investments at the levels of the expected, the augmented, or the potential product.

nothing in the whole product is a showstopper from the point of a competitor seeking to neutralize Aruba’s differentiation, but taken as a whole, for a large competitor who has much bigger fish to fry, it takes more focus to accomplish this outcome than it is worth. And

Crossing the chasm, in this context, represents a transition from product-based to market-based values.

people who are supportive of your value proposition take an interest in your products and in your company. People who are skeptical of you do not. This means that, at the beginning of a market, when skepticism is the common state, basing communications on product or company strengths is a mistake.

creating the competition involves using two competitors as beacons so that the market can locate your company’s unique value proposition. The first of these two competitors we will call the market alternative. This is a vendor that the target customer has been buying from for years. The problem they address is the one we will address, and the budget that is allocated to them represents the money we as the new entrant are going to preempt. To earn the right to this budget, we are going to use a disruptive innovation to address a stubbornly problematic limitation in the traditional offer. The second reference competitor we will call the product alternative. This is a company that is also harnessing the same disruptive innovation we are—or at least close to it—and is positioning itself like us as a technology leader. Their very existence gives credibility to the notion that now is the time to embrace this new discontinuity. Our intent here is to acknowledge their technology but to differentiate from them by virtue of our own segment-specific focus.

People are highly conservative about entertaining changes in positioning. This is just another way of saying that people do not like you messing with the stuff that is inside their heads. In general, the most effective positioning strategies are the ones that demand the least amount of change.

When most people think of positioning in this way, they are thinking about how to make their products easier to sell. But the correct goal is to make them easier to buy.

The goal of positioning, therefore, is to create a space inside the target customer’s head called “best buy for this type of situation”

The answer here is an emphatic no. Indeed, this is just what defeats most positioning efforts. Remember, the goal of positioning is to create and occupy a space inside the target customers’ head.

Not who you want to sell to / who is in your head

One of the things they do not like is for you to take up too much space. This means they will use a kind of shorthand reference: Mercedes (“top-of-the-line, conservative”), BMW (“upscale performance sedan, yuppie”), Lincoln (“American top-of-the-line, tired”), Lexus (“New kid on the block, current best buy”). That’s all the space you get for your primary differentiation statement. It’s like a telegram with less than one line. If you don’t make the choice to fill the space with a single attribute, then the market will do it for you.

Taking such rapid passage as our charter, we then embarked on setting forth a strategy and set of tactics for accomplishing it. The fundamental strategic principle was to launch a D-Day type of invasion, one focused on a highly specific target segment within a mainstream marketplace. The tactics for implementing that invasion were then set out in four clusters. To begin with, we had to target the point of attack, which meant isolating our target customers and their compelling reason to buy. Then we had to assemble the invasion force, constructed around the whole product and the partners and allies needed to make it a reality. The next step was to define the battle, by creating our competition and positioning ourselves, in that context, as being easy to buy. Finally, we had to launch the invasion, selecting our intended distribution channel and setting our pricing to give us motivational leverage over that channel.