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Strategies for High Tech Marketing:
Crossing the Chasm
Henrik Berglund
Chalmers University of Technology
Center for Business Innovation
www.henrikberglund.com
twitter: khberglund
Todays lecture
1. Background: Classical diffusion theory
2. The Technology Adoption Life Cycle
3. Categories of Technology Adopters
4. Cracks and Chasms in the Adoption Life Cycle
5. Strategies and Tactics for Crossing the Chasm
Classical diffusion theory
Everett Rogers (1962)
Found that for most members of a social
system, the adoption-decision depends
heavily on the adoption-decisions of the
other members of the system.
The more people adopt an innovation, the
lower the perceived risk.
The result is an S-curve shaped pattern of
innovation diffusion.
Synthesized research on adoption of
innovation from several fields:
Anthropology, Early sociology, Rural
sociology, Education, Industrial sociology,
Medical sociology
Example: simple model
Example: simple model
Example: simple model
Example: simple model
Example: simple model
Example 2: dynamics of riots
Consider a hypothetical mob.
Each person's decision to riot or not is
dependent on what everyone else is
doing.
Instigators will begin rioting even if no
one else is, while others need to see a
critical number of trouble makers before
they riot, too (reduces risk of getting
caught).
This threshold for rioting is assumed to
follow some (e.g. normal) distribution.
Result: S-curve.
Adoption of new products
Classical diffusion theory
When faced with discontinuous
innovations, customers fall into
five broad categories along an
axis of risk-aversion.
Innovators
Early Adopters
Early Majority
Late Majority
Laggards
Technology adoption life cycle
In high-tech, the categories
have been given more specific
names (Geoffrey Moore).
Innovators = Technology Enthusiasts
Early Adopters = Visionaries
Early Majority = Pragmatists
Late Majority = Conservatives
Laggards = Skeptics
Technology adoption life cycle
Techies:
Try it!
Visionaries
Get ahead of
the heard!
Pragmatists:
Stick with the herd!
Late
Majority
Sceptics:
No way!
Early
Majority
Early
Adopters
Innovators Laggards
Conservatives:
Hold on!
Critical qualitative
differences, especially
in product needs and
buying behaviors.
Innovators – Technology Enthusiasts
Primary Motivation:
- Learn about new technologies for their own sake
Key Characteristics:
- Strong aptitude for technical information
- Like to alpha test new products
- Can ignore any missing elements
- Do whatever they can to help
Challenges:
- Want unrestricted access to top technical people
- Want no-profit pricing (preferably free)
Key Role: Gatekeeper to the Early Adopter
Early Adopters – The Visionaries
Visionaries
Get ahead of
the heard!
Late
Majority
Early
Majority
Early
Adopters
Innovators Laggards
Early Adopters – The Visionaries
Primary Motivation:
- Gain dramatic competitive advantage via revolutionary
breakthrough
Key Characteristics:
- Great imaginations for strategic applications
- Attracted by high-risk, high-reward propositions
- Will help supply the missing elements
- Perceive order-of-magnitude gains – so not price sensitive
Challenges:
- Want rapid time-to-market
- Demand high degree of customization and support
Key Role: Fund the development of the early market
Early Majority – Pragmatists
Pragmatists:
Stick with the herd!
Late
Majority
Early
Majority
Early
Adopters
Innovators Laggards
Early Majority – Pragmatists
Primary Motivation:
- Gain sustainable productivity improvements via evolutionary
change
Key Characteristics:
- Astute managers of mission-critical applications
- Understand real-world issues and tradeoffs
- Focus on proven applications
- Like to go with the market leader
Challenges:
- Insist on good references from trusted colleagues
- Want to see the solution in production at the reference site
Key Role: Bulwark of the mainstream market
Late Majority – Conservatives
Late
Majority
Early
Majority
Early
Adopters
Innovators Laggards
Conservatives:
Hold on!
Primary Motivation:
- Just stay even with the competition
- Avoid competitive disadvantage
Key Characteristics:
- Better with people than technology
- Risk averse
- Price-sensitive
- Highly reliant on a single, trusted advisor
Challenges:
- Need completely pre-assembled solutions
- Would benefit from value-added services but do not want to
pay for them
Key Role: Extend product life cycles
Late Majority – Conservatives
Laggards – Sceptics
Late
Majority
Sceptics:
No way!
Early
Majority
Early
Adopters
Innovators Laggards
Laggards – Sceptics
Primary Motivation:
- Maintain status-quo
Key Characteristics:
- Good at debunking marketing hype
- Disbelieve productivity-improvement arguments
- Believe in the law of unintended consequences
- Like taking a contrarian position
- Seek to block purchases of new technology
Challenges:
- Not a customer
- Can be formidable opposition to early adoption
Key Role: Retard the development of high-tech markets
Since these groups are so different…
Late
Majority
Early
Majority
Early
Adopters
Innovators Laggards
…adoption is interrupted at key
transitions.
Late
Majority
Early
Majority
Early
Adopters
Innovators Laggards
Crack 1
Crack 2
The Chasm
Crack 1
Early Adopters do talk to Innovators. Still Crack 1 occurs.
Problem: Innovators like cool technology products that cannot be
readily translated into major new business benefits. Early Adopters want
competitive advantage.
• Esperanto
• Desktop Video Conferencing
Solution: The product must be made to enable a valuable strategic leap
forward.
Crack 2
The Late Majority talks to Early Majority. Still Crack 2 occurs.
Problem: The Early Majority is willing and able to become technically
competent when needed. The Late Majority is not.
• Scanners and Video Editing Programs
• Telephone transferring systems
Solution: Ensure very high user-friendlieness to ensure ease of
adoption.
The chasm
Early
Adopters
Innovators
Crack 1
Late
Majority
Early
Majority
Laggards
Crack 2
The Chasm
(This is the big one)
The chasm
The Early Majority does not talk to the Early Adopters.
Hence a huge Chasm.
The Early Adopters is buying a revolutionary change agent
Expect a clear discontinuity between the old and the new
Expect clear strategic advantages
Tolerate bugs and glitches
The Early Majority is buying evolutionary productivity improvement
Want to minimize the discontinuity with the old way
Wants innovations to enhance established business processes
Expect a more or less bug free product
Different value delivered
Visionaries Pragmatist
It is new to the market
It is the fastest product
It is the easiest to use
It has elegant architecture
It has unigue functionality
It is the de facto standard
It has the largest installed base
It has most third party supporters
It has great quality of support
It has a low cost of ownership
The Chasm
Different buying behaviors
Visionaries Pragmatist
Willing to take risk
Rely on horizontal references:
other industries & techies
Want to buy from new firms
Want rich tech-support
Wants very little risk
Relies on vertical references within
their industry
Wants to buy from market leaders
Wants one point of contact
The Chasm
What Pragmatists think of Visionaries
1. The visionaries love technology but are bored with the
mundane details of their own industry, which is the
everyday work of us pragmatists.
2. The visionaries want to build systems from the ground up
and do not appreciate the importance of networks, systems
and processes already in place.
3. The visionaries seem to do all the fun things. They get all
the funds and all the attention for their blue sky projects. If
they fail, it is us pragmatists who have to clean up the mess.
If they succeed, the disruptive change is just too much to
handle.
Pragmatists don’t trust visionaries as references!
Crossing the chasm – Catch 22
“The pragmatists will use only those products that are
already used by a majority of pragmatists. And
generally look to one and other as references. So, how
can we get them to use a new product?”
?
The Chasm
Visionaries Pragmatist
Discovering that you are in the chasm
Visionary markets saturates, or visionaries abandon
- Too late for revolutionary competitive advantage
- There are other cool disruptive things out there
Pragmatists see no reason to buy yet
- Too early for anything to be ”in production”
- No herd of references has yet formed
The Chasm
Visionaries Pragmatist
Crossing the chasm
The problem
- 80% of many solutions – 100% of none
- Pragmatists won’t buy 80% solutions!
Conventional solution (tends to fail)
- Committing to the most common enhancement requests
- Never completely satisfying any one customer segment’s needs
”D-day” solution (more likely to succeed)
- Focus all efforts on a single ”beachhead” segment with a compelling
reason to buy, develop a whole product, become a market leader
- Then leverage product and user references to attack other segments
The consequence of being sales-driven instead
of strategy-driven in the chasm is fatal – Focus !!!
Beachhead segment
D-day – Omaha Beach
”D-day” invasion strategy & tactics
1. Target the point of attack
Segmentation – isolate target customers
and their compelling reason to buy
2. Assemble the invasion force
Differentiation – develop the ”whole
product” and choose allies to realize this
3. Define the battle
Positioning – reate the competition (if
there is none, you still need one) and
position yourself
4. Launch the invasion
Distribution and Pricing – select your
distribution channel and set your price
Target the point of attack
Segmentation
• Target a specific market segment:
– Target customer (user, tech., econ.)?
– Compelling reason to buy?
– Whole product?
– Competition?
– Partners
– Distribution
– Pricing
– Positioning
– Next target customer
• Focus all resources of achieving a
dominant leadership position – to
become a Big Fish in a Small Pond!
Assemble the invasion force
Differentiation
• Think through the customer’s
problems – and solutions – in their
entirety.
• Develop the “whole product”,
including the generic product plus
everything else you need to address
your customers’ compelling reason
to buy.
• These may be provided in-house or
by using partners and alliances.
Define the battle
Positioning
• Positioning is key to make buying easy
– Define your category and position (market leader!)
– Be clear about who will use it and for what?
– Show competition and differentiation (pragmatists
demand a comparative context)
– Ensure staying power
• Positioning statement
– For [target customers],
– Who are dissatisfied with [the current market
alternatives],
– Our product is a [new product category]
– That provides [key problem-solving capability],
– Unlike [the product alternative],
– We have assembled [key whole-product features
for our specific application].
Launch the invasion
Distribution and Pricing
• Secure access to a customer-oriented distribution channel
• Direct sales is often the optimal channel for high tech, and
typically the best initial channel for crossing the chasm
• Reward your channel during the Chasm phase!
• Set pricing at the market leader price-point
Customers will (almost) only see channel and price!
Crossing the Chasm!
1. Target the point of attack
2. Assemble the invasion force
3. Define the battle
4. Launch the invasion
How hard can it be?
Henrik Berglund
Chalmers University of Technology
Center for Business Innovation
www.henrikberglund.com
twitter: khberglund
Thank You!
And, thank You Geoffrey:
http://www.tcg-advisors.com/who/moore.htm

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Henrik Berglund - Crossing the Chasm

  • 1. Strategies for High Tech Marketing: Crossing the Chasm Henrik Berglund Chalmers University of Technology Center for Business Innovation www.henrikberglund.com twitter: khberglund
  • 2. Todays lecture 1. Background: Classical diffusion theory 2. The Technology Adoption Life Cycle 3. Categories of Technology Adopters 4. Cracks and Chasms in the Adoption Life Cycle 5. Strategies and Tactics for Crossing the Chasm
  • 3. Classical diffusion theory Everett Rogers (1962) Found that for most members of a social system, the adoption-decision depends heavily on the adoption-decisions of the other members of the system. The more people adopt an innovation, the lower the perceived risk. The result is an S-curve shaped pattern of innovation diffusion. Synthesized research on adoption of innovation from several fields: Anthropology, Early sociology, Rural sociology, Education, Industrial sociology, Medical sociology
  • 9. Example 2: dynamics of riots Consider a hypothetical mob. Each person's decision to riot or not is dependent on what everyone else is doing. Instigators will begin rioting even if no one else is, while others need to see a critical number of trouble makers before they riot, too (reduces risk of getting caught). This threshold for rioting is assumed to follow some (e.g. normal) distribution. Result: S-curve.
  • 10. Adoption of new products
  • 11. Classical diffusion theory When faced with discontinuous innovations, customers fall into five broad categories along an axis of risk-aversion. Innovators Early Adopters Early Majority Late Majority Laggards
  • 12. Technology adoption life cycle In high-tech, the categories have been given more specific names (Geoffrey Moore). Innovators = Technology Enthusiasts Early Adopters = Visionaries Early Majority = Pragmatists Late Majority = Conservatives Laggards = Skeptics
  • 13. Technology adoption life cycle Techies: Try it! Visionaries Get ahead of the heard! Pragmatists: Stick with the herd! Late Majority Sceptics: No way! Early Majority Early Adopters Innovators Laggards Conservatives: Hold on! Critical qualitative differences, especially in product needs and buying behaviors.
  • 14. Innovators – Technology Enthusiasts Primary Motivation: - Learn about new technologies for their own sake Key Characteristics: - Strong aptitude for technical information - Like to alpha test new products - Can ignore any missing elements - Do whatever they can to help Challenges: - Want unrestricted access to top technical people - Want no-profit pricing (preferably free) Key Role: Gatekeeper to the Early Adopter
  • 15. Early Adopters – The Visionaries Visionaries Get ahead of the heard! Late Majority Early Majority Early Adopters Innovators Laggards
  • 16. Early Adopters – The Visionaries Primary Motivation: - Gain dramatic competitive advantage via revolutionary breakthrough Key Characteristics: - Great imaginations for strategic applications - Attracted by high-risk, high-reward propositions - Will help supply the missing elements - Perceive order-of-magnitude gains – so not price sensitive Challenges: - Want rapid time-to-market - Demand high degree of customization and support Key Role: Fund the development of the early market
  • 17. Early Majority – Pragmatists Pragmatists: Stick with the herd! Late Majority Early Majority Early Adopters Innovators Laggards
  • 18. Early Majority – Pragmatists Primary Motivation: - Gain sustainable productivity improvements via evolutionary change Key Characteristics: - Astute managers of mission-critical applications - Understand real-world issues and tradeoffs - Focus on proven applications - Like to go with the market leader Challenges: - Insist on good references from trusted colleagues - Want to see the solution in production at the reference site Key Role: Bulwark of the mainstream market
  • 19. Late Majority – Conservatives Late Majority Early Majority Early Adopters Innovators Laggards Conservatives: Hold on!
  • 20. Primary Motivation: - Just stay even with the competition - Avoid competitive disadvantage Key Characteristics: - Better with people than technology - Risk averse - Price-sensitive - Highly reliant on a single, trusted advisor Challenges: - Need completely pre-assembled solutions - Would benefit from value-added services but do not want to pay for them Key Role: Extend product life cycles Late Majority – Conservatives
  • 21. Laggards – Sceptics Late Majority Sceptics: No way! Early Majority Early Adopters Innovators Laggards
  • 22. Laggards – Sceptics Primary Motivation: - Maintain status-quo Key Characteristics: - Good at debunking marketing hype - Disbelieve productivity-improvement arguments - Believe in the law of unintended consequences - Like taking a contrarian position - Seek to block purchases of new technology Challenges: - Not a customer - Can be formidable opposition to early adoption Key Role: Retard the development of high-tech markets
  • 23. Since these groups are so different… Late Majority Early Majority Early Adopters Innovators Laggards
  • 24. …adoption is interrupted at key transitions. Late Majority Early Majority Early Adopters Innovators Laggards Crack 1 Crack 2 The Chasm
  • 25. Crack 1 Early Adopters do talk to Innovators. Still Crack 1 occurs. Problem: Innovators like cool technology products that cannot be readily translated into major new business benefits. Early Adopters want competitive advantage. • Esperanto • Desktop Video Conferencing Solution: The product must be made to enable a valuable strategic leap forward.
  • 26. Crack 2 The Late Majority talks to Early Majority. Still Crack 2 occurs. Problem: The Early Majority is willing and able to become technically competent when needed. The Late Majority is not. • Scanners and Video Editing Programs • Telephone transferring systems Solution: Ensure very high user-friendlieness to ensure ease of adoption.
  • 28. The chasm The Early Majority does not talk to the Early Adopters. Hence a huge Chasm. The Early Adopters is buying a revolutionary change agent Expect a clear discontinuity between the old and the new Expect clear strategic advantages Tolerate bugs and glitches The Early Majority is buying evolutionary productivity improvement Want to minimize the discontinuity with the old way Wants innovations to enhance established business processes Expect a more or less bug free product
  • 29. Different value delivered Visionaries Pragmatist It is new to the market It is the fastest product It is the easiest to use It has elegant architecture It has unigue functionality It is the de facto standard It has the largest installed base It has most third party supporters It has great quality of support It has a low cost of ownership The Chasm
  • 30. Different buying behaviors Visionaries Pragmatist Willing to take risk Rely on horizontal references: other industries & techies Want to buy from new firms Want rich tech-support Wants very little risk Relies on vertical references within their industry Wants to buy from market leaders Wants one point of contact The Chasm
  • 31. What Pragmatists think of Visionaries 1. The visionaries love technology but are bored with the mundane details of their own industry, which is the everyday work of us pragmatists. 2. The visionaries want to build systems from the ground up and do not appreciate the importance of networks, systems and processes already in place. 3. The visionaries seem to do all the fun things. They get all the funds and all the attention for their blue sky projects. If they fail, it is us pragmatists who have to clean up the mess. If they succeed, the disruptive change is just too much to handle. Pragmatists don’t trust visionaries as references!
  • 32. Crossing the chasm – Catch 22 “The pragmatists will use only those products that are already used by a majority of pragmatists. And generally look to one and other as references. So, how can we get them to use a new product?” ? The Chasm Visionaries Pragmatist
  • 33. Discovering that you are in the chasm Visionary markets saturates, or visionaries abandon - Too late for revolutionary competitive advantage - There are other cool disruptive things out there Pragmatists see no reason to buy yet - Too early for anything to be ”in production” - No herd of references has yet formed The Chasm Visionaries Pragmatist
  • 34. Crossing the chasm The problem - 80% of many solutions – 100% of none - Pragmatists won’t buy 80% solutions! Conventional solution (tends to fail) - Committing to the most common enhancement requests - Never completely satisfying any one customer segment’s needs ”D-day” solution (more likely to succeed) - Focus all efforts on a single ”beachhead” segment with a compelling reason to buy, develop a whole product, become a market leader - Then leverage product and user references to attack other segments The consequence of being sales-driven instead of strategy-driven in the chasm is fatal – Focus !!! Beachhead segment
  • 36. ”D-day” invasion strategy & tactics 1. Target the point of attack Segmentation – isolate target customers and their compelling reason to buy 2. Assemble the invasion force Differentiation – develop the ”whole product” and choose allies to realize this 3. Define the battle Positioning – reate the competition (if there is none, you still need one) and position yourself 4. Launch the invasion Distribution and Pricing – select your distribution channel and set your price
  • 37. Target the point of attack Segmentation • Target a specific market segment: – Target customer (user, tech., econ.)? – Compelling reason to buy? – Whole product? – Competition? – Partners – Distribution – Pricing – Positioning – Next target customer • Focus all resources of achieving a dominant leadership position – to become a Big Fish in a Small Pond!
  • 38. Assemble the invasion force Differentiation • Think through the customer’s problems – and solutions – in their entirety. • Develop the “whole product”, including the generic product plus everything else you need to address your customers’ compelling reason to buy. • These may be provided in-house or by using partners and alliances.
  • 39. Define the battle Positioning • Positioning is key to make buying easy – Define your category and position (market leader!) – Be clear about who will use it and for what? – Show competition and differentiation (pragmatists demand a comparative context) – Ensure staying power • Positioning statement – For [target customers], – Who are dissatisfied with [the current market alternatives], – Our product is a [new product category] – That provides [key problem-solving capability], – Unlike [the product alternative], – We have assembled [key whole-product features for our specific application].
  • 40. Launch the invasion Distribution and Pricing • Secure access to a customer-oriented distribution channel • Direct sales is often the optimal channel for high tech, and typically the best initial channel for crossing the chasm • Reward your channel during the Chasm phase! • Set pricing at the market leader price-point Customers will (almost) only see channel and price!
  • 41. Crossing the Chasm! 1. Target the point of attack 2. Assemble the invasion force 3. Define the battle 4. Launch the invasion How hard can it be?
  • 42. Henrik Berglund Chalmers University of Technology Center for Business Innovation www.henrikberglund.com twitter: khberglund Thank You! And, thank You Geoffrey: http://www.tcg-advisors.com/who/moore.htm