Crossing The Chasm

Srini Kumar * 4/12/06

What is a market?

• A set of actual or potential customers• For a given set of products or services• Who have a common set of needs or

wants (which constitutes their demand)• Who reference each other when

making a buying decision.

The last point is the absolute key to successful high-tech marketing.

A Crack In The Adoption Curve

• Between Early Adopters and Early Majority there is a large chasm

• The latter group has trouble accepting a new product if it is presented in the same way – REPACKAGE THE PRODUCT FOR THE LARGER EARLY MAJORITY

• Most high tech ventures fail to cross the chasm and sales peter out

Who Are Early Adopters?

• Driven By A Dream– They match an emerging technology to a

strategic opportunity– The core goal is a BUSINESS goal, not a

technology goal– The innovation helps them take a quantum

leap forward in how business is conducted in their industry or by their customers

• They want an “order of magnitude” improvement and will take risks to get it

Visionaries

• Easy To Sell– Willing To Start Out On A Pilot Project– Going Where No Man Has Gone Before– They See Implementation As A Project

• Very Hard To Please– Because They Are Buying A Dream

• The payoff for your firm: please the Visionaries and you will be seen as a High Flyer with a Hot Product

Who Are The Early Majority?

• They care about:– The company they are buying from– The quality of the product they are buying– The infrastructure of supporting products– The ease of system interfaces– The reliability of the service

• Vertically oriented– They communicate with others like themselves

in their own industry– References and relationships are very important– Won’t buy from you until you’re established

Pragmatists

• Tend to be very loyal once they’ve tried a service and found it satisfying

• They may even go out of their way to make sure your firm succeeds

• When this happens, the cost of sales goes way down

• The leverage on incremental R&D to support any given customer goes up

What Pragmatists Want

• They like to see competition• They buy from proven market leaders• They want THIRD PARTIES to build

around your MARKET-LEADING PRODUCTS

• They do not really like visionaries all that much: they don’t really trust them

How To Market To Pragmatists

• You must be patient• Show up to industry tradeshows/conferences• Be mentioned in magazines they read• Be installed in other companies in their

industry• Develop applications specific to their industry• Have partnerships and alliances with other

firms in their industry• Earn a reputation for quality and service

Why Pragmatists Don’t Like Visionaries

• Lack of respect for their colleagues’ experiences – they are renegades.

• Taking greater interest in technology than in the nuts&bolts of their industry.

• Failing to recognize the importance of the existing product infrastructure.

• Overall disruptiveness is annoying.

To Cross The Chasm, Find The Beachhead

• A single market that you can use as a springboard to adjacent extended markets to win: D-Day Analogy

• Who Will Be Your Champions?– If you’re an APPLICATION: END USERS because

they’re the ones who see it

• Fix a broken, mission-critical business process so they can insist on deployment despite IT reluctance

• End-User Sponsorship Secures A Beachhead

The D-Day Analogy

• The perils of the chasm: the life or death of the firm

• You must win entry to the mainstream, despite any possible resistance

• Long-term goal: to enter and take control of a mainstream market that is currently dominated by an entrenched competitor.

The D-Day Analogy (cont’d)

• To enter the market we must conquer, we need an early market base (England)

• We must aim at a strategic target market segment (Normandy beaches)

• Separating us from our goal is the chasm (the English Channel)

• Cross the chasm as fast as we can with an invasion force focused directly on the point of attack

The D-Day Analogy (cont’d)

• SECURE THE BEACHHEAD– Force The Competitor Out Of Our Targeted

Niche Markets Through Focused Marketing

• Move out to take over additional and adjacent market segments

• Eventually will achieve Overall Market Domination – they will struggle to protect a shrinking base of sales

Why The D-Day Analogy?• The fledgling enterprise can WIN OVER PRAGMATIST

CUSTOMERS in advance of broader market acceptance – messages travel through word of mouth

• Focus an overabundance of support into a confined market niche: makes targeting your firm’s messaging much easier than trying to please everyone

• Simplifies the initial challenge – a restricted set of market variables that makes it easier to be perfect

• Develop a solid base of references, collateral, and internal procedures and operational resources for the firm and therefore wins sales over incumbents

• Tightly bound segments: easier to create messages

Steps To Cross The Chasm

• Target The Point Of Attack• Assemble An Invasion Force• Define The Battle• Launch The Invasion

1) Target The Point Of Attack

• A specific market niche upon which your firm must focus all of its resources

• You must achieve the dominant leadership position in that segment

• Identify the Primary Market Identifiers– Target customer– Compelling Reason To Buy– Whole Product– Competition

• Also: Partners/Allies, Distribution, Pricing, Positioning, and Target Customer

2) Assemble An Invasion Force

• Create the WHOLE PRODUCT– Think through your customers’ problems

– and solutions – in their entirety– Core product PLUS everything else you

need to achieve your compelling goals– Additional software, hardware, systems

integration, installation, debugging, training and support, procedures

• May be provided by you or a partner

3) Define The Battle

• Create Competition– Identify Their Weakness: There’s The Battle

• Define Positioning• Develop the Elevator Pitch

– A Two-Sentence Formula

• Build All Of This Into Your Marketing And Signalling Communications

• Focus The Competitive Posturing Around Your Key Strengths And Build Those Competencies

• Demonstrate The Validity Of Your Claim

4) Launch The Invasion

• Distribution And Pricing– The direct sales force is optimized for creating

demand– Consultative Salesperson who works with the

clients in Needs Analysis – Supported by Application Technology

Specialists who develop solutions– Additional interaction with the customer is

built in; competitive pricing b/c of lifetime value

– A very expensive way to sell, but this is how you can CROSS THE CHASM

Select Strategic Target Market Segments First

• Target a segment that creates an entry point into a larger segment.

• Provide compelling EVIDENCE to back up your POSITIONING to FOUR TYPES:– Specialist Supporters: Focus On Product– Generalist Supporters: Focus On

Company– Specialist Skeptics: Focus On Technology– Generalist Skeptics: Focus On Market

Specialist Supporters: Focus On Product

• Benchmarks• Product Reviews• Design Wins• Initial Sales Volumes• Trade Press Coverage• Visionary Endorsements

Generalist Supporters: Focus On Company

• Revenues And Profits• Strategic Partners• Top Tier Customers• Full Product Line• Business Press Coverage• Financial Analyst Endorsements

Specialist Skeptics: Focus On Technology

• Architecture• Schematics• Demos• Trials• Upgrade Path• Compatibility• Technology Press Coverage• Guru Endorsements

Generalist Skeptics: Focus On Market

• Market Share• Third Party Support• Standards Certification• Applications Proliferation• Vertical Press Coverage• Industry Analyst Endorsements

Managers Must Choose Niche Marketing Strategy

• Be brave: Make Niche Commitments• Have A Strong Will About Niches• A Niche Strategy Is ALWAYS Best• Do Not Pretend That You Can’t Afford

To Pay Attention To Single Niches• Niches Are More Important Than The

Pursuit Of All Sales From All Angles• You Must Be MARKET-DRIVEN, not

merely SALES-DRIVEN

Being Sales-Driven During The Chasm Will Destroy Your Firm

• The sole goal of your firm during the chasm must be securing a BEACHHEAD in a MAINSTREAM MARKET

• You must create a PRAGMATIST consumer base – visionaries are not DEMANDING ENOUGH of your product and service

• Our first customers must be COMPLETELY SATISFIED after dealing with your firm

• We must provide the WHOLE PRODUCT• FOCUS ON ONE OR TWO NICHE MARKETS

Breaking Into A New Market

• Establish A Strong Word-Of-Mouth Reputation Among Buyers

• Seed The Communications Process– Pragmatists communicate along industry

lines: professional associations– Win over a whole SEGMENT at a time– Segments make sales PREDICTABLE

• This Creates The Feeling Of Your Firm As THE MARKET LEADER (for that segment)

Be The Market Leader Faster

• Simple Mathematics: You Need The Largest Market Share WITHIN THAT NICHE

• Provide The Whole Product For Your Selected Niche And Satisfy Them Completely & Forever

• If You Want Market Leadership Fast, CHOOSE VERY SMALL PONDS AND BECOME THE BIG FISH IN THEM – don’t sell to the whole market

• Focus exclusively on market leadership within one or two carefully selected market segments... OR ELSE LOSE EVERYTHING!!!

The Sales-Driven Company Will Fail During Year Three

• Despite expansion of sales function, the sales for that year are disappointing

• Prolonged Sales Struggles• Significant Price Compromises• Fewer Sales Than Expected• Growth In Expenses Is Larger Than

Growth In Revenue• R&D Is Bogged Down In Existing System

Panic For The Sales-Driven Firm

• Salespeople complaints– Holes In The Product Line– Our Offering Is Overpriced, Full Of Bugs, And

Does Not Meet Customer Desires

• Engineers Beg Innocence: They Have Met Their Release Schedule

• Politics Start To Bog Down The Firm• Whip The Slaves -> Turnover -> Dilution• THEY MISTAKE THE EARLY LEAD IN SALES

FOR A PERMANENT ADVANTAGE IN THE MARKET

THE MORAL OF THE STORY

• A ramp in sales leading smoothly “up the curve” is in fact an initial blip: the early market – and not the first indications of an emerging mainstream market.

• Recognize that there is something fundamentally different between a sale to an early adopter and a sale to the early majority.