As a tech startup is seeking to adopt its disruptive innovation and push it to the market, it is inevitable that it will find a formidable “chasm” that block the way to the mainstream market. Crossing the chasm is an essential task for every aspiring tech startup to understand in order to succeed in the market.
A Tech Startup Parable
Say you are the CEO of a tech startup company that has released a cutting-edge VR headset that allows the customers to have a more immersive experience watching videos. The launch of the product was a great success: tech geeks love using your product. Thanks to a great first-year-performance you raised millions of dollars from the venture capitalists and angel investors, as they were confident about the prospect of your VR headset and projected a 300% increase in sales for the coming year. To meet this goal in sales, you decided to push forward a more aggressive expansion using the money you have raised in the coming year. You have spent tons of money on advertising and marketing, framing your VR headset as revolutionary and building up hype on the internet. You have also abandoned your original direct-to-consumer approach and opened more sales channels, both online and offline, in the hope of increasing the sales volume. Unfortunately, your sales revenue was disappointing despite your effort, as your growth in expenses greatly surpassed your growth in income. Your VR headset somehow does not fit the mass market. As the debt started to pile up, you began to wonder what went wrong …
The parable above is a common dilemma that tech startups are facing today. There are hundreds of thousands of tech startups out there that have great ideas and innovations, yet only a few of them are able to stand out in the market. Many entrepreneurs have a seemingly promising launch yet fail to continue the hype and make their product reach the mass market. How come? Geoffrey A. Moore provides an answer in his book Crossing the Chasm: Marketing and Selling Disruptive Products to Mainstream Customers. He refers to the process of reaching mainstream customers as crossing the chasm and provided tips and frameworks that are widely used among Silicon Valley entrepreneurs today. For this article, we will take a peek at Moore’s idea of crossing the chasm and demystify the secret behind the process of reaching the mainstream customers.
The Technology Adoption Life Cycle
Moore introduced this idea of the Technology Adoption Life Cycle, which is a model for understanding the acceptance of new products. It divides the entire journey of product penetration in a market into five phases. Each phase represents a specific group of people that completely adopt this new product in their lives. The model is in a bell curve shape as the customer groups in the middle are significantly larger than the ones on the two sides of the graph.
The five customer groups in this model are:
- Innovators: These are the ones that aggressively pursue new technologies. They view technology as their central interest in their lives and eager to try the innovation right after its release. There are not many innovators out there, but it is still vital to winning them over to reassure that the product works.
- Early Adopter: They are the less extreme version of the innovator as they are the ones who find it easy to imagine, understand, and appreciate the benefits of new technology. They make purchases relying mainly on their intuition and vision.
- Early Majority: Aside from their enthusiasm for new technology, the early majority cares more about the product’s practicality. Before they reach out to make their purchase decision, they want to see well-established references. This segment is huge, as it is one-third of the whole population. Thus, it is critical to extending the business to this group of customers.
- Late Majority: They are the ones who are less comfortable with their ability to handle technologies. They would rather adopt new technology when it is well-established.
- Laggards: Those are the ones that simply don’t want anything to do with new technology unless they have to. Usually, they would adopt new technology when it’s so ubiquitous.
According to Moore, a marketer should focus on one group of customers at a time, using each group as a base for marketing to the next group. It is difficult for any group to accept a new product if it’s presented in the same way as the previous group.
Crossing the Chasm
The transition from one group to the other, however, is not without its own perils and obstacles. There are gaps between each of the customer groups, and the entrepreneurs need to cross these gaps in order to reach the next customer group. Among all the gaps, the most difficult one is in between the early adopters and early majority, which is known as the notorious “chasm.” This is, by far, the most dangerous transition in the Technology Adoption Life Cycle and has led to many startups’ demise.
Why is the chasm so formidable and unforgiving? It is mainly due to the different customer expectations between the two customer groups. What the early adopter is buying is some change agent. They expect to get a jump on the competition and radical discontinuity between the old ways and new ways. On the other hand, the early majority are looking to buy a productivity improvement for existing operations. This drastic difference between the two needs statements requires the early startup to change their approaches drastically. Only if they cross the chasm, they will be able to reach the mainstream market.
Target the Beachhead
The key for a tech startup to cross the chasm is to target a beachhead segment or niche market. A beachhead segment refers to a customer segment that can be captured by the entrepreneurs and control establishment. It is the Normandy that the Allies were trying to capture during the D-day Operation that allows the Allies to move on and capture the rest of France. The followings are the four characteristics of a beachhead target:
- The beachhead segment should share similar needs with the early adopter segment.
- The beachhead segment should have opportunities for interactions among target customers (e.g., trade association)
- The beachhead segment should have well-established communication channels. (e.g., trade press)
- The beachhead segment should be easier to establish leadership (e.g., Own a market)
The tricks to select an appropriate beachhead segment are:
- Big enough to matter
- Small enough to win
- Good fit with your crown jewels
- Entry point into other segments.
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