August 25, 2004
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Marketing

Facing the Tech Market Chasm

Pragmatic customers don't appreciate visionaries

In the book "Crossing the Chasm" (first published in 1991) high-tech marketing guru Geoffrey Moore offers time tested insights into the problems and dangers facing start-up and growing technology companies, and a blueprint for survival. This classic text is widely accepted as the bible for bringing cutting-edge products to progressively larger markets.

According to Moore, a market is defined as

• a set of actual or potential customers,
• for a given set of products or services,
• who have a common set of needs or wants, and
• who reference each other when making a buying decision.

The final point may be the least intuitive, but Moore says, "the notion that part of what defines a high-tech market is the tendency of its members to reference each other when making buying decisions-- is absolutely key to successful high-tech marketing."

Many business plans are based on a traditional Technology Adoption Life Cycle, a smooth bell curve of high tech customers, progressing from Innovators, Early Adopters, Early Majority, Late Majority, and finally Laggards. In turn, this model becomes the foundation for a high-tech marketing model which says the way to develop a market is to work the curve from left to right, progressively winning each group of users, using each "captured" group as a reference for the next.

Moore demonstrates that in fact, there are cracks in the curve, between each phase of the cycle, representing a disassociation between any two groups-- that is, any group will have difficulty in accepting a new product if it is presented the same way as it was to the group to its immediate left. The largest crack, so large it can be considered a chasm, is between the Early Adopters and the Early Majority. Many (most) high tech ventures fail trying to make it across this chasm.

It is critical for any company with an emerging product or service to understand this model, and adapt their marketing strategies accordingly. The key is understanding the motivations and needs of the two groups on either side of the chasm. Each are described below, largely in Moore's own words.

Early Adopters

Early Adopters are the rare breed of visionaries "who have the insight to match an emerging technology to a strategic opportunity,… driven by a 'dream'. The core dream is a business goal, not a technology goal, and it involves taking a quantum leap forward in how business is conducted in their industry or by their customers…

"Visionaries drive the high-tech industry because they see the potential for an 'order-of-magnitude' return on investment and willingly take high risks to pursue that goal. They will work with vendors who have little or no funding… As a buying group, visionaries are easy to sell but very hard to please… because they are buying a dream…

"They want to start out with a pilot project, which makes sense because they are 'going where no man has gone before' and you are going with them. This is followed by more project work, conducted in phases with milestones, and the like."

"You can succeed with the visionaries, and you can thereby get a reputation for being a high flyer with a hot product, but that is not ultimately where the dollars are. Instead, those funds are in the hands of more prudent souls who do not want to be pioneers"

Early Majority

The Early Majority are pragmatists… "they care about the company they are buying from, the quality of the product they are buying, the infrastructure of supporting products and system interfaces, and the reliability of the service they are going to get…

"Pragmatists tend to be 'vertically' oriented, meaning that they communicate more with others like themselves within their own industry than do technology enthusiasts and early adopters… It is very difficult to break into a new industry selling to pragmatists. References and relationships are very important… Pragmatists won't buy from you until you are established, yet you can't get established until they buy from you…

"On the other hand, once a startup has earned its spurs with the pragmatist buyers within a given vertical market, they tend to be very loyal to it, and even go out of their way to help it succeed. When this happens, the cost of sales goes way down, and the leverage on incremental R&D to support any given customer goes way up. That's one of the reasons pragmatists make such a great market…

"They like to see competition… Pragmatists want to buy from proven market leaders because they know third parties will design supporting products around a market-leading product's… aftermarket.

"Overall, to market to pragmatists, you must be patient. You need to be conversant with the issues that dominate their particular business. You need to show up at the industry-specific conferences and trade shows they attend. You need to be mentioned in articles that run in magazines they read. You need to be installed in other companies in their industry. You need to have developed applications that are specific to their industry. You need to have partnerships and alliances with the other vendors who serve their industry. You need to have earned a reputation for quality and service."

The Chasm

A start-up company (or new product within an established company) will often find initial success with a handful of very enthusiastic customers. These are the early adopters who want the product to help them fulfill their visionary dream. And they're often more tolerant of struggling young companies.

On the other hand, the early majority customers look first for established products, references, reputation, support, and integration. But worse, if you try to use an early adapter as a reference for a pragmatist customer, it could backfire. "Pragmatists are not anxious to reference visionaries in their buying decisions. Hence the chasm. Four fundamental characteristics of visionaries that alienate pragmatists:

1. Lack of respect for colleagues' experiences.
2. Taking greater interest in technology than in their industry.
3. Failing to recognize the importance of existing product infrastructure.
4. Overall disruptiveness."

High risk of failure comes when a company interprets its first early successes as a ramp in sales leading smoothly “up the curve”, when in fact it is an initial blip and not the first indications of an emerging mainstream market. Companies fail because its managers are unable to recognize that there is something fundamentally different between a sale to an early adopter and a sale to the early majority, even when the company name on the check reads the same.

-- by Jonathan Linowes

In a follow-up article, we will discuss Moore's prescription for crossing this chasm.

Geoffrey A. Moore, Crossing the Chasm, Marketing and Selling High-Tech Products to Mainstream Customer (revised edition), Harper Collins Publishers, New York, 1999

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