Crossing The Chasm


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Crossing The Chasm

  1. 1. Crossing The Chasm Srini Kumar * 4/12/06
  2. 2. What is a market? <ul><li>A set of actual or potential customers </li></ul><ul><li>For a given set of products or services </li></ul><ul><li>Who have a common set of needs or wants (which constitutes their demand ) </li></ul><ul><li>Who reference each other when making a buying decision. </li></ul><ul><li>The last point is the absolute key to successful high-tech marketing. </li></ul>
  3. 3. A Crack In The Adoption Curve <ul><li>Between Early Adopters and Early Majority there is a large chasm </li></ul><ul><li>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 </li></ul><ul><li>Most high tech ventures fail to cross the chasm and sales peter out </li></ul>
  4. 4. Who Are Early Adopters? <ul><li>Driven By A Dream </li></ul><ul><ul><li>They match an emerging technology to a strategic opportunity </li></ul></ul><ul><ul><li>The core goal is a BUSINESS goal, not a technology goal </li></ul></ul><ul><ul><li>The innovation helps them take a quantum leap forward in how business is conducted in their industry or by their customers </li></ul></ul><ul><li>They want an “order of magnitude” improvement and will take risks to get it </li></ul>
  5. 5. Visionaries <ul><li>Easy To Sell </li></ul><ul><ul><li>Willing To Start Out On A Pilot Project </li></ul></ul><ul><ul><li>Going Where No Man Has Gone Before </li></ul></ul><ul><ul><li>They See Implementation As A Project </li></ul></ul><ul><li>Very Hard To Please </li></ul><ul><ul><li>Because They Are Buying A Dream </li></ul></ul><ul><li>The payoff for your firm: please the Visionaries and you will be seen as a High Flyer with a Hot Product </li></ul>
  6. 6. Who Are The Early Majority? <ul><li>They care about: </li></ul><ul><ul><li>The company they are buying from </li></ul></ul><ul><ul><li>The quality of the product they are buying </li></ul></ul><ul><ul><li>The infrastructure of supporting products </li></ul></ul><ul><ul><li>The ease of system interfaces </li></ul></ul><ul><ul><li>The reliability of the service </li></ul></ul><ul><li>Vertically oriented </li></ul><ul><ul><li>They communicate with others like themselves in their own industry </li></ul></ul><ul><ul><li>References and relationships are very important </li></ul></ul><ul><ul><li>Won’t buy from you until you’re established </li></ul></ul>
  7. 7. Pragmatists <ul><li>Tend to be very loyal once they’ve tried a service and found it satisfying </li></ul><ul><li>They may even go out of their way to make sure your firm succeeds </li></ul><ul><li>When this happens, the cost of sales goes way down </li></ul><ul><li>The leverage on incremental R&D to support any given customer goes up </li></ul>
  8. 8. What Pragmatists Want <ul><li>They like to see competition </li></ul><ul><li>They buy from proven market leaders </li></ul><ul><li>They want THIRD PARTIES to build around your MARKET-LEADING PRODUCTS </li></ul><ul><li>They do not really like visionaries all that much: they don’t really trust them </li></ul>
  9. 9. How To Market To Pragmatists <ul><li>You must be patient </li></ul><ul><li>Show up to industry tradeshows/conferences </li></ul><ul><li>Be mentioned in magazines they read </li></ul><ul><li>Be installed in other companies in their industry </li></ul><ul><li>Develop applications specific to their industry </li></ul><ul><li>Have partnerships and alliances with other firms in their industry </li></ul><ul><li>Earn a reputation for quality and service </li></ul>
  10. 10. Why Pragmatists Don’t Like Visionaries <ul><li>Lack of respect for their colleagues’ experiences – they are renegades. </li></ul><ul><li>Taking greater interest in technology than in the nuts&bolts of their industry. </li></ul><ul><li>Failing to recognize the importance of the existing product infrastructure. </li></ul><ul><li>Overall disruptiveness is annoying. </li></ul>
  11. 11. To Cross The Chasm, Find The Beachhead <ul><li>A single market that you can use as a springboard to adjacent extended markets to win: D-Day Analogy </li></ul><ul><li>Who Will Be Your Champions? </li></ul><ul><ul><li>If you’re an APPLICATION: END USERS because they’re the ones who see it </li></ul></ul><ul><li>Fix a broken, mission-critical business process so they can insist on deployment despite IT reluctance </li></ul><ul><li>End-User Sponsorship Secures A Beachhead </li></ul>
  12. 12. The D-Day Analogy <ul><li>The perils of the chasm: the life or death of the firm </li></ul><ul><li>You must win entry to the mainstream, despite any possible resistance </li></ul><ul><li>Long-term goal: to enter and take control of a mainstream market that is currently dominated by an entrenched competitor. </li></ul>
  13. 13. The D-Day Analogy (cont’d) <ul><li>To enter the market we must conquer, we need an early market base (England) </li></ul><ul><li>We must aim at a strategic target market segment (Normandy beaches) </li></ul><ul><li>Separating us from our goal is the chasm (the English Channel) </li></ul><ul><li>Cross the chasm as fast as we can with an invasion force focused directly on the point of attack </li></ul>
  14. 14. The D-Day Analogy (cont’d) <ul><li>SECURE THE BEACHHEAD </li></ul><ul><ul><li>Force The Competitor Out Of Our Targeted Niche Markets Through Focused Marketing </li></ul></ul><ul><li>Move out to take over additional and adjacent market segments </li></ul><ul><li>Eventually will achieve Overall Market Domination – they will struggle to protect a shrinking base of sales </li></ul>
  15. 15. Why The D-Day Analogy? <ul><li>The fledgling enterprise can WIN OVER PRAGMATIST CUSTOMERS in advance of broader market acceptance – messages travel through word of mouth </li></ul><ul><li>Focus an overabundance of support into a confined market niche: makes targeting your firm’s messaging much easier than trying to please everyone </li></ul><ul><li>Simplifies the initial challenge – a restricted set of market variables that makes it easier to be perfect </li></ul><ul><li>Develop a solid base of references, collateral, and internal procedures and operational resources for the firm and therefore wins sales over incumbents </li></ul><ul><li>Tightly bound segments: easier to create messages </li></ul>
  16. 16. Steps To Cross The Chasm <ul><li>Target The Point Of Attack </li></ul><ul><li>Assemble An Invasion Force </li></ul><ul><li>Define The Battle </li></ul><ul><li>Launch The Invasion </li></ul>
  17. 17. 1) Target The Point Of Attack <ul><li>A specific market niche upon which your firm must focus all of its resources </li></ul><ul><li>You must achieve the dominant leadership position in that segment </li></ul><ul><li>Identify the Primary Market Identifiers </li></ul><ul><ul><li>Target customer </li></ul></ul><ul><ul><li>Compelling Reason To Buy </li></ul></ul><ul><ul><li>Whole Product </li></ul></ul><ul><ul><li>Competition </li></ul></ul><ul><li>Also: Partners/Allies, Distribution, Pricing, Positioning, and Target Customer </li></ul>
  18. 18. 2) Assemble An Invasion Force <ul><li>Create the WHOLE PRODUCT </li></ul><ul><ul><li>Think through your customers’ problems – and solutions – in their entirety </li></ul></ul><ul><ul><li>Core product PLUS everything else you need to achieve your compelling goals </li></ul></ul><ul><ul><li>Additional software, hardware, systems integration, installation, debugging, training and support, procedures </li></ul></ul><ul><li>May be provided by you or a partner </li></ul>
  19. 19. 3) Define The Battle <ul><li>Create Competition </li></ul><ul><ul><li>Identify Their Weakness: There’s The Battle </li></ul></ul><ul><li>Define Positioning </li></ul><ul><li>Develop the Elevator Pitch </li></ul><ul><ul><li>A Two-Sentence Formula </li></ul></ul><ul><li>Build All Of This Into Your Marketing And Signalling Communications </li></ul><ul><li>Focus The Competitive Posturing Around Your Key Strengths And Build Those Competencies </li></ul><ul><li>Demonstrate The Validity Of Your Claim </li></ul>
  20. 20. 4) Launch The Invasion <ul><li>Distribution And Pricing </li></ul><ul><ul><li>The direct sales force is optimized for creating demand </li></ul></ul><ul><ul><li>Consultative Salesperson who works with the clients in Needs Analysis </li></ul></ul><ul><ul><li>Supported by Application Technology Specialists who develop solutions </li></ul></ul><ul><ul><li>Additional interaction with the customer is built in; competitive pricing b/c of lifetime value </li></ul></ul><ul><ul><li>A very expensive way to sell, but this is how you can CROSS THE CHASM </li></ul></ul>
  21. 21. Select Strategic Target Market Segments First <ul><li>Target a segment that creates an entry point into a larger segment. </li></ul><ul><li>Provide compelling EVIDENCE to back up your POSITIONING to FOUR TYPES: </li></ul><ul><ul><li>Specialist Supporters: Focus On Product </li></ul></ul><ul><ul><li>Generalist Supporters: Focus On Company </li></ul></ul><ul><ul><li>Specialist Skeptics: Focus On Technology </li></ul></ul><ul><ul><li>Generalist Skeptics: Focus On Market </li></ul></ul>
  22. 22. Specialist Supporters: Focus On Product <ul><li>Benchmarks </li></ul><ul><li>Product Reviews </li></ul><ul><li>Design Wins </li></ul><ul><li>Initial Sales Volumes </li></ul><ul><li>Trade Press Coverage </li></ul><ul><li>Visionary Endorsements </li></ul>
  23. 23. Generalist Supporters: Focus On Company <ul><li>Revenues And Profits </li></ul><ul><li>Strategic Partners </li></ul><ul><li>Top Tier Customers </li></ul><ul><li>Full Product Line </li></ul><ul><li>Business Press Coverage </li></ul><ul><li>Financial Analyst Endorsements </li></ul>
  24. 24. Specialist Skeptics: Focus On Technology <ul><li>Architecture </li></ul><ul><li>Schematics </li></ul><ul><li>Demos </li></ul><ul><li>Trials </li></ul><ul><li>Upgrade Path </li></ul><ul><li>Compatibility </li></ul><ul><li>Technology Press Coverage </li></ul><ul><li>Guru Endorsements </li></ul>
  25. 25. Generalist Skeptics: Focus On Market <ul><li>Market Share </li></ul><ul><li>Third Party Support </li></ul><ul><li>Standards Certification </li></ul><ul><li>Applications Proliferation </li></ul><ul><li>Vertical Press Coverage </li></ul><ul><li>Industry Analyst Endorsements </li></ul>
  26. 26. Managers Must Choose Niche Marketing Strategy <ul><li>Be brave: Make Niche Commitments </li></ul><ul><li>Have A Strong Will About Niches </li></ul><ul><li>A Niche Strategy Is ALWAYS Best </li></ul><ul><li>Do Not Pretend That You Can’t Afford To Pay Attention To Single Niches </li></ul><ul><li>Niches Are More Important Than The Pursuit Of All Sales From All Angles </li></ul><ul><li>You Must Be MARKET-DRIVEN, not merely SALES-DRIVEN </li></ul>
  27. 27. Being Sales-Driven During The Chasm Will Destroy Your Firm <ul><li>The sole goal of your firm during the chasm must be securing a BEACHHEAD in a MAINSTREAM MARKET </li></ul><ul><li>You must create a PRAGMATIST consumer base – visionaries are not DEMANDING ENOUGH of your product and service </li></ul><ul><li>Our first customers must be COMPLETELY SATISFIED after dealing with your firm </li></ul><ul><li>We must provide the WHOLE PRODUCT </li></ul><ul><li>FOCUS ON ONE OR TWO NICHE MARKETS </li></ul>
  28. 28. Breaking Into A New Market <ul><li>Establish A Strong Word-Of-Mouth Reputation Among Buyers </li></ul><ul><li>Seed The Communications Process </li></ul><ul><ul><li>Pragmatists communicate along industry lines: professional associations </li></ul></ul><ul><ul><li>Win over a whole SEGMENT at a time </li></ul></ul><ul><ul><li>Segments make sales PREDICTABLE </li></ul></ul><ul><li>This Creates The Feeling Of Your Firm As THE MARKET LEADER (for that segment) </li></ul>
  29. 29. Be The Market Leader Faster <ul><li>Simple Mathematics: You Need The Largest Market Share WITHIN THAT NICHE </li></ul><ul><li>Provide The Whole Product For Your Selected Niche And Satisfy Them Completely & Forever </li></ul><ul><li>If You Want Market Leadership Fast, CHOOSE VERY SMALL PONDS AND BECOME THE BIG FISH IN THEM – don’t sell to the whole market </li></ul><ul><li>Focus exclusively on market leadership within one or two carefully selected market segments... OR ELSE LOSE EVERYTHING!!! </li></ul>
  30. 30. The Sales-Driven Company Will Fail During Year Three <ul><li>Despite expansion of sales function, the sales for that year are disappointing </li></ul><ul><li>Prolonged Sales Struggles </li></ul><ul><li>Significant Price Compromises </li></ul><ul><li>Fewer Sales Than Expected </li></ul><ul><li>Growth In Expenses Is Larger Than Growth In Revenue </li></ul><ul><li>R&D Is Bogged Down In Existing System </li></ul>
  31. 31. Panic For The Sales-Driven Firm <ul><li>Salespeople complaints </li></ul><ul><ul><li>Holes In The Product Line </li></ul></ul><ul><ul><li>Our Offering Is Overpriced, Full Of Bugs, And Does Not Meet Customer Desires </li></ul></ul><ul><li>Engineers Beg Innocence: They Have Met Their Release Schedule </li></ul><ul><li>Politics Start To Bog Down The Firm </li></ul><ul><li>Whip The Slaves -> Turnover -> Dilution </li></ul><ul><li>THEY MISTAKE THE EARLY LEAD IN SALES FOR A PERMANENT ADVANTAGE IN THE MARKET </li></ul>
  32. 32. THE MORAL OF THE STORY <ul><li>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. </li></ul><ul><li>Recognize that there is something fundamentally different between a sale to an early adopter and a sale to the early majority. </li></ul>