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

by Geoffrey A. Moore

Therefore, whole product commitments must be made not only sparingly but also strategically—that is, made with a view toward leveraging them over multiple sales. This can only happen if the sales effort is focused on a single niche market. More than one, and you take on additional use cases, causing you to burn out your key resources, falter on the quality of your whole product commitment, and prolong your stay in the chasm. To be truly sales-driven is to invite a permanent stay.

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. Seeding this communications process is expensive, particularly once you leave the early market, which in general can be reached through the technical press and related media.

Finally, there is a third compelling reason to be niche focused when crossing the chasm, which has to do with the need to achieve market leadership. 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.

So, take the sales you expect to generate over any given time period—say the next two years—double that number, and that’s the size of market you can expect to dominate. Actually, to be precise, that is the maximum size of market, because the calculation assumes that all your sales came from a single market segment.

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.

They do not lend themselves to vertical marketing because, as products, they do not change very much from niche to niche. Unfortunately, however, pragmatist customers rarely adopt any new technology en masse. Usually these innovations are taken up first by a single niche, one that has such pressing problems it goes ahead of the herd. The rest of the herd is delighted by this eventuality because it gets a free look at how well the technology plays out without having to take any immediate risk.

Now there are only about forty of these in the whole world, and the largest is a few dozen people or so, so how could a company justify reducing its market scope from “all personnel who touch complex documents in all large enterprises,” to maybe one thousand people total on the planet? The answer is that when you are picking a chasm-crossing target it is not about the number of people involved, it is about the amount of pain they are causing.

Documentum ensured itself a strongly committed customer. The commitment did not come from the IT organization, which pragmatically was content to work with its established vendors, making continuous improvements to the existing document management infrastructure. Instead, it came from the top brass, who, seeing in Documentum a chance to reengineer the entire process to a very different new end, overruled the in-house folks and demanded that they support the new paradigm.

In the end, it turned out that financial services was the biggest customer segment for the company—but importantly, it was not the right target segment for crossing the chasm because its needs, while more pervasive, were not as urgent as those of the pharmaceutical industry.

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.

Once out, your opportunities to expand into other niches are immensely increased because now, having one set of pragmatist customers solidly behind you, you are much less risky for others to back as a new vendor.

Interestingly, they did not go after a vertical market. Instead they focused their segmentation along the following lines: • They targeted salespeople and their managers only—not customer service, not marketing. • They targeted mid-market companies, big enough to need systems to compete with market leaders in their category, small enough to be unable to afford the IT investment required. • They focused on the United States only, in part to stay close to the customer, in part because the United States has always been the early-adopting country in enterprise software. • They focused on technology-savvy industries, beginning with high tech itself, then moving into telco, pharmaceuticals, and financial services.

Big enough to matter • Small enough to win, and a • Good fit with your crown jewels.

Rather, they suffer from a built-in hesitancy and lack of confidence related to the paralyzing effects of having to make a high-risk, low-data decision.

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.

And given that you must act quickly, you need to approach the decision from a different vantage point. You need to understand that informed intuition, rather than analytical reason, is the most trustworthy decision-making tool to use.

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.

One caveat, though: It is extremely difficult to cross the chasm in a consumer market. Almost all successful crossings happen in business markets, where the economic and technical resources can absorb the challenges of an immature product and service offering. Alternatively, consumer markets can spin up with no chasms at all if the technology is already adopted and the disruption is coming from a new business model. (For an alternative market development model that describes these dynamics, see “The Four Gears” discussion in Appendix 2.)

one—and only one—beachhead target. The italics immediately above are meant to answer the single most asked question of the Chasm Group: Can’t we go after more than one target? The simple answer is no. (The more complex answer is also no, but it takes longer to explain.) Just as you cannot hit two balls with one bat swing, hit two birds with one stone, or brush your teeth and your hair at the same time, so you cannot cross the chasm in two places.

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.”

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. That is the sort of vendor performance that causes pragmatist customers to sit up and take notice. At the same time, you will still be taking orders from other segments. So do the math.

compelling reason to buy your product. The next step is to ensure that you have a monopoly over fulfilling that reason to buy. 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.

One of the most useful marketing constructs in all of high-tech marketing is the concept of a whole product, an idea described in detail more than four decades ago in Theodore Levitt’s The Marketing Imagination, and one that played a significant role a decade later in Bill Davidow’s seminal Marketing High Technology. The

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.

the customers least in need of whole product support are the technology enthusiasts. They are perfectly used to cobbling together bits and pieces of systems and figuring out their own way to a whole product that pleases them.

Visionaries, by contrast, take no pleasure in pulling together a whole product on their own, but they accept that, if they are going to be the first in their industry to implement the new system—and thereby gain a strategic advantage over their competitors—then they are going to have to take responsibility for creating the whole product under their own steam.

Systems integrators could just as easily be called whole product providers—that is their commitment to the customer.

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.

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.

For those who wish to take a more prudent course, however, whole product planning is the centerpiece for developing a market domination strategy. Pragmatists will hold off committing their support until they see a strong candidate for leadership emerge. Then they will back that candidate forcefully in an effort to squeeze out the other alternatives, thereby bringing about the necessary standardization to ensure good whole product development in their marketplace.

Oracle did not have the best product when the market standardized on it. What Oracle offered instead was the best case for a viable whole product—a query language (SQL) based on an IBM standard plus all the major portability across hardware platforms plus an aggressive sales force to drive product into the market quickly. That is what the pragmatists in the IT department got behind.

For now, our focus should be on the minimum commitment to whole product needed to cross the chasm. That is defined by the whole product that assures that the target customers can fulfill their compelling reason to buy. To work out how much whole product this is, you only need a simplified version of the whole model: The Simplified Whole Product Model

The contract does not require the company to deliver on this promise, but the customer relationship does. Failure to meet this promise in a business-to-business market has extremely serious consequences. As the bulk of purchases in this marketplace are highly reference oriented, such failure can only create negative word of mouth, causing sales productivity to drop dramatically. Classically,

If you leave your customer’s success to chance, you are giving up control over your own destiny. Conversely, by thinking through your customer’s problems—and solutions—in their entirety, you can define—and work to ensure that the customer gets—the whole product.

Prior to the chasm there is some hope that the visionaries will backfill the whole product through their own systems integration efforts. Once the product is established in the mainstream, there is some hope that some third party will see an opportunity for itself to make money fleshing out the whole product. But while you are crossing the chasm, there is no hope of any external support that is not specifically recruited by you for this purpose.

Lithium had to target a pragmatist enclave disaffected with the status quo. They found that enclave in tech support.

By extending their core product to create a whole product, Lithium was meeting the needs both of their immediate target customers—consumer tech companies—and their customers’ customers, the consumers themselves needing help and the technology enthusiasts looking to share their expertise.

The main point, again, is that these are tactical alliances growing out of whole product needs, not strategic alliances growing out of . . . well, whatever strategic alliances grow out of (my personal feeling is that the number-one cause of strategic alliances is too many staff people with not enough to do).

This created an initial conundrum for Infusionsoft—how do you attract typically late-adopting target customers to a technology they are not themselves engaging with?

The company solved this problem by partnering with a cadre of small business marketing experts who made their living selling seminars to small business owners advocating the new online approach. These gurus were able to attract prospects in droves, and what better way to stay in touch with them than to help them install an online marketing capability?

The software reinforced the teachings, and the teachings reinforced the software. To be sure, this was still a congregation of early adopters, but it helped In...

While strategic partnerships often struggle mightily to sustain their engagement and maintain their relevance, whole product partnerships built around whole products for specific target markets with compelling reasons to buy do not.

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.”

The net result of the partnering activities we have been reviewing in the cases of Rocket Fuel, Infusionsoft, and Mozilla is the creation of a market. For markets represent more than just a buyer and a seller. They are an ecology of interrelated interests interoperating to create what business schools call value chains.

For any company crossing the chasm, fostering the initial partnerships to create the whole product is the equivalent of seeding the value chain, getting it started. Once value starts being generated, a free-market system becomes self-reinforcing, and the whole product manager’s job then is simply to let go and get out of the way.

any company that executes a whole product strategy competently has a high probability of mainstream market success.

If you are fresh from developing a new value proposition with visionaries, that competition is not likely to exist—at least not in a form that a pragmatist would appreciate. What you have to do then is create it.

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. Our goal in the early market has been to enlist visionary sponsors to help overcome this resistance.

Pragmatists work to educate the company on the risks and costs involved. Visionaries counter with charismatic appeals to taking bold and decisive actions. The competition takes place at the level of corporate agenda, not at the level of competing products.

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. It helps to start with the right conceptual model—in this case, the 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.