Main takeaways: - How do you modify the marketing mix, typically used in linear business models, for platform/marketplace business models - How is marketing modified for the “sharing economy” and the “zero-marginal cost society” - How do you market “experiences” and not just “commodities,” “products,” “services”

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How to Modify the Marketing Mix by
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10. Michelle McLin
TONIGHT’S SPEAKER

11. Copyright © 2018 President and Fellows of Harvard College.
Product Innovation
Disruptive Technologies
Large Scale Market Adoption
“Crossing the Chasm”

12. Copyright © 2018 President and Fellows of Harvard College.
Product Innovation
• Co-founder of Conveyance
• Self-Driving Vehicles (SDV) Market
• Technology Hub – Gallium Glen
• Six Years Old; $30M; Large Accounts; Buzz
Background
Goal
• Become the biggest SDV player in region before going national
• Exponential growth between Year 6 & Year 7; build on
momentum

13. Copyright © 2018 President and Fellows of Harvard College.
How Do You Cross the Chasm?
• Market Opportunity – Select Segments
− Hardware − Software Integration
− Maintenance − Customer Support
• Choose Partners & Allies
• Choose Sales Channels
• Allocate Budget
− Personal Vehicles − Taxi / Car Share − Local Delivery Service
− Rentals − Long Haul Trucks − Package Delivery
• Revenue
• Market share
• Ratings
• Feedback
DECISIONS
• Determine Pricing Methods
• Develop Positioning Statement
RESULTS

14. Copyright © 2018 President and Fellows of Harvard College.
Technology / Innovation Adoption Cycle
ORIGINAL
Early adopters,
13.5%
Early majority,
34%
Late majority,
34%
Laggards,
16%
Innovators,
2.5%
Mean time of adoption →
Decreasing tolerance of risk →

15. Copyright © 2018 President and Fellows of Harvard College.
Technology / Innovation Adoption Cycle
REVISED

16. Copyright © 2018 President and Fellows of Harvard College.
Technology / Innovation Adoption Cycle
REVISED

17. Copyright © 2018 President and Fellows of Harvard College.
Categories of Adopters
(Early Market: 16%)
Innovators (technology enthusiasts, 2.5%)
• Appreciate technology for its own sake
• Motivated by the idea of being a change agent
• Will tolerate initial glitches and are willing to alpha/beta test
“I think electric cars are the future!”
“I embrace cloud computing and love the new technological shift!”
Early adopters (visionaries, 13.5%)
• Attracted by high risk, high reward
• Demand tech support, but willing to work with you
• Want to stand out with revolutionary products
“I want to be the first one on the block with an electric car.”

18. Copyright © 2018 President and Fellows of Harvard College.
Categories of Adopters
(Mainstream Market: 68%)
Early majority (pragmatists, 34%)
• Comfortable with evolutionary changes
• Want proven applications and a standard technology solution
• Buy only with a reference from a trusted source (herd mentality)
“I want to see electric cars prove themselves, and I want enough charging and
service stations.”
“I want to see all the security issues and pitfalls fixed in cloud computing.”
Late majority (conservatives, 34%)
• Risk averse, technology shy, very price sensitive
• Require assembled, bullet-proof solutions from established brands
“Not until the majority have made the switch and it’s inconvenient to drive regular

19. Copyright © 2018 President and Fellows of Harvard College.
Technology / Innovation Adoption Cycle
REVISED
VISIONARIES PRAGMATISTS
Early Market Mainstream Market

20. Copyright © 2018 President and Fellows of Harvard College.
Early Market vs. Mainstream Market
Visionaries
• Adventurous / take risks
• Think / spend big
• Want to stand out
• Follow their own dictate
• Motivated by future opportunities
• Want revolutionary products & solutions
Pragmatists
• Prudent / manage risk
• Reasonable / within budget
• Want to adopt in a herd
• Consult colleagues and peers
• Motivated by present problems
• Want evolutionary products & solutions
A chasm exists between these two groups of adopters

21. Copyright © 2018 President and Fellows of Harvard College.
How Do You Know You’re in the Chasm?
You are in the chasm when the visionary market is saturated but the
mainstream market is not yet ready to buy.
• Visionaries are willing to take risks. They will work around the
product to customize.
• Pragmatists are risk averse. They want a completely customized
solution before buying.

22. Copyright © 2018 President and Fellows of Harvard College.
Problems within the Chasm
• The chasm presents a Catch-22
– Pragmatists don’t buy until a company is established, but companies really
become established when pragmatists buy.
– Pragmatists don’t trust visionaries, but the only reference group a company has at
this point is visionaries.
• The market stalls, revenue declines, firms lose money, and venture
capitalists become impatient.
• The chasm is a graveyard for many high-tech companies and products
– Pen computing (Logitech), Segway, video conferencing
– Many current innovations are struggling in the chasm
• Mobile payments
• Virtual reality
• Electric cars

23. Copyright © 2018 President and Fellows of Harvard College.
How Do You Cross the Chasm?
D-Day Analogy (Allied invasion of Normandy during WWII)
• Objective:
– Cross the chasm (the English Channel) and invade Europe
• Method:
– Select a point of attack (Normandy coast)
– Attack with overwhelming force (195,000 troops, 5,000 ships)
– Move outward from the point of attack to other targets and capture the center

24. Copyright © 2018 President and Fellows of Harvard College.
Crossing the Chasm
with Disruptive Innovations
• The original technology / innovation adoption cycle
• The revised technology / innovation adoption cycle
• What is the chasm?
• How do you successfully cross the chasm?
• Why isn’t crossing the chasm intuitive?

25. Copyright © 2018 President and Fellows of Harvard College.
How Do You Cross the Chasm?
Bowling Pin Analogy
• Objective:
– Cross the chasm
• Method:
– Select a point of attack (beachhead segment)
• Big enough to matter, but small enough to lead (a big fish in a small pond)
– Attack with overwhelming force on a specific target
• Offer the whole product as a complete solution to their needs
• Assemble all necessary partners for the end-to-end
solution
– Move outward from the point of attack to other
targets and capture the center (the bowling pin effect)
• The beachhead has reference value for others
• Beachhead pins should knock down either new segments or new
App 1
App 1
App 1
App 3App 2
App 2
Seg 1
Seg 2 Seg 1
Seg 1
Seg 3
Seg 2
Beachhead

26. Copyright © 2018 President and Fellows of Harvard College.
Selecting a Beachhead Segment
A beachhead segment is a single segment to focus all your resources on.
Critical success factors when choosing a beachhead segment:
1. Accessible, well-funded target customer segment (non-fragmented, big
buyers)
2. Environment that creates a compelling reason to buy
3. Feasible whole product to provide solutions
4. No entrenched competition (no one has captured the segment yet)
5. Good follow-on potential (can influence adjacent segments)
• The simulation gives higher weight to the above criteria in scoring segments.
(Segment size gets the least weight.)
• The simulation penalizes if more than one segment is selected.

27. Copyright © 2018 President and Fellows of Harvard College.
Selecting a Beachhead Segment

28. Copyright © 2018 President and Fellows of Harvard College.
The Whole Product Solution
The whole product concept solves the gap between the promise made to a
customer and the product’s ability to fulfill the promise by augmenting the product
with ancillary products and services.
Developing the whole product:
1. Hardware customization
– Developing self-driving capability in cares or light / heavy trucks based on segment
2. Software development
– Developing platform based on segment needs (e.g., food delivery, in-vehicle services, etc.)
3. Training and support
– Customer training for usage and after-sales support
4. Maintenance
– For vehicles and software, contingent upon usage levels (some segments are higher than others)
• The simulation provides a whole product rating based on accurate allocation.
• Selecting more than one segment hampers accurate resource allocation.

29. Copyright © 2018 President and Fellows of Harvard College.
Other Decisions
• Partners and allies—develop a whole product solution for segments
– Hardware (car / truck manufactures)
– Applications (UI)
– Services (payments, entertainment)
• Sales channel—sell the solution to selected segments
– Direct sales (usually most appropriate)
– Authorized dealer (good for cars / shuttles)
– Value-added reseller
• Pricing
– Cost plus
– Premium (good for specialized segments such as construction)
– Value-based (usually most appropriate)

30. Copyright © 2018 President and Fellows of Harvard College.
Multiple Paths to Success
• It doesn’t matter where you start as long as you focus on one segment
• Persist with it in rounds 3 and 4 (correcting the whole product and other
decisions)
• Achieve 30% share and the bowling pin effect (bonus share / revenue from
adjacent segments)
Example paths:
• R2 focus on food delivery → R3 persist and correct decisions → R4 achieve
bowling pin with local delivery
• R2 focus on car share → R3 persist and correct decisions → R4 achieve bowling
pin with car rental
• R2 focus on long-haul trucks → persist and correct decisions → R4 achieve
bowling pin with retirement homes

31. Copyright © 2018 President and Fellows of Harvard College.
Why Isn’t Crossing the Chasm Intuitive?
• Firms and marketers want to hedge their bets
– They target as many segments as possible
• Firms spread themselves too thin
– They go in several directions at the same time, which costs more and confuses
pragmatists
• Firms spend too much on advertising or promoting an imperfect or
incomplete product
– They throw money at advertising, but advertising isn’t effective without a
concrete beachhead segment that can influence others

32. Copyright © 2018 President and Fellows of Harvard College.
Successfully Crossing the Chasm
• Focus exclusively on one beachhead segment that you can dominate
– Need, accessibility, a feasible solution, no entrenched competitor, and influence
potential are all more important than segment size.
• Use a complete product for your beachhead segment (whole
product solution)
– Generic product + augmentation (maintenance and support)
– Partners and allies are needed for a complete solution
– Appropriate sales channels and pricing
• Your head pin (beachhead) should influence other adjacent
segments (the bowling pin effect)
– New segment, same application
– New application, same segment

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