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

by Geoffrey A. Moore

Financials and futures. Customers cannot be completely secure in buying a product until they know it comes from a vendor with staying power who will continue to invest in this product category. This is the final extension of positioning needed to make a product easy to buy for a conservative.

The key takeaway from this section is that positioning is more about the audience’s state of mind than yours.

1. The claim. The key here is to reduce the fundamental position statement—a claim of undisputable market leadership within a given target market segment—to a two-sentence format outlined later on in this chapter. 2. The evidence. The claim to undisputed leadership is meaningless if it can, in fact, be disputed. The key here is to present sufficient evidence as to make any such disputation unreasonable. 3. Communications. Armed with claim and evidence, the goal here is to identify and address the right audiences in the right sequence with the right versions of the message. 4. Feedback and adjustment. Just as football coaches have to make halftime adjustments to their game plans, so do marketers, once the positioning has been exposed to the competition. Competitors can be expected to poke holes in the initial effort, and these need to be patched

up or otherwise responded to.

Of the four components, by far the hardest to get right is the claim.

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).

Remember, the goal of positioning is to create and occupy a space inside the target customers’ head.

If you don’t make the choice to fill the space with a single attribute, then the market will do it for you.

The function of the statement of position is to control the ad campaign,

The key point to notice is the transition from product to market, corresponding to crossing the chasm.

pragmatists are more interested in the market’s response to a product than in the product itself.

It is actual investment in building the whole product that demonstrates to the pragmatist that, if you are not already the market segment leader, you are destined to become so.

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.

distribution is the vehicle that will carry us on our mission, and pricing is its fuel.

The number-one corporate objective, when crossing the chasm, is to secure a distribution channel into the mainstream market, one with which the pragmatist customer will be comfortable.

during the chasm period, the number-one concern of pricing is not to satisfy the customer or to satisfy the investors, but to motivate the channel.

group into five classes, each of which is associated with an optimal approach: 1. Enterprise executives making big-ticket purchasing decisions focused on complex systems to be adopted broadly across their companies, 2. End users making relatively low-cost purchasing decisions focused on personal or workgroup technologies to be adopted locally and individually, 3. Department heads making medium-cost purchasing decisions for use-case-specific solutions that will be adopted within their own organization, 4. Engineers making design decisions for products and services to be sold to their company’s customers, and 5. Small business owner-operators making modest purchase decisions that are nonetheless highly material to them, given limited capital to spend and a strong need to get value back.

Pragmatists, as we have said repeatedly, want to back the market leader. They have learned that by so doing they can keep their whole product costs—the costs not only of purchase but of ownership as well—to their lowest, and still get some competitive leverage from the investment. They expect to pay a premium price for the market leader relative to the competition, perhaps as high as 30 percent. This is competition-based pricing.

Indeed, because of the primary importance of securing ongoing means of access to the mainstream, this latter issue should be the number-one factor for pricing decisions during this period.

From a distribution perspective, there are two pricing issues that have significant impact on channel motivation: • Is it priced to sell? • Is it worthwhile to sell?

Companies crossing the chasm, coming from success in the early market with visionary customers, typically have their products priced too

high.

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.

The fundamental lesson of this chapter is a simple one: The post-chasm enterprise is bound by the commitments made by the pre-chasm enterprise.

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.

Early market development efforts typically do not respond well to massive infusions of capital—in

In sum, this is when you want to spend your market development money—not before. It is important, therefore, that you not start this process until after you have established early market leadership, and that you not commit to throwing off all kinds of cash during the chasm period. Simply applying these two concepts to the business plan can keep you out of a lot of trouble.

To sum up, at the beginning of the chasm period, the organization is dominated by pioneers, with strong powers invested in a few top-gun salespeople and product managers. By the time we are into the mainstream market, that power should be distributed far more broadly among major account managers, industry marketing managers, and product marketing managers. This gradual dissemination of authority will ultimately frustrate the pioneer contributors, hampering their ability to make quick decisions and rapid responses. Ultimately, it will make them want to leave.

Whole product R&D is driven not by the laboratory but by the marketplace.

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.

As long as they are in the Bowling Alley phase, however, the distribution channel will be more focused on value than volume, the pricing will still maintain a premium above the commodity price point, and the competitive positioning can still be framed in terms of an intersection between the domain expertise delivered by the incumbent market alternative and the performance value delivered by a next-generation product alternative.

In a consumer model, the goal of the enlistment gear is, at minimum, to keep churn below, say, 2 percent per month (giving you a lifetime customer value of about four years), and more positively, during the growth