In a world increasingly wrapped in technology, knowing how to handle different markets is essential if you want to innovate. You will only be able to reach the different audiences in a competitive and accelerated way if you learn how to end this chasm. In Crossing the Chasm, the author presents us the most varied markets and their characteristics for high technology businesses. Also, he explains how these characteristics lead to a chasm between these markets, presenting the appropriate way to deal with them. Crossing the Chasm is the bible for anyone who wants to bring cutting-edge products to the big markets.
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WHY DO TECHNOLOGICAL PRODUCTS NOT SELL?
The technology strengthens the global competitiveness of the United States. But to stay competitive, companies need to market new technologies to their target audience. So much depends on that factor, that whole business has already failed after only a few months of declining sales, caused by negative signals seen by investment analysts, thus shortening the careers of many technology marketers. While non-tech American companies often sell their products successfully, why have so many technological products gone – probably as a result of marketing failures?
The answer lies partly in finding the right market. Many technology products fail to make the transition from a few users to a larger audience that has different concerns. Advertisers may assume that this transition will be quiet, but there is a big chasm and crossing it is so dangerous that it may be the main reason for the failure of technology companies. To survive this transition from serving a fashion to fueling a trend, the challenge of high-tech marketing is to successfully manage fashion to turn it into a trend. And that’s how many technology products were launched. Without the acceptance of a broader market beyond early adopters, the product will fail, so this transition from the esoteric to the mainstream is very important.
To reap the benefits of this transition, a company needs to make dramatic changes in many departments, not just sales, and marketing. The business needs to involve all its internal units and carefully follow a plan that addresses the distinction between early and late users. This requires methodical preparation, not a brilliant marketing campaign.
TECH USER PROFILES
Early adopters and late adopters are very different. Most people are a late user because using a new technology is disruptive and requires consumers to change their behavior. A color television required viewers to buy new sets, but hooking up a VCR required yet another change in behavior. High definition television forces viewers to find programs in that format. New computer operating systems are usually disruptive because they do not work on older computers. The microwave changed the way they cooked frozen dinners. In contrast, updated products (other than reinvented) do not require behavior changes. Toothpaste that promotes whiter teeth is still used in the same way as ordinary toothpaste.
The natural inclination of the consumer is to avoid discontinuity, but the high-tech industry is based on introducing new products that make customers behave differently. This “technology adoption lifecycle” is the basic marketing idea that drives product introductions in Silicon Valley. The public that buys high-tech equipment belongs to these groups:
“Innovative” – they are the smallest segment, but their opinions encourage others to investigate the product. These techies are often familiar with new technologies. They aggressively pursue new technologies and often seek information even before launching through marketing campaigns. This is because technology is a central concern in their lives, regardless of the function being performed. Winning this segment early in a marketing campaign is a very important point because their support ensures other players that the product works.
“Early adopters” – have a similar role, but they are not very familiar with the technology. These “visionaries” are drawn to the benefits of technology. They are the people who understand and appreciate the benefits of new technology and identify with these potential benefits. By relying on their intuition and vision, they are key customers to enter any high-tech market segment.
“Initial majority” – these consumers do not want to be absorbed by fads, and so they prefer to wait. But if a product is practical, it can gain the support of them. They even share the early adopters’ ability to identify with technology but are more driven by a strong sense of practice. They want to see well-established references before investing substantially in any product. Since this segment is large – about a third of people – they are very important for any substantial profit and growth.
“Late majority” – these buyers want to see that technology is accepted and that all bugs have been fixed. They also want to be able to ask for help when they need it. This group includes about 33% of the market and represents great potential for profit. They share all the initial majority concerns and another major concern: while the initial majority people are comfortable with their skills in dealing with a technological product, late majority members are not. And so they prefer to wait.
“Retards” – are the last public. They do not consider technology to be worth it. They simply do not want to relate to any new technology for a variety of economic and personal reasons. It’s not usually worth pursuing this group.
A graph of these markets would look like a bell curve, with the initial and late majorities occupying most of the curve. Each group is different in some buyers and their profiles, including psychological and demographic profiles. Technology advertisers need to recognize each group and work methodically on each of them to reach out to the next, and eventually the entire audience. The success of a product in a group creates messages and endorsements that can help in the gap for the next group and generate a boost in marketing.
The right way to develop a high-tech market is to work the left-to-right curve, focusing first on innovators, growing that market. So one should move to the early adopters, growing that market, and so on. In this effort, companies need to use each “captured” group as a baseline to enter the next group’s market. Hence, the approval of innovators becomes an important tool for developing a reliable presentation for early adopters, and early adopters for the initial majority, and so on.
Lotus 1-2-3 was one of the first products to use this marketing model successfully. Lotus was based on VisiCalc, which ran on the Apple II computer, but Lotus also worked well on IBM computers and allowed consumers to create popular what-if scenarios. In the late 1980s, more than half of IBM PCs came with Lotus, despite numerous competitors. Other successful companies that also started with specific niche markets and then conquered the mass market include Oracle (relational databases), HP (printers), and IBM (mainframes). Each company captured more than half of its market and did very well with the initial majority.
This is a useful way to see segmentation, but it is not continuous or smooth. Advertisers who want to grow, cling to or defend markets, need to observe the gaps within the model, including when the market can disappear. A market segment is created from current or future customers with common product needs. They should be able to refer to each other, then develop an identity while buying and discussing the product. In time, they will share ideas and reinforcements. Achieving this dialogue in every segment of the market creates a satisfied customer base.
HOW TO DEAL WITH THE ABYSS
Your company may fall into the gulf between customer groups when these connections do not happen, when there is a shortage of money to compete or when a very new market is pursued. In a venture capital situation, some lenders will try to take advantage of that bad period to devalue the company and buy it back for a lower price in the next round of financing. Their goal is to gain control of the company by blaming managers for failure in marketing.
To avoid this, aggressively attract key users to take control of the target audience of current vendors. Then strive to maintain or accelerate your penetration rate, and explore your starting position in the niche. When you are positioned among the market segments, focus on marketing strategies, not just sales. At this point, you need very satisfied customers who can point you to other customers and get the most from your technology product. When consumers share their positive experiences, word of mouth about your product gives you the credibility you need to cross the chasm.
Microsoft is an exception to this market segmentation approach. She avoided any attempt to link the gaps between customer segments, perhaps because of her unusual story. Microsoft has emerged as a standard industry by customizing the IBM operating system. It could modify existing technologies, such as Windows and Internet Explorer, so it did not need to create innovative solutions in the introduction of new products.
But other companies can not enjoy this luxury. They need to wait to exploit the market beyond their segments. The Apple Macintosh left a niche market for general acceptance when it came to be considered the standard machine for corporate art departments. Platform companies, such as Apple, and application companies, face different challenges while traversing the chasm. Applications appeal to specific markets, which can be organized by profession, industry or location, and sold to different audience segments. In contrast, platforms reach different programs and machines and change little from user to user.
However, thanks to people’s approach to new technologies, to expand the penetration of a platform, advertisers still need to position it as a new product and establish a position with a target audience. PalmPilot did this by gaining a segment among technology management teams with long shifts. Palm’s initial users moved away from other products by looking for functional features that the Palm offered, such as a simple application interface and pocket size. Alternatives, such as small computers, have been over-designed with many functions. Rather than reaching a wider audience, they alienated buyers who needed specific functions. By adding functions, they increased the risk of failure.
LAUNCHING A TECHNOLOGICAL PRODUCT
The best way to launch a new technology product is to establish your space in a market segment and grow from there. This has some risks because reliable data is rare. Advertisers need to replace their common data analyzes with “informed intuition.” Using the best and most memorable bits of data available, advertisers need to create visual archetypes and market profiles of each consumer segment. With this information, they can create attack plans. When it’s time to implement, there is fast. If you wait for more research, your existing competitors will win. Delay is your enemy. Execute your plan quickly.
The key is to understand how intuition – more specifically informed intuition – works. Unlike numerical analysis, it does not rely on the statistical processing of a sample of data to achieve a certain level of confidence. Instead, it involves conclusions based on the isolation of some high-quality images – the data fragments – that are archetypes of a broader and more complex reality. These images stand out from the different mental materials that are in our heads. They are the ones that are memorable. So the first rule to work with an image is: if you can not remember it, do not try because it will not work. Or just work with memorable images.
Let’s call these characterization images. As such, they represent the characteristics of market behavior.
Now the early adopters and the initial and final majority represent a set of fashionista-like images and yuppies – though they are at a high level of abstraction. And each of these labels also represents characteristics of market behaviors-specifically, about adopting a discontinuous innovation-from which we can predict the success or failure of marketing tactics. The problem is, they are very abstract. They need to become more concrete, more specific to the market. This is the function of characterization of the target customer.
To meet customer expectations about product performance, advertisers need to embrace Theodore Levitt’s “product magnification concept,” which requires consumers to be fully informed about the product’s current and future benefits and growth. You want to generate a positive word-of-mouth between your target audiences, creating a circle that competitors can not interrupt.
As the business press has credibility with the appropriate audience for many innovative products, use this to convey your story. Include information from product developers, industry analysts, satisfied customers, and distribution partners. Do not just focus on the product or the new technology, but on how the industry will change as a result of this innovation. Look for the trade magazines that cover your industry, but be aware that they can prioritize insider stories about new products. Your marketing priority is to present your product from the customer perspective. You want the conventional public.
SELLING TO THE GREAT PUBLIC
In the distribution of technology products, the secret to serving the general public has traditionally been to rely on direct sales through retailers, which are still the best distribution channels to create demand. Other channels, such as value-added resellers (VARs), original equipment manufacturers and system integrators, have varying strengths. VARs typically sell technical solutions to specific industries and may not be the best to sell to the general public. Build product awareness and then expand demand by adding new distribution channels.
The other important variable is price, which changes based on each customer segment. For example, visionaries are often not very sensitive to price; they will pay for features they need and enjoy. Conservative consumers and the mass market, who buy later in the product cycle, still want to pay as little as possible. However, conservatives will pay 30% more for a product from a market leader because they want to gain a competitive advantage while continuing to operate their systems. Conversely, if you are not a market leader, compete with price by selling your products at around 30% below the prevailing price. Do not worry too much about pricing your product for other suppliers. This can be a distraction. Focus on the main consumers.
So to maintain your lead in the core market, you need to:
At the very least, keep the same pace as the competition. It is no longer necessary to be the technological leader, nor to have the best product. But the product needs to be good enough.
If a competitor creates something very innovative and disruptive, try to at least present a recovery response to achieve it.
There are also scenarios where you can lose the main market, for example:
Stop investing in the market and stop R & D funding to reach your competitors.
Launch a product that is not desirable. Leading customers hate discontinued innovations.
Stay very focused on what is happening in the initial markets and ignore the undeveloped elements of the main market.
These scenarios are dangerous, and in those cases, you need to recognize the errors and correct them immediately.
Once the chasm has been crossed, your company needs to deliver its promises to buyers. Many businesses get excited when they cross the chasm and suffer later because they can not deliver. To avoid this, never make promises you can not keep to your customers. This transition leaves many companies worried, because corporate leadership now needs to re-examine everything from its people to their R & D practices. Once your company crosses the chasm, it needs to transform its culture to value group work. This is the only way to deliver consistent quality on a large scale. Revenues at this early stage are not equal to profits; profit comes later when the product gains a broader position in the market.
Do not make entrepreneurial financial projections based on sustaining rapid revenue growth. Recognize the development of the cost curve and the expectations of venture capitalists for return on investment (ROI) growth. Do not base the future on ever-changing profitability growth patterns. Over time, the growth curve will decrease. Founders often fail to make financial projections based on rapid revenue growth. When this does not happen, homeowners may lose their ownership interests to venture capitalists who buy their companies for a fraction of the value.
The first step in bringing your highly technological product to the big markets is to understand how the chasm between early adopters and the initial majority works. Also, you need to know your customer, understand what segment they are in and what is important to each of them.
So if you want to have market leadership, have an efficient product, choose a market and expand from there.