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

by Geoffrey A. Moore

Mapping out a global assault plan, attacking on all fronts at once, may work for massively intimidating market leaders who already have troops in place throughout the world, but it is just plain silly for stripling challengers. Instead, we need to pick our spots carefully, attack fiercely, and then dig in and hold.

The key to moving beyond one’s initial target niche is to select strategic target market segments to begin with. That is, target a segment that, by virtue of its other connections, creates an entry point into one or more adjacent segments.

Knowing they were in the chasm, and knowing that the first key to getting out was to select a beachhead market segment, they surveyed their client experience to date and targeted a very thin market niche: the regulatory affairs departments in Fortune 500 pharmaceutical companies.

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 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 as quickly as possible.

In one sense, this is a straightforward market-entry problem, to which the correct approach is well-known. First you divide up the universe of possible customers into market segments. Then you evaluate each segment for its attractiveness. After the targets get narrowed down to a very small number, the “finalists,” then you develop estimates of such factors as the market niches’ size, their accessibility to distribution, and the degree to which they are well defended by competitors. Then you pick one and go after it. What’s so hard?

The place where most crossing-the-chasm marketing segmentation efforts get into trouble is at the beginning, when they focus on a target market or target segment instead of on a target customer.

Sample Scenario 1. HEADER INFORMATION. At the top of the page you need thumbnail information about the end user, the technical buyer, and the economic buyer of the offer. For business markets, the key data are: industry, geography, department, and job title. For consumer markets, they are demographic: age, sex, economic status, social group. For our sample scenario, we are going to focus on a lighting designer who is bringing to market a new line of fixtures for the home. The plan is to sell these through wholesale distributors to interior decorators and designers acting as agents for their relatively wealthy clientele. In this context our key header information is: Economic buyer: The client who ultimately pays for the lighting fixture. End user: The interior designer who will guide the client in making the choice. Technical buyer: The home maintenance provider or building contractor who will install the fixture.

2. A DAY IN THE LIFE (BEFORE) The idea here is to describe a situation in which the user is stuck, with significant consequences for the economic buyer. The elements you need to capture are five: • 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

Turning back to the checklist, the four factors that raise showstopper issues for crossing the chasm are as follows: TARGET CUSTOMER: Is there a single, identifiable economic buyer for this offer, readily accessible to the sales channel we intend to use, and sufficiently well funded to pay the price for the whole product? In the absence of such a buyer, sales forces waste valuable time evangelizing groups of people trying to generate a sponsor. Sales cycles drag on forever, and the project can be shut down at any time. COMPELLING REASON TO BUY: Are the economic consequences sufficient to make any reasonable economic buyer anxious to fix the problem called out in the scenario? If pragmatists can live with the problem for another year, they will. But they will continue to be interested in learning more. So your salespeople will be invited back again and again—they just won’t return with any purchase orders. Instead, they will report that the customer said, “Great presentation!” What the customer was really saying was “I learned some more and I didn’t have to buy anything.” 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 han...

Since, however, investment and time are two of your scarcest resources, cheaper and sooner are very desirable attributes in a target market scenario. Here’s how they play out: 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? Calling on the line-of-business side of the house requires some fluency in the language of the target niche, and established relationships with targeted buyers and users accelerates this process dramatically. Lacking this, companies typically hire a well-connected individual out of the target industry and charter her to lead the sales force back in. 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? Note here that it is the whole product price, not the price of the product per se, that matters. Services will often make up as much or more of this total as product. POSITIONING: Is the company credible as a provider of products and services t...

Making the commitment to a niche market can be challenging, especially for entrepreneurs who are technology enthusiasts or visionaries, because they personally don’t have the pragmatist response and thus have trouble trusting in the market dynamics outlined in this book.

The good news in this is that you do not have to pick the optimal beachhead to be successful. What you must do is win the beachhead you have picked. If there is a genuine problem in the segment, you will have the target customer pulling for you. If it is a hard problem, and the segment is reasonably small, you probably will not have competition to distract you. This means you can focus all your attention on the whole product, which is where it needs to be. Nail that and you win.

To become a going concern, a persistent entity in the market, you need a market segment that will commit to you as its de facto standard for enabling a critical business process. To become that de facto standard, you need to win at least half, and preferably a lot more, of the new orders in the segment over the next year.

Say your revenue target is $10 million over all. That means $5 million from the target segment. It also means that same $5 million has to represent at least half of the total orders from the segment if you are to have the desired market-leader impact. In other words, if you are going to be a $10 million company next year you do not want to attack a segment larger than $10 million. At the same time, it should be large enough to generate your $5 million. So the rules of thumb in crossing the chasm are simple: Big enough to matter, small enough to lead, good fit with your crown jewels.

For selecting the target market segment that will serve as the point of entry for crossing the chasm into the mainstream market, the checklist is as follows: 1. Develop a library of target customer scenarios. Draw from anyone in the company who would like to submit scenarios, but go out of your way to elicit input from people in customer-facing jobs. Keep adding to it until new additions are no more than minor variations on existing scenarios. 2. Appoint a subcommittee to make the target market selection. Keep it as small as possible but include on it anyone who could veto the outcome. 3. Number and publish the scenarios in typed form, one page per scenario. Accompanying the bundle, provide a spreadsheet with the rating factors assigned to columns and the scenarios assigned to rows. Break the rating factors into two subtotals, showstoppers first, then nice-to-haves. 4. Have each member of the subcommittee privately rate each scenario on the showstopper factors. Roll up individual ratings into a group rating. During this process discuss any major disagreements about scores. This typically surfaces different points of view on the same scenario and is critical not just to getting the opportunity correctly in focus but also in laying the groundwork for a future consensus that will stick. 5. Rank order the results and set aside scenarios that do not pass the first cut. This is typically about two-thirds of the submissions. 6. In a 400-degree oven, bake . . . (Oops! ...

If you are committing an act of aggression, you’d better have the force to back it up. Or, to put this in terms closer to our immediate topic, marketing is warfare—not wordfare.

There is a widespread perception among high-tech executives that marketing consists primarily of some long-range strategic thinking (when you can afford to take the time for it) and then a lot of tactical sales support—with nothing in between. In fact, marketing’s most powerful contribution happens right in between. It is called whole product marketing, a term introduced earlier, and it is the fundamental basis for assembling the invasion force.

There is a gap between the marketing promise made to the customer—the compelling value proposition—and the ability of the shipped product to fulfill that promise. For that gap to be overcome, the product must be augmented by a variety of services and ancillary products to become the whole product.

The whole product model

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.

Now, at the introduction of any disruptive innovation, the marketing battle initially takes place at the level of the generic product—the thing in the center, the product itself. This is the hero in the battle for the early market. But as marketplaces develop, as we enter the mainstream market, products in the center become more and more alike, and the battle shifts increasingly to the outer circles. To understand how to dominate a mainstream marketplace we need to take a closer look at the significance of what Paul Harvey might once have called the rest of the whole product.

To get to the right of the chasm—to cross into the mainstream market—you have to first meet the demands of the pragmatist customers. These customers want the whole product to be readily available from the outset. They like a product such as Microsoft Office because virtually every desktop and laptop supports it, files are exchangeable without fuss, there are books in every bookstore about how to use it, not to mention seminars for training, hotline support, and a whole cadre of temporary office workers already trained on its core products of Word, Excel, and PowerPoint.

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. How to determine where to target these investments is the role of whole product planning.

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 a jump on their competition), whereas the latter are not.

Simplified whole product model

By solving the whole product equation for any given set of target customers, high tech has overcome its single greatest obstacle to market development.

every additional new target customer will put additional new demands on the whole product. That is, the total sum of products and services needed in order to get the desired benefit changes any time you change the value proposition. It soon becomes clear to even the most optimistic product marketing managers that they cannot go after all markets at once, that at minimum they have to sequence and prioritize opportunities, and that each opportunity has very real support costs.

Surround your disruptive core product, the thing that got you to the dance, with a whole product that solves for the target customer’s problem end to end. That will keep you on the dance floor for a long time to come.

Specialized offerings must focus intensely on what is core to their differentiation, which means that spending anything on context dilutes their ability to scale their value and size. As a result, companies taking this path must look to leverage existing systems and players wherever they can. This requires a whole host of “silent” partners and allies, totally necessary to the whole product, economically aligned with, in this case, Rocket Fuel’s value proposition, but not able or willing to actively engage in a lot of partnering activities.

The fact that Infusionsoft customers were willing to pay several thousand dollars to be guided through their onboarding and coached through their first several marketing campaigns was not lost on the service providers in their ecosystem.

This led the company to host an Implementation Accelerator workshop, in which they brought twenty-five customers together with a complete suite of experts for a two-day “marketing hackathon.” Included in the effort were Infusionsoft success coaches to help with inventing marketing strategy and tactics, copywriters, script writers and videographers, software object designers, and webmasters, not to mention Infusionsoft’s own tech support staff.

To sum up, whole product definition followed by a strong program of tactical alliances to speed the development of the whole product infrastructure is the essence of assembling an invasion force for crossing the chasm.

The force itself is a function of actually delivering on the customer’s compelling reason to buy in its entirety. That force is still rare in the high-tech marketplace, so rare that, despite the overall high-risk nature of the chasm period, any company that executes a whole product strategy competently has a high probability of mainstream market success.

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 custo...

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 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. So, coming from the early market, where there are typically no perceived competing products, with the goal of penetrating the mainstream, you often have to go out and create your competition.

Creating the competition is the single most important marketing communication decision made in the battle to enter the mainstream. It begins with positioning your product within a buying category that already has some established credibility with the pragmatist buyers. That category should be populated with other reasonable buying choices, ideally ones with which the pragmatists are already familiar. Within this universe, your goal is to position your product as the indisputably correct buying choice.

So, how can you avoid selecting a self-serving or irrelevant competitive set? The key is to focus in on the values and concerns of the pragmatists, not the visionaries.

Competitive Positioning Compass

You can keep yourself from making most positioning gaffes if you will simply remember the following principles: 1. Positioning, first and foremost, is a noun, not a verb. That is, it is best understood as an attribute associated with a company or a product, and not as the marketing contortions that people go through to set up that association. 2. Positioning is the single largest influence on the buying decision. It serves as a kind of buyers’ shorthand, shaping not only their final choice but even the way they evaluate alternatives leading up to that choice. In other words, evaluations are often simply rationalizations of preestablished positioning. 3. Positioning exists in people’s heads, not in your words. If you want to talk intelligently about positioning, you must frame a position in words that are likely to actually exist in other people’s heads, and not in words that come straight out of hot advertising copy. 4. 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.

Most people resist selling but enjoy buying. By focusing on making a product easy to buy, you are focusing on what the customers really want. In turn, they will sense this and reward you with their purchases. 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.

Customers cannot know what to expect or what to pay for a product until they can place it in some sort of comparative context. This is the minimum extension to positioning needed to make a product easy to buy for a pragmatist.

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).

Let’s try this out with a few examples, starting with some we have already looked at earlier in the chapter. Verinata • For older pregnant mothers and others • Who want an alternative to amniocentesis to screen for Down syndrome • Verinata provides a genetic analysis of fetal DNA • That does not involve inserting a needle into the womb. • Unlike other genetic tests for fetal abnormalities, • The Verinata test is the most accurate on the market.

Positioning The evidence work your way up the left then the right

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.

The concept of a whole product launch is a derivative of the widely known practice of a product launch. That is, whenever a new high-tech product is introduced, it is customary to launch it by first briefing the industry analysts and long-lead press editors well in advance of the launch date (so they can serve as references), and then taking the top company executives on a tour to the weekly trade press the week prior to announcement, with the announcement itself capped by an event. These product launches work just fine when the product itself is “new news.” Then they are an appropriate tool for the development of early markets. By the same token, however, they are not appropriate for crossing the chasm. At this point the product is not new news—at least it had better not be if we are planning to win over the pragmatist buyer.