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

by Geoffrey A. Moore

This profile is in turn the very foundation of the High-Tech Marketing Model. That model says that the way to develop a high-tech market is to work the curve left to right, focusing first on the innovators, growing that market segment, then moving on to the early adopters, growing that segment, and so on, to the early majority, late majority, and even to the laggards. In this effort, companies must use each “captured” group as a reference base for launching their marketing into the next group. Thus the endorsement of innovators becomes an important tool for developing a credible pitch to the early adopters, that of the early adopters to the early majority, and so on.

If momentum is lost, then we can be overtaken by a competitor, thereby losing the advantages exclusive to a technology leadership position—specifically, the profit-margin advantage during the middle to late stages, which is the primary source from which high-tech fortunes are made.

Revised tech adoption lifecycle

As we shall see in the next chapter, 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. This benefit is typically symbolized by a single, compelling flagship application, something that showcases the power and value of the new product.

Simply put, the early majority is willing and able to become technologically competent where necessary; the late majority is not. When a product reaches this point in the market development, it must be made increasingly easier to adopt in order to continue being successful. If this does not occur, the transition to the late majority will stall.

The real news, however, is not the two cracks in the bell curve, the one between the innovators and the early adopters, the other between the early and late majority. No, the real news is the deep and dividing chasm that separates the early adopters from the early majority. This is by far the most formidable and unforgiving transition in the Technology Adoption Life Cycle, and it is all the more dangerous because it typically goes unrecognized.

What the early adopter is buying, as we shall see in greater detail in Chapter 2, is some kind of change agent. By being the first to implement this change in their industry, the early adopters expect to get a jump on the competition, whether from lower product costs, faster time to market, more complete customer service, or some other comparable business advantage.

By contrast, the early majority want to buy a productivity improvement for existing operations. They are looking to minimize the discontinuity with the old ways. They want evolution, not revolution. They want technology to enhance, not overthrow, the established ways of doing business. And above all, they do not want to debug somebody else’s product.

Because of these incompatibilities, early adopters do not make good references for the early majority. And because of the early majority’s concern not to disrupt their organizations, good references are critical to their buying decisions. So what we have here is a catch-22. The only suitable reference for an early majority customer, it turns out, is another member of the early majority, but no upstanding member of the early majority will buy without first having consulted with several suitable references.

What the company staff interpreted as a ramp in sales leading smoothly “up the curve” was in fact an initial blip—what we will be calling the early market—and not the first indications of an emerging mainstream market. The company failed because its managers were unable to recognize that there is something fundamentally different between a sale to an early adopter and a sale to the early majority, even when the company name on the check reads the same. Thus, at a time of greatest peril, when the company was just entering the chasm, its leaders held high expectations rather than modest ones, and spent heavily in expansion projects rather than husbanding resources.

Of course, talking this way about marketing merely throws the burden of definition onto market, which we will define, for the purposes of high tech, as: • 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.

Unfortunately, getting the last part—the notion that part of what defines a high-tech market is the tendency of its members to reference each other when making buying decisions—is absolutely key to successful high-tech marketing. So let’s make this as clear as possible. If two people buy the same product for the same reason but have no way they could reference each other, they are not part of the same market.

That is, if I sell an oscilloscope for monitoring heartbeats to a doctor in Boston and the identical product for the same purpose to a doctor in Zaire, and these two doctors have no reasonable basis for communicating with each other, then I am dealing in two different markets.

Marketing professionals insist on market segmentation because they know that no meaningful marketing program can be implemented across a set of customers who do not reference each other.

No company can afford to pay for every marketing contact made. Every program must rely on some ongoing chain-reaction effects—what is usually called word of mouth. The more self-referencing the market and the more tightly bounded its communications channels, the greater the opportunity for such effects.

To reach technology enthusiasts, you need to place your message in one of their various haunts—on the Web, of course. Direct response advertising works well with this group, as they are the segment most likely to send for literature, or a free demo, a webinar, or whatever else of substance you offer.

Enthusiasts are like kindling: They help start the fire. They need to be cherished for that. The way to cherish them is to let them in on the secret, to let them play with the product and give you their feedback, and wherever appropriate, to implement the improvements they suggest and to let them know that you implemented them.

Visionaries are that rare breed of people who have the insight to match up an emerging technology to a strategic opportunity, the temperament to translate that insight into a high-visibility, high-risk project, and the charisma to get the rest of their organization to buy into that project.

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.

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.

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.

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.

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.

In terms of prospecting for visionaries, they are not likely to have a particular job title, except that, to be truly useful, they must have achieved at least a senior vice presidential level in order to have the clout to fund their visions. In fact, in terms of communications, 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.

When the market is unfolding as it should, the entrepreneurial company seeds the technology enthusiast community with early copies of its product while at the same time sharing its vision with the visionary executives. It then invites the visionary executives to check with the technology enthusiast of their choice to verify that the vision is indeed achievable.

The basis for reform is the principle that winning at marketing more often than not means being the biggest fish in the pond. If we are very small, then we must search out a very small pond, a target market segment that fits our size. To qualify as a “real pond,” as we also noted before, its members must be aware of themselves as a group, that is, it must constitute a self-referencing market segment, so that when we establish a leadership position with some of its members, they will get the word out—quickly and economically—to the rest.

To look more closely into these values, if the goal of visionaries is to take a quantum leap forward, the goal of pragmatists is to make a percentage improvement—incremental, measurable, predictable progress. If they are installing a new product, they want to know how other people have fared with it.

If pragmatists are hard to win over, they are loyal once won, often enforcing a company standard that requires the purchase of your product, and only your product, for a given requirement. This focus on standardization is, well, pragmatic, in that it simplifies internal service demands. But the secondary effects of this standardization on your growth and profitability—increasing sales volumes and lowering the cost of sales—is dramatic. Hence the importance of pragmatists as a market segment.

When pragmatists buy, they care about the company they are buying from, the quality of the product they are buying, the infrastructure of supporting products and system interfaces, and the reliability of the service they are going to get. In other words, they are planning on living with this decision personally for a long time to come.

Pragmatists tend to be “vertically” oriented, meaning that they communicate more with others like themselves within their own industry than do technology enthusiasts and early adopters, who are more likely to communicate “horizontally” across industry boundaries in search of kindred spirits. This means it is very tough to break into a new industry selling to pragmatists. References and relationships are very important to these people, and there is a kind of catch-22 operating: Pragmatists won’t buy from you until you are established, yet you can’t get established until they buy from you.

As a rule, however, the path into the pragmatist community is smoother if a smaller entrepreneurial vendor can develop an alliance with one of the already accepted vendors or if it can establish a value-added-reseller (VAR) sales base.

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 importance of the product itself, its unique functionality, when compared to the importance of the ancillary services to the customer, is at its highest with the technology enthusiast, and at its lowest with the conservative.

As we move from segment to segment in the technology adoption life cycle, we may have any number of references built up, but they may not be of the right sort.

Visionaries lack respect for the value of colleagues’ experiences. Visionaries are the first people in their industry segment to see the potential of the new technology. Fundamentally, they see themselves as smarter than their opposite numbers in competitive companies—and quite often they are. Indeed, it is their ability to see things first that they want to leverage into a competitive advantage. That advantage can only come about if no one else has discovered it. They do not expect, therefore, to be buying a well-tested product with an extensive list of industry references. Indeed, if such a reference base exists, it will almost certainly turn them off, indicating that for this technology, at any rate, they are already too late.

Visionaries take a greater interest in technology than in their industry. Visionaries are defining the future. You meet them at technology conferences and other futurist forums where people gather to forecast trends and seek out new market opportunities.

Pragmatists, on the other hand, don’t put a lot of stake in futuristic things. They see themselves more in present-day terms, as the people devoted to making the wheels of their industry turn. Therefore, they tend to invest their convention time in industry-specific forums discussing industry-specific issues. Where pragmatists are concerned, sweeping changes and global advantages may make for fine speeches, but not much else.

This situation can be further complicated if the high-tech company, fresh from its marketing successes with visionaries, neglects to change its sales pitch. Thus, the company may be trumpeting its recent success at early test sites when what the pragmatist really wants to hear about are up-and-running production installations. Or the company may be saying “state-of-the-art” when the pragmatist wants to hear “industry standard.”

Indeed, a truly predatory type of investor—sometimes referred to as a vulture capitalist—looks to use the chasm period of struggle and failure as a means to discredit the current management, thereby driving down the equity value in the company, so that in the next round of funding, he or she has an opportunity to secure dominant control of the company, install a new management team, and, worst case, become the owner of a major technology asset, dirt cheap. This is an incredibly destructive exercise during which not only the baby and the bathwater but all human values and winning opportunities are thrown out the window. Nonetheless, it happens.

Cross the chasm by targeting a very specific niche market where you can dominate from the outset, drive your competitors out of that market niche, and then use it as a base for broader operations. Concentrate an overwhelmingly superior force on a highly focused target. It worked in 1944 for the Allies, and it has worked since for any number of high-tech companies.

The key to the Normandy advantage, what allows the fledgling enterprise to win over pragmatist customers in advance of broader market acceptance, is focusing an overabundance of support into a confined market niche. By simplifying the initial challenge, the enterprise can efficiently develop a solid base of references, collateral, and internal procedures and documentation by virtue of a restricted set of market variables. The efficiency of the marketing process, at this point, is a function of the “boundedness” of the market segment being addressed. The more tightly bound it is, the easier it is to create and introduce messages into it, and the faster these messages travel by word of mouth.

Companies just starting out, as well as any marketing program operating with scarce resources, must operate in a tightly bound market to be competitive. Otherwise their “hot” marketing messages get diffused too quickly, the chain reaction of word-of-mouth communication dies out, and the sales force is back to selling “cold.” This is a classic chasm symptom, as the entrepreneurial enterprise leaves behind the latent enthusiasm of the early market. It is usually interpreted as a letdown in the sales force or a cooling off ...

Most companies fail to cross the chasm because, confronted with the immensity of opportunity represented by a mainstream market, they lose their focus, chasing every opportunity that presents itself, but finding themselves unable to deliver a salable proposition to any true pragmatist buyer. The D-Day strategy keeps everyone on point—if we don’t take Normandy, we don’t have to worry about how we’re going to take Paris. And by focusing our entire might on such a small territory, we greatly increase our odds of immediate success.

Most high-tech leaders, when it comes down to making marketing choices, will continue to shy away from making niche market commitments, regardless.

Instead, 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.

To put it simply, the consequences of being sales-driven during the chasm period are 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, gain us access to other mainstream prospects.

One of the keys in breaking into a new market is to establish a strong word-of-mouth reputation among buyers. 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.

Now, for word of mouth to develop in any particular marketplace, there must be a critical mass of informed individuals who meet from time to time and, in exchanging views, reinforce the product’s or the company’s positioning. That’s how word of mouth spreads.

For all these reasons—for whole product leverage, for word-of-mouth effectiveness, and for perceived market leadership—it is critical that, when crossing the chasm, you focus exclusively on achieving a dominant position in one or two narrowly bounded market segments. If you do not commit fully to this goal, the odds are overwhelmingly against your ever arriving in the mainstream market.