Marketing and Selling Disruptive Products to Mainstream Customers
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Crossing the Chasm offers an outline of the process of transitioning your product through the five segments of the market. These segments begin with innovators and move to early adopters, early majority, late majority, and laggards. There is a vast chasm between the early adopters and the early majority. Early adopters are willing to sacrifice for the advantage of being first. However, the early majority wait until they know that the technology offers productivity improvements. The challenge for innovators and marketers is to narrow this chasm and ultimately accelerate adoption across every segment.
Geoffrey Moore’s Perspective
Geoffrey Moore is an author, speaker, and advisor who splits his consulting time between start-up companies and established high-tech enterprises, including Google. Moore has a bachelor’s in American literature from Stanford University and a Ph.D. in English literature from the University of Washington. After teaching English for four years at Olivet College, Moore began a career in high-tech as a training specialist. Over time, he transitioned first into sales and then into marketing. Moore found his niche in marketing consulting. He first worked at Regis McKenna Inc, then with the three firms he helped found: The Chasm Group, Chasm Institute, and TCG Advisors. Today he is chairman emeritus of all three.
StoryShot #1: The Technology Adoption Life Cycle
Discontinuous innovations require a change in consumer behavior. Subsequently, market penetration often requires consistent, discontinuous innovation. To outline the stages one should adopt for market penetration, Moore introduces The Technology Adoption Life Cycle. Within this model, customers fall into one of five graph segments. This graph displays a bell curve with segments related to psychological and demographic characteristics.
Segment 1: Innovators
The first segment consists of deeply engaged technologists. These are the customers you can rely on to buy a new product purely as a form of adventure and exploration. You must win these customers at the beginning of your marketing journey if you wish to succeed. The reason innovators are so important is that their recommendations carry significantly greater credibility than the average consumer. They will also speak at length about your product and offer excellent feedback to improve your product during the early stages. As this is a lower part of the bell curve, there are not many innovators. However, winning this group over is key to winning the next segment.
Segment 2: Early Adopters
Moore describes the early adopters as visionaries. They have the charisma and strategic opportunities to make a genuine difference in a project. Early adopters generally have access to multi-million dollar budgets. Due to their considerable budget, early adopters are within the least price-sensitive segment. The key to marketing to visionaries is to understand their strategic dream. If you can cater to this dream, you can quickly get positive press coverage. This is because visionaries often draw significant press coverage and influence other consumers. As a result, Moore encourages you to view visionaries as key to the rest of the market.
Early adopters will be easy to sell to, as they have lots of money. However, they will be difficult to please, as they have many options. Henceforth, Moore recommends adopting a degree of personalization with these consumers and designing milestones for each phase. Crucially, these milestones need to be realistic, make your product more marketable, and convince the visionary that your product incorporates innovation. An optimal strategy is to send companies comprising technology enthusiasts some examples of your products. Then, you can invite visionaries to interact with these technology enthusiasts. The goal is to achieve an outcome whereby the two parties verify the feasibility of your product. You can then start marketing to the broader market when the visionary is convinced. You may need to make several product modifications before you can convince them.
Segment 3: Early Market Pragmatists
“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.”— Geoffrey Moore
Pragmatists will only invest after observing the technology establish itself. Subsequently, pragmatists seek productivity improvements without risk. They buy from proven market leaders to ensure an ecosystem of supporting products and reliable support. Moore is keen to highlight the importance of this group due to the sheer size of its segment. Pragmatists make up one-third of the overall market. You will struggle to win over pragmatists, but they will remain loyal once you win them.
When marketing to pragmatists, you should start by attending industry-specific conferences. Pragmatists are likely to attend these conferences and also read industry magazines. Hence, try to get mentioned in many industry-specific magazines. You will have to invest time and money to penetrate this market. Despite this, the impact of winning this market leaks into the next segment.
Segment 4: Late Majority
Moore describes the late majority as conservatives. They are conservative because they are not open to new concepts. Hence, innovation and advanced technology scare them. Instead of jumping on a trend, conservatives will only invest when the product has already become an established standard.
Marketing to conservatives requires selling complete solution packages. Conservatives tend to prefer to buy preassembled packages at discounts. Hence, offer these packages through a low-overhead distribution channel. The pragmatists and conservatives constitute the mainstream market.
Segment 5: Laggards
Laggards generally avoid high-tech marketplaces. The only exception to this rule is when making block decisions. Effective marketing should obtain some laggards as customers by adopting a virtual monopoly. This is only possible if you continue your momentum after obtaining the early majority. If not, you could be overtaken by a competitor.
StoryShot #2: Two Cracks and a Chasm
The First Crack
The first crack is between innovators and early adopters. If you cannot show how innovative your technology is, you will not interest early adopters. Subsequently, a crack will lie between innovators and early adopters.
The Second Crack
The second crack lies between the early majority and late majority segments. The early majority is technologically competent; however, your technology must be simple to adopt. For example, suppose your technology is inaccessible. In that case, you will not acquire the early majority required to lure in the late majority.
Although there are two cracks, they are minute compared to the chasm. Moore explains that a vast chasm exists between early adopters and the early majority. If you do not adopt a viable approach during this stage, it could undermine your whole company’s success. These two groups have radically different customer expectations. Visionaries are champions of new technology and innovation. Hence, they are willing to accept some product glitches as long as they see the potential. Comparatively, the early majority expect instant improvement in their productivity and want technology that is easy to adopt. On top of these differences, the early majority requires strong and reputable references before trusting a product. Visionaries do not count as this reliable reference, as they are often considered a disruptive influence. Consider when a start-up transitions from visionary early adopters to the pragmatist early majority. At this stage, they operate without a reference base and support base in a market highly dependent on both.
Moore offers an outline of how the chasm can be potentially dangerous. With the visionary market saturating and the early majority not buying, market and revenue can shrink rapidly. Simultaneously, mainstream competitors will notice your product, and competitors will catch up with you. You have to rapidly break into the early majority, or your start-up will not survive. You will either lose your investors, lose out to competitors, or be phased out by large companies.
One way to cross the chasm and become part of the mainstream market is to focus on a niche market. If you focus on a niche market, you are more likely to secure a foothold. Once you have this foothold, you can use it as a base for further expansion.
StoryShot #3: Choosing which Market Segment to Target
The success or failure of your start-up depends on selecting the right market segment to target. Generally, you would hope to make this decision based on large amounts of data. However, start-ups do not have this data. Therefore, Moore recommends targeting customer images instead of finding your target market segment.
Target-customer characterization is a process by which multiple target-customer scenarios, each with a customer profile and use-case, are created. These scenarios then represent characteristic market behaviors. Moore suggests you run this approach with a minimum of ten customer-facing members, which should generate around fifty scenarios.
The Target-Customer Scenario Template
Aim to create a one-page target-customer scenario template. This template should include:
- Customer details.
- A use-case before the start-up’s technology is implemented.
- A use-case after the start-up’s technology is implemented.
- Each use-case should document what the customer is attempting to do, the approach taken, interfering/enabling factors, and the economic consequences/rewards.
After developing a template, each participant should rate each scenario on a scale of one to five against four points:
- Is there a single identifiable buyer who is well-funded?
- Is there a compelling reason to buy?
- Can the enterprise, thanks to partners, deliver a complete solution within three months?
- Has another company already addressed this problem?
After adding up the total, you should eliminate the low-scoring scenarios from your options. After this, the surviving scenarios should be scored against five more factors with the same scale:
- Does the organization have relationships with other companies to fulfill the whole product?
- Are the sales and distribution channels in place?
- Is the pricing consistent with the target customer’s budget and the magnitude of the issue?
- Does the organization have credibility in the target niche?
- Does this niche have considerable potential to enable easy growth into other niches?
Your team’s highest-scoring scenarios should be discussed with these factors until one segment is identified as the target. Once you have made this decision, you must commit to it. You may have chosen a sub-optimum niche, but the important thing is winning the niche you select. Hence, you must double down on the niche you have picked. The market segment must be big enough to meet minimum revenue targets to dominate your chosen niche market. Additionally, the market segment must be small enough to win half the orders.
StoryShot #4: Crafting Your Product
Your organization must understand the entirety of your product and organize the marketplace to produce that whole product.
The Whole Product Model
The shipped product cannot deliver on the customer’s compelling value proposition. A range of products and services are needed to support the product and make it a whole. You can succeed in the early market with one product. However, pragmatists prefer to buy whole products. You aim to create the minimum whole product that fulfills the target segment’s buying requirements. You can maximize your chances of quickly achieving this whole product by creating tactical alliances to co-develop and market your whole product.
StoryShot #5: Define Your Market
The Competitive-Positioning Compass
Your key-value domains will vary depending on the market segment you are targeting. For example, the key-value domain for visionaries is the product. However, different needs dominate the mainstream market. The value domain for pragmatists is the market. Comparatively, the value domain for conservatives is the company. The value domain must influence the marketing strategy adopted at each stage.
To win the early market, win the skeptical technology enthusiasts with a strong technology advantage, and convert it into product credibility. Comparatively, the mainstream market is built by convincing skeptical pragmatists through market leadership advantages. Crossing the chasm is a transition from marketing to supportive specialist visionaries who care about the product. Crossing the chasm is a transition toward marketing to skeptical generalist pragmatists who care about the market. Marketing must shift from an exclusive focus on product-centric attributes to market-centric values supplemented by product-centric values.
StoryShot #6: The Subtle Art of Positioning
Positioning is a communications process with four components:
- The Claim: A two-line statement of indisputable market leadership in a particular segment. You must define the position based on the target segment and value proposition.
- The Evidence: To make the claim incontestable. Market share is the most compelling evidence for pragmatists. In its absence, they look for the quality, number of partners, and their commitment to your product.
- Communication: Identify and address the right audience with the right message.
- Feedback and Adjustment: When competitors poke holes in the initial effort.
StoryShot #7: Securing Distribution
“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. This objective comes before revenues, before profits, before press, even before customer satisfaction. All these other factors can be fixed later – but only if the channel is established.”— Geoffrey Moore
Moore highlights that you must consider the early majority pricing models when choosing your distribution challenge. There are three pricing models in general:
- Customer-Oriented Pricing – Pragmatists will buy from the market leader to keep the whole product costs low. They are willing to pay a premium of about 30% over what the competition charges. Therefore, price the product above the price of the two reference competitors.
- Vendor-Oriented Pricing – The cost incurred from goods to sales is the foundation of this pricing model. However, this is not effective when crossing the chasm.
- Distribution-Oriented Pricing – When pricing, companies must consider the price a distributor would be willing to sell. This is crucial as you are seeking to sell disruptive innovation.
“Chasm crossing is not the end, but rather the beginning, of mainstream market development.”– Geoffrey Moore
We rate this book 4.1/5.
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