crossing the chasm, by geoffrey moore

Crossing the Chasm is widely referenced as a must-read in the field of digital marketing. The book is premised on the following observation – the point of greatest peril in the development of a high tech market is making the transition from an early market dominated by a few visionary customers, to a mainstream market dominated by a large block of customers who are predominantly pragmatist in orientation.

Geoffrey Moore introduces the concept of the technology adoption lifecycle (image below). Markets have a number of distinct customer types, including:

• Innovators: These are the tech fanatics
• Early Adopters: People who are not looking for an improvement, but for a fundamental breakthrough
• Early Majority: This group has historically represented the bulk of market volume for any tech product
• Late Majority: This group cares more about convenience than performance

The underlying thesis with these various customer types is that tech is absorbed into any given community in stages, corresponding to the psychological and social profiles of various segments in that community.

The high-tech marketing model suggests that you work the curve from left to right, using each captured group as a reference base for launching marketing into the next group. The key is to make this process as smooth as possible. 

However, as you can see in the image above, there is a crack in the bell curve between the early adopters and the early majority. This is because early adopters do not make good references for the early majority. As a result, when marketing to the early majority, you are operating without a reference or support base in a market that is highly reference and support oriented. This is problematic because part of what defines a high-tech market is the tendency of its members to reference each other when making buying decisions.

One of the key lessons here is that the longer your product is in the market, the more important the service element is to the customer. To achieve this, you must design out as much as possible that the service demands, and ensure that the services yields an improved user experience.

To cross the chasm, you want to start by targeting a very specific niche market where you can dominate from the outset. From here, drive competitors out of that market niche, and then use it as a base for broader operations. The key is an abundance of support into a confined market niche. Put differently, you want to focus on a highly specific goal that is both readily achievable, and also capable of being directly leveraged into long-term success. Targeting a specific niche leads to word-of-mouth leverage, and also makes it easier to achieve market leadership. You want to start with a strategic market that, by virtue of its other connections, provides a strong entry point into one or more adjacent segments. 

Figuring out which niche market to target is a high risk, low data decision. The rule of thumb is that you want to pick a market that is big enough to matter, small enough to lead, and a good fit with your crown jewels.

Once you have selected a market, you want to surround your core product with a whole product that solves for the targets customers problems from end to end. Design the whole product by working backwards from the target customers use case.

Moving to competition – you want to define the battle. Pragmatist customers insist on seeing viable competition. Alongside the technology adoption lifecycle, the nature of competition will change dramatically. Initially, competition comes from alternative modes of operation, i.e., inertia. In the pragmatist domain, competition is defined by comparative evaluations of products and vendors within a common category.

In some cases, you may have to “create” your competition, by positioning your product within a buying category that has some established credibility with pragmatist buyers. To appeal to their values, use the competitive positioning compass (image below).

Use 2 competitors to create competition – a market alternative and a product alternative. Market alternatives call out the budget and thus the market category, whilst product alternatives call out the differentiation you offer.

The final stage is launching the invasion. The goal here is to set pricing at the market leader price point, thereby reinforcing your claims to market leadership. You must also build disproportionally high rewards for the channel into the price margin.

If successful, you will be in a position to leave the chasm behind. The post-chasm enterprise is bound by the commitments made by the pre-chasm enterprise. The best solution is to avoid making the wrong kind of commitments during the pre-chasm period. Obviously, this won’t always be practical. And finally, the purpose of the post-chasm enterprise is to make money. Until breakeven cash flow is achieved, nothing is secure.