1-Page Summary

Periodically, a new high-tech innovation will transform the way we live or do business and propel its inventors to wealth and fame. More often, though, new high-tech products seem to stagnate and die instead. In Crossing the Chasm, marketing consultant Geoffrey Moore provides an explanation for this, and he presents a strategy for introducing your product effectively into the mainstream market.

His explanation is grounded in the “technology adoption life cycle” (TALC), which predicts how innovations are adopted by different segments of society as a technology matures. Moore argues that there’s a little-recognized gap or “chasm” in this model between the early market and the mainstream market—and failure to cross this gap accounts for the failure of many high-tech products.

In this guide, we’ll discuss Moore’s analysis of the TALC and his strategy for crossing the “chasm,” a strategy that includes targeting a niche market, forming corporate alliances to ensure the customer gets a complete solution, positioning your product as the market leader in that niche, and setting up an effective distribution channel. For each step, we’ll compare Moore’s perspective to other analysts’, including marketing consultant Regis McKenna and sales coach Oren Klaff.

(Shortform note: Moore’s strategy is intended specifically for business-to-business marketing, and thus, he presents most of the principles assuming the target customer is a business, although there are elements that could apply to individual consumers as well.)

The Technology Adoption Life Cycle

To understand Moore’s strategy, you need to understand the chasm between the early and mainstream markets, and to understand the chasm, you need to understand the Technology Adoption Life Cycle (TALC), also referred to as the “diffusion of innovations.”

As Moore explains, the TALC predicts that as a technology matures, the number of potential new buyers first increases (as the technology starts to catch on) and then decreases (as you run out of potential customers who haven’t already bought it), following the profile of a bell curve. The area under the curve represents the total number of customers for the new technology. This area is divided into five categories of prospective customers, as shown in the figure below.

(Shortform note: This concept was originated by George Beal and Joe Bohlen of Iowa State College, who, in 1956, published studies on when farmers adopted new agricultural technologies (such as fertilizer and hybrid seed corn). Six years later, a communications professor at Ohio State University named Everett Rogers expanded upon Beal and Bohlen’s research in a book titled Diffusion of Innovations, which popularized the concept outside of the farming community and made it relevant to other industries.)

(Shortform note: Moore states that the boundaries between these five categories lie approximately at the standard-deviation intervals on the bell curve. However, the graph that he presents in Crossing the Chasm depicts the boundaries further from the center than the standard deviation intervals would be. Moore provides no explanation for this, so presumably, his graphic simply wasn’t drawn to scale. However, in our figure above, the boundaries are marked at the standard-deviation intervals.)

Psychographic Categories of Customers

The TALC model divides customers into five categories based on their “psychographics,” the combination of psychology and demographics that dictates their purchasing behavior. These categories are:

Innovators

Innovators are the first to buy new technology. According to Moore, they love new technology just because it’s new technology, but they’re often on a limited budget because they usually work highly technical jobs, rather than positions in upper management.

(Shortform note: While Moore describes innovators as having limited budgets, Beal and Bohlen assert that innovators have high net worth and are typically influential people in their communities. Perhaps the difference arises from studying them in different contexts. An engineer working in industry might have a limited budget for assessing experimental technologies, while a self-employed farmer would only be able to experiment if he had the money to do so.)

Early Adopters

Early Adopters are the second group to buy new technology. According to Moore, early adopters are usually visionary business managers: They don’t value new technology for its own sake, but they have enough technical insight to identify the strategic advantages that new technology can provide.

(Shortform note: According to Beal and Bohlen’s original characterization, early adopters tend to be younger and more highly educated than members of the early and late majority, and are the most likely category to hold public office. Moore doesn’t mention these characteristics, which again may be a function of context: In a farming community of the 1950s, a college degree would make a farmer stand out as exceptionally educated, while in high-tech industries, almost everyone has an advanced degree. So too, perhaps early adopters in rural farming communities tend to be more involved in municipal politics, while early adopters in high-tech companies tend to be more involved in corporate politics.)

Early Majority

The Early Majority are the third group to adopt new technology. According to Moore, they are pragmatic people, who are interested in leveraging new technology to improve their business, but also averse to the risks of unproven technologies. They are less technically inclined than innovators or early adopters, and they tend to measure a high-tech product more by industry standards and the product’s reputation than by direct assessment of the underlying technology.

(Shortform note: Beal and Bohlen emphasize that the early majority tend to have fewer resources than innovators and early adopters, and thus, cannot afford to take risks with unproven technology. Moore asserts not that they can afford risks less, but that they are less interested in taking risks unless they can see a clear benefit.)

Late Majority

The Late Majority are the fourth group to adopt new technology. According to Moore, they are more conservative and less technically competent than the early majority: They’re not interested in getting ahead with technology, but they don’t want to fall behind.

(Shortform note: Beal and Bohlen’s original characterization refers to this category simply as the “majority.” Perhaps, in their assessment, this group was larger than the early majority. Then again, they may just have been using the term “majority” in a cumulative sense, since after you pass the peak of the bell curve, a majority of total customers have adopted your product. The fact that Beal and Bohlen displayed their customer categories on an s-shaped cumulative distribution curve, instead of on the bell curve suggests that they may have been thinking in cumulative terms.)

Laggards

Laggards do not adopt new technology willingly. If they adopt it at all, it will be old technology by the time they do.

(Shortform note: Beal and Bohlen referred to this category as the “non-adopters.”)

The Gaps in the Technology Adoption Life Cycle

Now that we’ve discussed the TALC, we can discuss the weakness of the model that gives rise to Moore’s “chasm”.

Moore explains that the traditional TALC assumes sales to the five categories of customers transition seamlessly from one to the other as the technology matures. However, according to Moore, this assumption is wrong. He argues that the psychographic differences between the people in each stage of adoption create gaps between each category. Thus, Moore proposes a “Revised TALC,” which recognizes those gaps, as shown below.

Shortform Commentary: Distinct Gaps Versus Overlapping Populations

In Moore’s revised TALC, the categories are shown as separate blocks of a segmented bell curve. However, given that Moore acknowledges you may sometimes be making sales to more than one category at once, a more accurate graphical representation of Moore’s model might represent the categories as individual, overlapping bell curves, as shown below.

The Chasm

By far the largest gap in Moore’s revised TALC is between the early adopters and the early majority. He refers to this gap as the “chasm.”

Moore explains that early adopters assess new technology at a technical level, to determine if it can give them a strategic advantage, whereas the early majority assess it based on its reputation and standardization. Because they value different things, the early majority won’t look to the opinions of early adopters when deciding whether to buy your product.

This creates a catch-22, because the early majority won’t buy your product until it has built up a good reputation in their industry, but your product can’t build up a good reputation until they start buying it and using it.

(Shortform note: Beal and Bohlen didn’t identify the chasm or discuss this catch-22 of innovation diffusion, but you can see the basis for it in their original paper: The early majority can’t afford to take risks on unproven technologies, but a new technology can’t be widely proven until they adopt it.)

The Early Market and the Mainstream Market

Moore defines the “early market” as the portion of the market made up of innovators and early adopters, and the “mainstream market” as the remaining portion of the market on the other side of the chasm.

(Shortform note: In business, the term “early market” is used mostly in this sense, and most business dictionaries cite Moore’s book as the source of the term. The term “mainstream market,” however, is also used by others to refer to any large or broadly distributed market, in contrast to a “niche market,” which is smaller and more tightly connected.)

How to Cross the Chasm

Now you understand what the “chasm” is and where it comes from, but what can you do about it?

Moore warns that you might reach the chasm quickly in your roll-out—just three to five significant sales contracts with early adopters may be enough to saturate the early market. After that, you have to enter the mainstream market. Otherwise, your sales will stagnate, and your product will die in the chasm.

(Shortform note: Moore’s estimate might be a slight exaggeration, given relative category sizes. Moore asserts that innovators make up about 2% of the market and early adopters make up about 16.7% of it. Thus, if there are only about five significant customers in the early market, who represent about 18.7% of the total, then there are only about 27 significant customers in the total market. For most products, the market probably consists of more than 27 potential significant customers, in which case there might be more than five large contracts in the early adopter category.)

How do you cross the chasm? At a high level, Moore’s strategy for crossing the chasm consists of focusing your efforts on becoming the market leader in a very specific niche market, then expanding into other niches until you dominate the market.

According to Moore, the reason this works is that it has an amplifying effect on marketing. He asserts that all marketing is ultimately dependent on word-of-mouth. Word of mouth spreads quickly through a small niche market: If just a few customers are impressed with your product, everyone will hear about it (whereas in a large market, their voices would be lost in the crowd). This is what makes it possible to build a reputation for your product and attract early-majority customers.

(Shortform note: Regis McKenna, a pioneering marketer who made his name publicizing tech companies and their products (including Apple, America Online, and Compaq), echoes Moore’s assertion that word-of-mouth is the most effective method of marketing. His premise is that word-of-mouth is an experience that turns raw information into effective communication. When a message is delivered from one person directly to another, it’s inherently tailored to the individual, increasing its impact and reducing misunderstandings. He goes on to cite the “90-10 rule,” namely that 90% of the population’s decisions are determined mostly by the influence of the other 10%.)

Moore then breaks down his strategy into four steps:

1. Choose Your Niche

Moore notes that when you first cross the chasm, you don’t have enough existing market data to choose your niche based on rational analysis, so you have to choose it based on intuition. He further observes that it’s easier to intuitively predict the behavior of a person than an abstract entity like “the market for electric cars.” Thus, he recommends creating hypothetical customer profiles and purchasing scenarios that show how each hypothetical customer would benefit from your product. Then you can select your niche by choosing the most promising of these archetypal customers.

(Shortform note: Moore is not the only one to advocate intuitive decision-making in situations like this. Malcolm Gladwell encourages you to harness the power of “unconscious thinking,” which is his term for the mental processes that make up intuition. He contrasts “unconscious thinking” with “conscious thinking,” or analytical decision making. By comparison, unconscious thinking is faster, less susceptible to stress, and less sensitive to the amount of available data.)

2. Assemble Your Whole Product

Moore refers to the complete solution that your customer wants as the “whole product,” in contrast to your core product, which only provides a central piece of the solution. For example, if you had invented the smartphone, the phone itself would be your core product, while the phone’s operating system, a data service plan, and electricity to charge the phone are all components of the “whole product.”

(Shortform note: The “whole product” concept is also called the “total product.” Most sources credit Theodore Levitt for developing the concept in his book The Marketing Imagination. However, in that book, Levitt himself attributes the concept to Harvard Business School professor Raymond Corey.)

Moore observes that to build a good reputation for your product, you need to make sure your customer can readily use it within a complete, working solution. Thus, you need to identify every component of the whole product and make sure your customer can easily access it. There are three possibilities for any given component:

1. You can design your product to use elements that are already readily available, like 120 V AC electricity.
2. If a component is difficult to find or install, you can bundle it with your product, like a phone that comes with the operating system already installed.
3. If it’s not something readily available but also not something you want to provide yourself, you can partner with another company to deliver that part of the whole solution. For example, maybe you want to deploy a hydrogen-powered car, and you coordinate with another company that can supply hydrogen fuel and set up fueling stations for your customers.

(Shortform note: After briefly mentioning all three of these options, Moore devotes significant space to discussing corporate alliances. From this, we infer that he considers partnerships a particularly important method of supplying the whole product. Meanwhile, McKenna stresses the importance of relationships with other companies not only for supplying the whole product but also for establishing your company’s reputation by association.)

3. Position Your Product as the Market Leader in Your Niche

Moore uses the word “positioning” to describe how potential customers view a product or company and where they place it on the market landscape in relation to competing products or companies. Clearly identifying your competitors and defining your positioning claim helps to focus your marketing efforts so that customers are more likely to position your product where you want them to.

(Shortform note: In Pitch Anything, Oren Klaff recommends introducing your product with a standardized statement to the effect of “For [you target customers] who are unsatisfied with [competitor], [your product name] provides [the customer’s compelling reason to buy]. Unlike [competitor], [your product name] provides [these key features].” Moore’s theory tracks closely to this template, providing a straightforward and clear way to communicate the most important aspects of your product.)

Moore says that, to early-majority customers, the most convincing evidence of market leadership is market share. However, since you don’t have the largest market share yet, the evidence that you soon will is your commitment to delivering the whole product through alliances with other companies.

(Shortform note: Regis McKenna asserts that you can enhance your company’s reputation by associating with other companies with strong reputations. He argues that the strongest evidence for a positioning claim of market leadership is financial success (corroborating Moore’s assertion about market share), but that when you don’t yet have a proven track record of financial success, the reputation of your financial backers can be an important source of credibility.)

4. Setup Distribution

The final step in Moore’s strategy is to set up distribution so that your target customer can actually buy your product. For the purpose of distribution, he categorizes target customers according to their job titles, and advises that these different customers are more easily reached by different sales channels:

1. According to Moore, Engineers are best reached by a two-phase approach: First you publish your product specifications online. Then you send sales personnel to meet with them and conduct demonstrations or facilitate testing once they express interest. This works because engineers don’t respond well to promotional marketing and typically don’t have corporate purchasing authority, but can put you in touch with their purchasing department when you demonstrate your product.
2. Moore recommends reaching out to Enterprise Executives by sending your senior staff to leadership conferences where they can connect with them and develop a consultant-like relationship. He calls this “relationship marketing.”
3. Moore advises cultivating relationships with Department Managers through an online system that provides basic information about your product and then connects them with a human sales representative who is also online. Managing customer relationships digitally is more efficient, which is important because department managers typically place smaller orders than enterprise executives.
4. If your target customer is a Small-Business Owner-Operator, Moore recommends distributing your product through a value-added reseller (VAR). VAR’s can provide local service and support, as well as helping the customer set up the product, and educating them on how to use it, all of which small business owners tend to find particularly helpful.
5. For selling to End Users, Moore recommends fully automated online self-service, with FAQ and community help forums to streamline support. This is necessary because end users typically make relatively small purchases, and so you can’t afford to spend time dealing personally with each customer.

In The Psychology of Selling, Brian Tracy identifies six types of customers, based on their psychological profiles rather than job titles: reluctant, certain, analytical, relationship-based, directive, and social.

Of the six, Tracy’s “reluctant customers” and “certain customers” correlate with the “laggards” and the “early adopters” of the TALC, while the others potentially overlap significantly with Moore’s job-title classifications. Specifically, Moore’s engineers bear a strong resemblance to Tracy’s “analytical customers,” while Moore’s enterprise executives most nearly overlap with Tracy’s “relationship customers,” as do Moore’s department managers with Tracy’s “social customers,” and Moore’s small-business owner-operators with Tracy’s “directive customers.”

Either method of categorizing customers essentially asks you to consider how certain people think and what matters to them and to tailor your approach accordingly.

Shortform Introduction

Periodically, a new high-tech innovation will transform the way we live or do business and propel its inventors to wealth and fame. More often, though, new high-tech products seem to stagnate and die instead.

In Crossing the Chasm, Geoffrey Moore provides an explanation for this and presents a strategy for introducing your product effectively into the mainstream market. First, he discusses the different categories of buyers who become interested in a product at different stages of its technological maturity. Then he shows how their different perspectives create a gap, or “chasm” between the early market and the mainstream market.

Moore outlines a strategy that companies can use to move their products across this “chasm” to enter the mainstream market. He notes that his strategy is intended only for business-to-business products, as opposed to consumer products, although some of the principles he presents are applicable to consumer products as well.

Moore aimed his theories at business executives, to help them act decisively when they reach the chasm. Since the book’s publication, it has become a standard text for managers, engineers, and students, as well.

About the Author

Geoffrey Moore (not to be confused with the actor of the same name) is a marketing consultant, public speaker, and co-founder and chairman of The Chasm Group, a consulting firm. He specializes in the market dynamics of disruptive technologies and asserts that his firm has helped hundreds of companies make the difficult transition from the early market to the mainstream market.

Connect with Geoffrey Moore:

• Website
• Twitter page

The Book’s Publication

Crossing the Chasm was first published by HarperCollins Publishers, using the Harper imprint, in 1991. A Revised edition was published in 1999, and a third edition was published in 2014. Each new edition updated the examples and case studies in the book to more recent ones, and the third edition added two appendices. This guide covers the third edition.

Crossing the Chasm was the first of seven books that Moore has written, and remains his most popular book. All his books deal in some way with the relationship between innovation and market dynamics.

The Book’s Context

Historical Context

In the latter part of the 20th century and the first part of the 21st, countless startup companies have formed around innovative high-tech products. Some of these products profoundly transform the way we live, or at least the way a certain industry conducts its business, but most of them seem to stagnate and die instead of taking off. The timely relevance of Moore’s explanation for this may have contributed to the book’s success.

Intellectual Context

Crossing the Chasm is grounded in the concept of “diffusion of innovation,” which explains how innovations are adopted by society. This concept was originated in 1956 by George Beal and Joe Bohlen of Iowa State College, who studied farmers’ adoption of agricultural technologies.

Six years later, a communications professor at Ohio State University named Everett Rogers expanded upon Beal and Bohlen’s research in a book titled Diffusion of Innovations, which was influential in popularizing the concept and making it relevant to industries beyond the farming community. Diffusion of innovations also came to be known as the “Technology Adoption Life Cycle” as the pace of technological advancement accelerated and the concept was increasingly applied to high-tech products.

In Crossing the Chasm, Moore first discusses the “Technology Adoption Life Cycle,” then points out a flaw in the model, which gives rise to the “chasm” that the remainder of the book deals with. Some sources assert that the “chasm” concept was originated by Lee James of the Regis McKenna consultant company, and there are a number of common elements between Moore’s business strategy and the strategies published by Regis McKenna in 1985.

The Book’s Impact

The success of Crossing the Chasm was unexpected. Moore notes in his foreword to the third edition that he originally estimated his target audience to consist of about 5,000 readers, specifically marketing executives in high-tech startup companies. However, the book has now sold over a million copies.

In addition to its business executive audience, it has become a reference for managers, engineers, and students. The second and third editions of the book kept its case studies up to date, and demonstrate that the ideas it presents remain influential.

The Book’s Strengths and Weaknesses

Critical Reception

As noted above, Crossing the Chasm was well received by readers. Reviewers praised the book for presenting a clear theoretical model to explain the period of transition from early to mainstream markets. Many of its more recent reviewers emphasize the book’s value as a teaching tool for industry terminology over its original purpose as a strategy guide for making the transition to the mainstream market.

However, the book was not without its critics. Some reviewers said the book was too verbose and didn’t have enough in-text citations. Others expressed concern that Moore’s strategy was oversimplified, and that Moore didn’t attribute the chasm concept to Lee James or his colleagues at Regis McKenna. More than a few reviewers complained that the book introduced too much technical jargon. Finally, some reviewers felt that the book inappropriately elevated the role of the marketing department in the hierarchy of a business.

Commentary on the Book’s Approach

The message of Crossing the Chasm is two-fold: First, it helps you understand the market dynamics that create the chasm. Then it tells you how to pilot a company across the chasm.

In explaining the theory, Moore starts by presenting the Technology Adoption Life Cycle (TALC). Then he discusses the flaw in this model, namely that it portrays the market as a continuous population of people who can be grouped according to their buying practices, when there are actually gaps between the different groups. Moore then explains how he has modified the model to make it accurate. He spends the first two chapters comparing and contrasting the original TALC with his modified version.

While this presentation is adequate, jumping back and forth between the two models can make Moore’s critique of the original model hard to follow. As evidence of this difficulty, when Seth Godin quotes Moore’s model in Purple Cow, he actually presents the original TALC, mistakenly attributing it to Moore and omitting the modification that Moore introduced to correct the model.

In explaining how to cross the chasm, Moore uses the D-Day invasion strategy of World War II as an illustration of his strategy for entering the mainstream market with an innovative product. He breaks the strategy down into four major steps, which he then elaborates upon, continually revisiting the D-Day analogy.

The D-Day analogy works well for illustrating Moore’s strategy at a high level, but like every analogy, it eventually breaks down when scrutinized in sufficient detail. Thus, as Moore elaborates on the details of his strategy, the continued references to D-Day arguably become more distracting than illustrative.

Our Approach in This Guide

Part 1 of this guide spans the first two chapters and introduces concepts that set the stage for understanding the “chasm” between the early and mainstream markets and the market dynamics that create the chasm.

Part 2 spans chapters 3-7 and presents Moore’s strategy for crossing the chasm. Specifically, chapter 3 gives an overview of his strategy, breaking it down into four steps. Each respective step is covered in more detail in one of the remaining four chapters.

In addition to providing commentary, we’ve reorganized the book’s material. In Part 1, Moore jumps back and forth between discussing the original TALC (technology adoption life cycle), his improved version of it, and strategy considerations for the early market. For clarity, we’ve separated these topics.

We’ve also added commentary comparing Moore’s presentation of the TALC with Beal and Bohlen’s original presentation and contrasting Moore’s strategy with Blue Ocean Strategy and the approach of pioneering marketer Regis McKenna.

Part 1 | Chapter 1: The Technology Adoption Life Cycle

According to Moore, there is a “chasm” between the early market and the mainstream market. Innovative products often flourish in the early market and then stagnate and die in the chasm instead of succeeding in the mainstream market as well.

To understand Moore’s strategy for crossing the chasm and entering the mainstream market successfully, you need to understand the chasm between the early and mainstream markets. And to understand the chasm, you first need to understand the Technology Adoption Life Cycle (TALC).

(Shortform note: The TALC, also known as “diffusion of innovation,” was developed by Beal and Bohlen, two agricultural extension agents working for Iowa State College in the 1950s. They developed the model based on studies of when farmers started using new agricultural innovations, such as fertilizer and hybrid seed corn. Others soon generalized the model to technological innovations outside of agriculture.)

As Moore explains, the TALC predicts that as a technology matures, the number of potential new buyers first increases (as the technology starts to catch on) and then decreases (as you run out of potential customers who haven’t already bought it), following the profile of a bell curve. The area under the curve represents the total number of customers for the new technology. This area is divided into five psychographic categories (classifications by psychological and demographic criteria) of prospective customers, as shown in the figure below.

Measuring Technological Maturity

Technology does not become more mature by itself. It takes investment in R&D to refine it. This is why the horizontal axis of the TALC graph is “technological maturity,” and not simply time.

How do you measure technological maturity? There are a number of metrics that can be used to quantify it, of which the most common is the “Technology Readiness Level,” or TRL system. That said, the TRL system only partially overlaps with the scale of technological maturity shown in the TALC:

• TRL-1 through TRL-3 denote levels of preliminary scientific research and development. At this point, there is no product to sell, so this region of technological maturity lies completely to the left of the TALC curve.

• TRL-4 through TRL-6 represent stages of laboratory R&D, component development, and proof-of-concept prototype testing. It is possible that you might work with a few innovators outside the company (under an NDA) during this period, but even at TRL-6 your product is only ready for preliminary proof-of-concept demonstrations. Thus, the technology maturity scale on the TALC graph starts at about TRL-6.

• TRL-7 and TRL-8 represent increasingly sophisticated prototypes, such as beta versions that you might sell to innovators or demonstrate to early adopters to get an order for a custom solution tailored to their application.

• The official TRL system ends at TRL-9, which denotes a technology that has been used successfully in the field. Thus, by the time you have completed your first full system installation for an early adopter, your product should be at TRL-9.

Perhaps the TRL-system could be extended to cover the rest of the TALC. For example:

• TRL-10 could denote the point where the technology is recognized in industry standards. On the graph, this would be near where the early majority section begins.

• TRL-11 could denote widespread proliferation of the technology, or more precisely, the point under the peak of the curve, where at least half of the potential customers have already adopted it.

• TRL-12 could denote the point where the technology is considered essential for routine operations in its applicable context. On the graph, this would be in the laggard region.

Category Boundaries

Moore states that the boundaries between these five psychographic categories lie approximately at the standard deviation intervals on the bell curve. (Most of the area under a normal bell curve lies within three standard deviations of the center, so in this case, the standard deviation intervals essentially divide the graph into six equally spaced regions along the horizontal axis.)

However, the graph that Moore presents in Crossing the Chasm depicts the boundaries considerably further from the center of the curve than standard deviation intervals would be. This makes the early and late majorities appear to represent a larger proportion of the overall population. Moore provides no explanation for the discrepancy in the graph, so presumably, his graphic artist simply didn’t draw it to scale.

In our figure above, the boundaries are marked at the standard deviation intervals, consistent with Moore’s assertion. However, other analysts have challenged the proportions of the population allotted to each category. Some argue that with the accelerating pace of technological innovation, the peak of the bell curve has shifted to the left, meaning that today there are proportionately more people in the early majority and early adopter categories, and fewer people in the late majority.

In the remainder of this chapter, we'll discuss the characteristics of the people in each category in terms of their population size, motive for buying new technology, technical competence, quality requirements, price sensitivity, perspective on the whole product, and perspective on product positioning.

(Shortform note: Moore’s strategy is intended specifically for business-to-business marketing, so he depicts the people of each category in this light, though others have applied the TALC concept to individual consumers as well.)

However, to understand the two final characteristics, you first need to understand the “whole product model” and the concept of “positioning” as Moore uses these terms.

The Whole Product Model

As Moore explains, the premise of the “whole product” concept is that a product has to interface with other products, services, or infrastructure in order to perform its intended function. For example, if you buy a smartphone, your “whole product” might consist of the phone itself plus a data plan, electricity to charge the phone, and some third-party apps.

(Shortform note: The “whole product” concept is also called the “total product.” Most sources credit Theodore Levitt for developing the concept in his book The Marketing Imagination. However, in his book, Levitt attributes the concept to Harvard Business School professor Raymond Corey. Moore introduces a “simplified whole-product model” that differs from Levitt’s model, as we will discuss in Chapter 6.)

The Concept of Positioning

Moore uses the word “positioning” to describe how potential customers view a product or company and where they place it on the market landscape in relation to competing products or companies.

He also uses it to describe what you do to help customers establish your product’s positioning. However, he emphasizes that positioning is ultimately determined by the customers, not the company. For example, you could run a great advertising campaign extolling the reliability of your product, but if customers encounter problems with it, then people may still regard it as an unreliable knock-off.

(Shortform note: The term “positioning” is used differently by different sources. For example, one online business glossary defines product positioning as the process by which you identify the critical function your product will perform for your prospective customers and communicate it to them. Another defines it similarly and emphasizes that the key to doing this is understanding your customers. While Moore’s perspective still prompts these kinds of actions, his definition contrasts with these definitions at a theoretical level, because he insists that positioning ultimately takes place in the customer’s mind, not in your marketing department.)

Innovators

The first category of customers represented in the TALC is made up of “innovators.” Moore also calls them “technology enthusiasts,” or “techies,” because they value innovative technology for its own sake. They buy new or experimental products just to try them out because they want to be on the cutting edge and participate in advancing the state of the art. Moore characterizes innovators as follows:

• Population size: About 2% of the total population.
• Technical Competence: Extremely high. Moore observes that innovators can get by with minimal operating instructions, and they’ll often invest their own time in debugging your product.
• Quality Requirements for your product: Low. They are used to working with products that don’t have all the bugs worked out of them yet.
• Price Sensitivity: High. Moore notes that innovators typically operate on a limited budget, and some of them believe that technology should be free or provided at-cost. (Shortform note: It seems likely that most innovators would be in technical rather than executive roles in a company. This would limit their budget and their ability to place large orders for their company, consistent with Moore’s characterization.)
• Whole-Product Perspective: Innovators don’t need whole products, because they take pleasure in assembling components into working systems for themselves.
• Product Positioning Perspective: According to Moore, innovators assess your product’s positioning on a purely technical basis. To help them evaluate where it fits relative to other technology, they look for schematics, demonstrations or user trials, and endorsements from respected technology gurus. They tend to communicate broadly, both within and outside of their own industry or community, to keep abreast of new technological developments.

Beal and Bohlen’s Perspective on Innovators

According to Beal and Bohlen’s original characterization, innovators, by definition, are the first people in their respective communities to adopt new technology.

They report that there are usually only one or two of them in a local community, corroborating Moore’s assessment of their population size.

Beal and Bohlen report that innovators typically have high net worth, and most importantly, they have large amounts of “risk capital.” They can afford to buy new technology just to try it out. This contradicts Moore’s assertion that innovators are more price-sensitive. Perhaps the price sensitivity of innovators is context-specific. An engineer working in industry might have a limited budget for assessing experimental technologies, while a self-employed farmer would only be able to experiment with new agricultural technologies if he had the money to do so.

According to Beal and Bohlen, innovators are typically influential people in their communities, with many connections outside their local community as well. This description corroborates Moore’s assertion that innovators tend to communicate broadly.

Early Adopters

The second category consists of “early adopters.” Moore prefers to call them “visionaries,” because most of them are ambitious leaders looking to gain a strategic advantage or make a quantum leap forward by leveraging new technological breakthroughs. Unlike the innovators, they are not interested in new technology for its own sake, but rather in the new advantages it may afford.

• Population size: About one-sixth of the population.
• Technical Competence: High. Moore observes that a typical early adopter has the technical insight to identify and implement strategic technologies, as well as the charisma to rally his company around the project.
• Quality Requirements for your product: Moderate. Moore describes early adopters as being comfortable accepting the risk of unproven technology because they envision it providing great benefits. However, he also notes that their expectations often exceed the product’s actual capabilities, making them difficult customers to please in the long run.
• Price Sensitivity: Lowest. Moore asserts that early adopters are usually corporate executives with resources to fund ambitious projects.
• Whole-Product Perspective: According to Moore, early adopters are willing to take responsibility for assembling the whole product because they want to be the first to leverage its capabilities.
• Product Positioning Perspective: According to Moore, early adopters assess your product’s positioning based on how it fits into their vision for the future or could help them realize their ambitions. They communicate broadly to keep an eye out for new technologies with strategic applications and evaluate them based on technical benchmarks, product reviews, initial sales metrics, and trade press coverage.

Beal and Bohlen’s Perspective on Early Adopters

According to Beal and Bohlen’s original characterization, early adopters tend to be younger and more highly educated than members of the early and late majority. They are well-read and stay well-informed, receiving more technical or agricultural publications than the majority do.

Moore echoes Beal’s assertion that early adopters are well-informed and communicate broadly, especially through publications, but he does not address their average age or level of education. Perhaps these characteristics were more pronounced in the population that Beal and Bohlen studied.

For example, perhaps in a farming community, the average farmer has a two-year degree or equivalent, while early-adopter farmers have graduate-level degrees. Meanwhile, the average office worker of a Silicon Valley manufacturing company has a graduate-level degree, and so highly-educated early adopters don’t stand out as being significantly more educated than the rest of the population.

Beal and Bohlen state that early adopters are also the most likely to hold public office or otherwise be formally involved in the institutions of their respective communities. Moore makes no mention of this but does say that early adopters usually hold executive positions in their respective companies. Perhaps early adopters in rural farming communities tend to be more involved in municipal politics, while early adopters in advanced manufacturing companies tend to be more involved in corporate politics.

After commenting that innovators tend to have large amounts of risk capital available, Beal and Bohlen offer no comment on the financial status of early adopters. This contrasts with Moore’s description, since Moore identifies early adopters as having the most funding available to spend on cutting-edge technology, while innovators are much more price sensitive.

Early Majority

The third category is made up of the “early majority.” Moore prefers to call them “pragmatists,” because they are interested in taking advantage of new technology, but they’re also averse to the risks of pioneering a new technology.

• Population size: About one-third of the population. Moore identifies them as the largest of all the categories.
• Technical Competence: Moderately high. According to Moore, they are willing and able to learn how to use new technology, but they expect good documentation and technical support.
• Quality Requirements for your product: High. Moore observes that they’re not interested in buying a product until it’s fully debugged. Moreover, they only buy from companies that have established a reputation for delivering a high-quality product and standing behind it.
• Price Sensitivity: Moderate. Typically they are looking for good value at the upper end of the performance spectrum.
• Whole-Product Perspective: According to Moore, the early majority will only buy your product if they can’t see that everything they need to benefit from it is readily available. They consider whole-product features such as compatibility and long-term support when evaluating the quality of your product.
• Product Positioning Perspective: According to Moore, the early majority assess your product’s positioning based on how it compares to alternatives. They tend to communicate narrowly within their own industry. To assess where your product fits into the landscape of their industry, they consider your market share, the industry standards or certifications that your product meets, press coverage, and endorsements from other users within their community.

Beal and Bohlen’s Perspective on the Early Majority

According to Beal and Bohlen’s original characterization, members of the early majority tend to have fewer resources than innovators and early adopters, such that they cannot afford to take risks with unproven technology. Thus, when a new innovation comes out, they wait until they can be sure it works before they adopt it.

Moore echoes this perspective but emphasizes that the early majority tend to base their evaluation of products heavily upon the reputation of the manufacturer and/or distributor.

Beal and Bohlen further observe that early adopters tend to be slightly more educated than the general population. Again, Moore does not mention education as a distinguishing characteristic of this group. As we discussed in the case of early adopters, the educational difference may have been more pronounced for the farming population that Beal and Bohlen were studying than for the industrial customers that Moore describes.

According to Beal and Bohlen, the early majority tend to be “informal leaders'' in their communities, in the sense that they do not hold public office or other positions of formal leadership, but their peers admire them and respect their opinions. They tend to place a high value on their peers’ respect and are careful to maintain their reputation. They tend to communicate closely within their own community, but not outside of it.

These observations corroborate Moore’s assertions about the close-knit nature of early majority communities, whether rural or industrial, and the value that the early majority place on reputation. Although Beal and Bohlen don’t explicitly extend the importance of reputation to the manufacturer or distributor as Moore does, their description of the early majority makes this a natural extrapolation.

Moreover, as we will see in the next chapter, these two qualities play a pivotal role in generating the “chasm” between early adopters and the early majority. Beal and Bohlen did not identify Moore’s “chasm,” but it arguably could be identified based solely on analysis of their original characterizations of the different categories of adopters.

Late Majority

The fourth category is made up of the “late majority.” Moore prefers to call them “conservatives,” because they tend to value stability over progress. They are not interested in new technology or the advantages it affords, but as it becomes standard and the technology that it replaces becomes obsolete, they will eventually upgrade to mitigate risk.

• Population size: About one-third of the population. More says they are almost as numerous as the early majority.
• Technical Competence: Moderately low. Moore says they tend to value simplicity and convenience over performance because they are less confident than the early majority in their ability to implement new technologies.
• Quality Requirements for your product: High. Moore observes that they require a product that is well-proven, thoroughly debugged, and widely supported across the industry.
• Price Sensitivity: High. As Moore points out, the early majority aren’t willing to spend much on new technology because they don’t expect to benefit from it.
• Whole-Product Perspective: According to Moore, the late majority are even more sensitive to missing parts of the whole product than the early majority are, because they are less competent at putting together the whole product.
• Product Positioning Perspective: Moore asserts that, because they value stability, the late majority tend to assess your product’s positioning based on how long they think it will be supported. To evaluate this, they consider its performance in industry to date, who else is using it, who is distributing and supporting it, and analysis provided by the business press.

Beal and Bohlen’s Perspective on the Late Majority

Beal and Bohlen’s original characterization refers to this category simply as the “majority,” rather than the “late majority.” Perhaps, where Moore identified the late majority as being slightly smaller than the early majority, Beal and Bohlen saw it as being slightly larger.

Then again, their nomenclature could also be a product of their method of analysis. When your product passes the peak of the bell curve into the region of the late majority, that implies that more than half of the total customers have adopted it. Thus, in a cumulative sense, selling to the late majority means your product has been adopted by the majority of the market. Beal and Bohlen displayed their customer categories on an S-shaped cumulative distribution curve, instead of on the bell curve that other analysts, such as Moore, used later. This could imply that they applied the term “majority” to the late majority in a cumulative sense.

In any case, Beal and Bohlen describe the late majority as typically being older and less educated than members of the preceding categories. They also describe them as less likely to read technical publications, hold positions of leadership within their communities, or communicate outside of their own community.

Their observations about technical publications and leadership positions is consistent with Moore’s assertion that they tend to be less technically competent and less confident in their ability to implement new solutions.

Moore does not discuss the relative age of the different categories. It may be that age became less relevant between the time of Beal and Bohlen’s research and the time of Moore’s writing. Perhaps generations that had experienced periods of technological stasis were more likely to be late adopters. Then, as the pace of technological advancement accelerated and the generation that was old enough to remember times of technological stasis died off, age would have ceased to be a defining quality of the late majority.

Laggards

The fifth category is made up of the “laggards.” Moore also calls them “skeptics,” because they tend to be skeptical of new developments and often criticize new technologies publicly. In their view, every new technology introduces new risks, and the alleged benefits of new innovations simply aren’t worth the risks.

• Population size: About one-sixth of the population.
• Technical Competence: Low. Moore asserts they are either unable or unwilling to learn how to use new technologies.
• Quality Requirements for your product: Very High. They probably won’t buy your product, but as it proliferates throughout the industry, they are adept at identifying discrepancies between your marketing claims and actual performance.
• Price Sensitivity: Not applicable, since they’re not likely to buy new technology at any price.
• Whole-Product Perspective: Not applicable, since they avoid implementing new technologies.
• Product Positioning Perspective: Moore does not describe how laggards assess the positioning of your product. However, from what he does say, we may infer that they tend to position products and companies based on risk, and they tend to assess the risk primarily based on product history, especially their own usage history or that of their immediate colleagues.

Beal and Bohlen’s Perspective on Laggards

Beal and Bohlen referred to this category as the “non-adopters.” They describe them as being the oldest, the least educated, and the least likely to read technical publications.

Moore does not characterize laggards in terms of age or education, per se. The age factor might have been less significant by the time of Moore’s writing, as we discussed in the case of the late majority. Moore identifies them as unable or unwilling to learn new technologies, which seems consistent with a lower level of education, even though Moore doesn’t bring it up.

Then again, Moore also notes that laggards tend to express criticism of new technologies and point out discrepancies in marketing claims. In order to do this, they would need some level of familiarity with both the technological basis of the product and the publications where it is advertised.

This dichotomy suggests that perhaps laggards are a more diverse category, or are not as thoroughly characterized as the other categories. The unifying characteristic of the laggard category is that they resist adopting new technologies, but perhaps different laggards have different motives. Neither Beal and Bohlen nor Moore spend much time discussing laggards, and it stands to reason that they have been studied less, because they are not regarded as having the potential to generate significant sales. Why spend time and money trying to understand a group that won’t buy your product anyway?

Exercise: What’s Your Psychographic Category?

Recall the psychographic categories of the TALC (technology adoption life cycle):

• Innovators love new technology for its own sake.
• Early adopters want to gain an advantage with new technology.
• The early majority look to how others around them feel about a new technology.
• The late majority want to keep up with the status quo.
• Laggards are skeptical.

• Think of the last time you bought (or downloaded, subscribed to, etc.) a high-tech product, such as a new software program, an electronic gadget or other tool you didn’t have before, or a medical treatment/drug that recently became available. What did you purchase, and what were your motives for buying it? Which category do you think you were in when you made that purchase?

• Think of an advertisement you’ve recently seen for something that you’ve decided not to buy, at least for now. What was the product or service? What were your motives for deciding not to get it? Which category does this put you in for this situation?

Chapter 2: The Gaps in the Technology Adoption Life Cycle

We have discussed the TALC (Technology Adoption Life Cycle). Now we’re ready to discuss the flaw in the TALC model that gives rise to Moore’s “chasm.”

Moore explains that the traditional TALC assumes that sales to the five psychographic categories of customers transition seamlessly from one to the other as the technology matures. Sales in earlier categories build momentum, prompting adoption in the next category. This matters because maintaining sales momentum is the key to success.

(Shortform note: In The Tipping Point, Malcolm Gladwell expresses precisely this sentiment. He argues that the key to making an idea or product wildly successful is to build momentum until it reaches the “tipping point,” or “critical mass,” after which popularity growth becomes self-sustaining. Gladwell does not discuss the TALC, per se, as his book does not focus specifically on innovative technological products, but his book nevertheless provides an example of the emphasis that marketers place on building momentum when promoting an idea or product in a contiguous population.)

However, according to Moore, the categories don’t transition smoothly and immediately from one to the next. He argues that the psychographic differences between the people in each stage of adoption create gaps between each category. Thus, Moore proposes a “Revised TALC,” which recognizes those gaps, as shown below. Because of the gaps, sales momentum in one category doesn’t necessarily carry over to the next. To illustrate this principle in more detail, we’ll devote the remainder of this chapter to discussing how the characteristics of each category generate each of the gaps.

Shortform Commentary: Distinct Gaps Versus Overlapping Populations

On the traditional TALC, the category boundaries divide a single population into contiguous groups. In Moore’s revised TALC, the categories are now shown as separate blocks of a segmented bell curve. However, a more accurate graphical representation of Moore’s model might represent the categories as individual bell curves, as shown below.

This is because the timing of purchases from customers in one category can sometimes overlap with those from another category. For example, you might have a far-sighted early adopter who can see the advantages of a new technology even though the technology is still in its infancy. You might also have some innovators who must wait until a product reaches a certain level of maturity before they are able to adopt it, because of limited equipment or expertise. In this case, some early adopters might actually buy the product (or fund further development) at a lower level of maturity than some of the innovators.

This implies that the innovator and early adopter populations overlap on the technological maturity scale if we define the categories based on attitude toward new innovations. Similarly, other categories could overlap as well. In discussing marketing strategies for the different categories and how to transition between them, Moore acknowledges that you may sometimes be selling to multiple categories at once.

Gap #1: The Application Gap Between Innovators and Early Adopters

Recall that, according to Moore’s characterizations, innovators value innovative technology for its own sake, while early adopters only value the benefits that innovative technology affords. Thus, the gap between innovators and early adopters represents the difference in technological maturity between presenting a new technology and showing that the new technology could actually be useful for something.

Moore notes that this gap is relatively small because early adopters tend to rely on innovators as references. Thus, if the innovators like your product, and the early adopters can think of beneficial uses for it, then this gap is easy to cross.

Symptoms of Reaching the Application Gap

How would you detect that your product has reached this gap? Moore doesn’t address this directly, but we can infer that the primary symptom of this gap would be feedback from prospective customers along the lines of, “That’s an impressive invention you’ve got, but what’s it actually good for?”

Gap #2: The Chasm Between Early Adopters and the Early Majority

The most significant gap is what Moore calls the “chasm” between early adopters and the early majority. The gap is wide enough that Moore presents it as separating the population into two different markets: The “early market” is made up of innovators and early adopters, while the “mainstream market” is composed of the early majority, late majority, and laggards.

(Shortform note: In business, the term “early market” is used mostly in this sense, and most business dictionaries cite Moore’s book as the source of the term. The term “mainstream market,” however, is also used by others to refer to any large or broadly distributed market, in contrast to a “niche market,” which is smaller and more tightly connected.)

As Moore explains, early adopters are eager to adopt unproven cutting-edge technology because they want first-mover advantage, while the early majority want to mitigate the first-mover risk by waiting until the technology is well proven and well supported. The early majority also tend to rely on industry standards as a means of managing risk, and thus tend to favor industry-standard products.

Therefore, as Moore explains, early adopters tend to base their buying decisions on the perceived benefits of the product itself, while the early majority place more weight on the reputation of the manufacturer and/or distributor. Early adopters also communicate broadly with each other and with innovators, so they can reference innovators’ impressions of your product, but the early majority communicate more narrowly within their own community or industry, so they are unlikely to reference the impressions of innovators or early adopters.

Symptoms of Reaching the Chasm

The characteristic symptom of the chasm that Moore repeatedly cites is stagnant sales: When you first release your product, you may see exponential growth of sales in the early market, but then sales revenue hits a plateau or even trails off as the early market saturates and you enter the chasm. This is probably the symptom that drove most of Moore’s clients to seek his help in crossing the chasm, so it is understandable that he would cite it.

However, from Moore’s description of the chasm, we can infer other symptoms as well. One symptom could be that coverage of your product in technology-oriented media sources has trailed off (because it’s no longer new enough to be technologically sensational) while business-oriented media sources aren’t interested in covering it yet (because your product or company doesn’t have enough market share to seem worthy of their attention).

Another symptom could be increased inquiries about installation support, or availability of parts of the whole product besides the core technology that you supply. Recall that, when they purchase the core technology, early adopters are usually willing and able to take ownership of assembling the whole product, whereas the early majority expect the whole solution to be readily available.

Thus, if you’ve run out of early adopters, such that most of your prospective customers are now from the early majority, they’ll be asking questions about the availability of the whole product (and not placing an order, when they find out you can’t supply the whole solution, leading to the stagnant sales we discussed earlier).

Similarly, if a prospective customer asks whether your product meets certain industry standards or has certain certifications, that likely means the prospect is a member of the early majority. And if a high percentage of your prospects are asking these types of questions, that could be an indication you’ve run out of early adopters and have reached the brink of the chasm.

The Catch-22 of the Chasm

According to Moore, the early majority won’t be comfortable buying your product until you build up a good reputation among other members of the early majority in their industry, but you can’t build up a reputation with them until they buy your products. By the same token, the early majority prefer to buy industry-standard products, but your product can’t become the industry standard until the early majority adopt it. This creates a catch-22 situation that makes it difficult to move your product across the chasm.

(Shortform note: Beal and Bohlen didn’t identify the chasm or discuss this catch-22 of innovation diffusion, but you can see the basis for it in their original paper: The early majority can’t afford to take risks on unproven technologies, but a new technology can’t be widely proven until they adopt it.)

Gap #3: The Competence Gap Between the Early and Late Majority

According to Moore, the gap between the early and late majorities is relatively small and is driven by their differing levels of technological competence. Specifically, the late majority are less confident in their ability to learn and implement new technologies, so they need solutions that are more user-friendly. Thus the gap between these two categories divides people who need more support (late majority) from people who need slightly less (early majority—although they still need more support than the early adopters).

Symptoms of Reaching the Competence Gap

Moore doesn’t explicitly address how you identify when you’ve reached this gap, but once again we can infer some symptoms from his description. For one thing, based on the size and distribution of the categories, you won’t hit this gap until your product is the market leader, with about 50% of the market share.

Another symptom could be a sharp uptick in the demand on your tech support department, as more customers with less technical competence start buying your product. Yet another symptom could be if you detect an assimilation gap: People are buying your product because of pressure to keep up with industry standards, but they aren’t actually using it, or aren’t taking advantage of its full capabilities.

Gap #4: The Gap Between the Late Majority and the Laggards

Moore does not discuss the gap between the late majority and laggards, although he does show this gap on his revised TALC figure. Presumably, he did not consider this gap worthy of discussion because crossing it has little bearing on the success of a company or product: The gap is small and the laggards offer limited sales potential anyway.

However, he does mention in passing that one of the few ways to sell new technology to laggards is to integrate it into something they already use without their realizing it.

For example, maybe you’ve developed a smart stock tank for ranchers that uses a microprocessor and an electronic valve to keep the water trough at a certain level, and allows the rancher to monitor water levels across all his tanks from his smartphone. The laggards want nothing to do with your new system: they will stick with their old-fashioned stock tanks that use mechanical float-activated valves. However, if you develop a model with a lifetime battery that can be deployed just like a regular mechanical stock tank, your distributor may be able to sell it to laggards as a “plain old self-filling stock tank,” even though it uses your electronic valve system and has wifi capabilities that they don’t realize and won’t use.

Thus, we might infer that the gap between the late majority and the laggards is one of visibility: To cross the gap into laggard territory, the technology has to mature to the point where it doesn't look like a new technology anymore. If it looks just like the same old thing that everybody’s been using all along, then the laggards may cease to be averse to it.

Part 2 | Chapter 3: High-Level Strategy

In the first two chapters, we discussed Moore’s explanation of the technology adoption life cycle (TALC), and how the gaps in the TALC create a chasm between the early market (innovators and early adopters) and the mainstream market (early majority, late majority, and laggards).

In this chapter, we’ll first discuss Moore’s general strategy for succeeding in the early market. Then we’ll consider Moore’s argument for why a company must cross the chasm, after which we’ll present an overview of Moore’s strategy for crossing the chasm, which uses a metaphor based on the World War II D-Day invasion to discuss focusing on a niche market.

Moore’s strategy can be broken down into four main steps, which we’ll elaborate on in the next four chapters: choose your niche, provide a whole product, position your product, and set up distribution.

Early Market Strategy

According to Moore, the best-case scenario for a high-tech startup to sell to the early market follows approximately this chronology:

1. You develop a breakthrough technology with at least one compelling application.
2. You show it to tech-savvy innovators, who agree it is revolutionary.
3. You connect with early adopters and help them see how your product could transform their industry.
4. The early adopters consult the innovators who’ve already adopted your product.
5. The innovators back up your claims, resulting in a major project contract with an early adopter.
6. You use the funding from the first major project to refine the product for the customer’s application and generate a few marketable spinoff products in the process.
7. You continue selling your product to early adopters until the early market starts to saturate.

It’s worth noting that Moore’s best-case chronology is just that: a chronology rather than a strategy. It depicts how your business should ideally develop in the early market, but, by itself, doesn’t tell you how to achieve this ideal.

For example, how do you develop a breakthrough technology? That’s beyond the scope of Crossing the Chasm, although Charles Duhigg addresses it to some extent in Smarter, Better, Faster. Similarly, how do you make sure that the innovators agree your product is revolutionary? We may infer that you do this by first making a technological breakthrough, and then marketing and positioning your product in ways that appeal to innovators as a psychographic group, but Moore doesn’t provide much specific advice on this issue. The same applies to most of the other steps in the chronology. Thus, while the best-case chronology gives you something to aim for, you may need additional resources to develop a comprehensive strategy for the early market.

Early Market Problems

However, Moore acknowledges that in real life things don’t always work out according to the best-case scenario. He offers solutions to a few common problems that can come up in the early market phase.

Problem: You don’t raise enough capital up front to fully develop your product for the entire market of early adopters.

According to Moore, the solution is to scale back your expectations and focus on a smaller set of customers with more specific needs. This reduces development and marketing costs by narrowing the scope of both technical development and marketing.

(Shortform note: If you have a compelling innovation, and just need more money to finish development or adequately market it, presumably another solution would be to ask your financial backers for additional capital, or appeal to additional investors. In Pitch Anything, Oren Klaff argues that the key to persuading investors to back you is controlling their frame of mind by packaging your ideas correctly and knowing how to maintain a psychologically dominant position.)

Problem: You sign a contract with an early adopter before you have developed your product enough to deliver on it.

Moore says that solving this problem requires a three-pronged approach: First, you shut down marketing, since there’s no point looking for new customers when you don’t even have the resources to deliver products to the one you have. You also confess any exaggerated claims to your customer and scale back your promises as much as possible. Then, you focus all your resources on product development to meet the remaining deliverables of your contract.

(Shortform note: A contrasting school of thought argues that by over-committing, you can actually become a brand leader. While this theory might not advocate the kind of contractual over-commitment that Moore deals with here, the strategy is functionally similar: First, you commit to delivering something extraordinary, then you focus all your resources on actually delivering it.)

Problem: You can’t articulate a compelling application for your product.

According to Moore, the solution to this problem is to reevaluate whether you have actually made a technological breakthrough.

If you have, he directs you to focus on developing and marketing one specific application.

(Shortform note: This implies that your real problem is you’re not communicating your product’s application clearly because you’re trying to promote too many possible applications at once. The “strategy canvas” developed by Chan Kim and Renee Mauborgne in Blue Ocean Strategy could be a useful tool for determining which application to pursue: Plot the value of your product’s features for a given application, and then plot the top few competing products on the same chart, giving you a visual of how much unique value your product or idea provides in that application. The charts would help you choose the application that provides the most unique value.)

If you haven’t actually made a true breakthrough, Moore suggests presenting your product as a supplement to some existing technology.

(Shortform note: Presumably you would only do this after first identifying a compelling way in which your product complements existing technology. Once again, the strategy canvas could be useful for identifying the unique value your product provides as a supplementary product in a given application.)

Why You Must Cross the Chasm

Having mastered selling your product in the early market, it might be tempting to stay there, but Moore says this is not an option. He estimates that three to five significant contracts with early adopters will saturate the early market. After that, your sales will stagnate unless you start attracting early major customers.

(Shortform note: This might be a slight exaggeration, given relative category sizes. Moore asserts that innovators make up about 2% of the market and early adopters make up about 16.7% of it. Thus, if there are only about five customers in the early market, who represent about 18.7% of the total, then there are only about 27 customers in the total market. For most products, the market probably consists of more than 27 potential customers, in which case there might be more than five early adopters.)

Moore also asserts that you make most of your profits in the mainstream market, because that’s where the majority of customers are.

(Shortform note: To quantify this, if we assume the early and late majorities each make up a third of the total market, we might initially estimate that the mainstream market makes up about two-thirds of your total sales. However, some sources claim that in recent years, the distribution of the categories has shifted, such that the early majority now makes up a larger fraction of the population.)

Dangers of the Chasm

Moore advises crossing the chasm decisively as soon as you reach it, because while you’re in the chasm, your company is vulnerable to a number of dangers.

For one thing, Moore warns that your success in the early market has made competitors aware of your product. If they’ve lost a few early-adopter sales contracts to you, they will be looking for ways to reclaim their market share.

(Shortform note: Moore doesn’t go into detail about what this focused competition looks like, but George Stalk and Rob Lachenauer discuss this kind of “hardball” competition at length. Perhaps, given enough time, your competitors will reverse-engineer your product and copy it or even develop a new version of it that gives them a competitive advantage. Perhaps they’ll focus advertising efforts on highlighting your product’s shortcomings, relative to theirs, or use other so-called “competitive blunting” tactics to avoid losing market share to your product.)

For another thing, Moore notes that your financial backers have seen your success in the early market, and they are excited about your revenue growth. As the early market saturates and sales stagnate, they become worried that something is wrong with your company. Some may even take advantage of the situation to drive down your stock value so they can buy up a controlling interest in your company and make sweeping changes. Moore calls the latter “vulture capitalists.”

(Shortform note: The term “vulture capitalist” is widely used in business to refer to any venture capitalist who buys up companies when they hit rock bottom, implements draconian measures to turn them around, and then sells them at profit.)

Products That Died in the Chasm

To further drive home the dangers of the chasm period, Moore discusses the Segway, a personal transportation device which, according to Moore, failed to break into the mainstream market because it couldn’t navigate stairs. He likewise cites Motorola’s Iridium network, a satellite phone system that never caught on with mainstream customers because it had poor signal reception indoors.

However, the technical nature of these product failures begs the question of whether they actually died in the chasm, or before they even got there. Recall that, according to Moore, one of the key distinctions between the early and mainstream markets is that early-market customers evaluate a technology based on its own technical merit, whereas mainstream-market customers evaluate it mostly based on reputation and market share.

Thus, if a product fails due to publicized technical limitations, such as the inability of a mobility device to climb stairs, or a phone’s poor reception, it seems likely that it was still in the early market at the time of its demise. If Segway failed because it couldn’t climb stairs and Iridium failed because its signal couldn’t penetrate walls, then it would appear that both these products died before they reached the chasm.

Other Perspectives on Segway’s Failure

In the case of the Segway, others have offered a variety of explanations for its failure in the market. For one thing, there is an active market for scooters and bicycles and similar transportation devices that don’t climb stairs. However, rather than competing for a share of the scooter market, Segway presented its product as an alternative to walking. Arguably, it was only this marketing decision that made stairs a problem for the Segway.

So, why didn’t the Segway company just pivot its marketing strategy, and take over the scooter market?

For one thing, their product retailed for about $5,000, which was roughly 10 times more than a motorized scooter, and 100 times more than a non-motorized scooter. The price alone put it out of reach of a large percentage of scooter buyers.

The Segway also looked different from other scooters, and became a punchline for making its users look like “dorks.” This further narrowed the potential customer base.

Furthermore, the safety of the Segway was called into question, particularly after the owner of the company accidentally ran his Segway off a cliff and died in the crash.

In the end, it appears Segway was unable to identify any compelling application where none of these concerns would have been show stoppers. Thus, the Segway may actually have died in the application gap, rather than the chasm: A few innovators thought it was cool, but it wasn’t practical enough to attract early adopters.

Strategy for Crossing the Chasm

By now you know why the chasm exists, and why you shouldn’t linger there. But how do you get across? At a high level, Moore’s strategy for crossing the chasm consists of focusing your efforts on becoming the market leader in a very specific niche market, then expanding into other niches until you dominate the market.

According to Moore, the reason this works is that it has an amplifying effect on marketing. Recall that members of the early majority communicate closely within their own industry, but not outside of it. Moore also asserts that all marketing is ultimately dependent on word-of-mouth. Word of mouth spreads quickly through a small niche market: If just a few customers are impressed with your product, everyone will hear about it, whereas in a large market, their voices would be lost in the crowd.

(Shortform note: Regis McKenna, a pioneering marketer who made his name publicizing tech companies and their products (including Apple, America Online, and Compaq), echoes Moore’s assertion that word-of-mouth is the most effective method of marketing. His premise is that word-of-mouth is an experience that turns raw information into effective communication. The marketing message is inherently tailored to the individual, and feedback is instant, increasing its impact and reducing misunderstandings. He goes on to cite the “90-10 rule,” namely that 90% of the population’s decisions are determined mostly by the influence of the other 10%.)

Moore breaks down his strategy into four steps, which we’ll discuss in the next four chapters. In Chapter 4, we’ll examine his advice on how to choose your niche. In Chapter 5, we’ll consider the issue of providing a whole product that will appeal to the early majority. In Chapter 6, we’ll discuss Moore’s recommendations for positioning your company as the market leader. Finally, in Chapter 7, we’ll talk about tailoring distribution to your target customers.

Moore’s D-Day Metaphor

Moore uses D-Day of World War II as a metaphor to illustrate his strategy. In his metaphor, the early market is like England, the mainstream market is like Western Europe, and the chasm is like the English Channel. He likens your target niche market to the beaches of Normandy. Just like the Allies established a foothold on the beaches of Normandy, expanded into nearby territory, and ultimately liberated all of Europe, your goal is to first conquer your target niche, then expand into adjacent market sectors, and ultimately dominate the entire market.

Moore emphasizes the combative nature of his strategy. He says the suppliers that your product must displace are like the Axis Powers, who will perceive your attempt to take their market share as an act of aggression. Similarly, he likens the companies you partner with to the Allied Forces.

Combative and Non-Combative Strategies

In Blue Ocean Strategy, Kim and Mauborgne advise you to create new, uncontested markets through innovation. In this way, they argue that you can create new opportunities where there are few if any competitors, instead of meeting existing competitors combatively. Their strategy actually bears a strong resemblance to Moore’s, despite the sharp contrast between Moore’s combative perspective and their non-combative viewpoint.

As Kim and Mauborgne explain, the key to value innovation is targeting a specific market, and knowing what your target customer values. Then you create a product with a unique combination of features tailored to their values, so your product stands alone as the clear solution to your customer’s needs. In their view, this creates a “blue ocean,” or uncontested market for your product.

This sounds very much like Moore’s strategy of targeting a specific niche market. In Moore’s model, once you become the market leader in your niche, you’ll tend to remain the market leader (as long as your product doesn’t become significantly inferior to the competition) because the early majority prefers to buy from the market leader.

Thus, establishing yourself as the market leader in your niche neutralizes the effects of competition to some extent. Moore views this as victory over aggressive competitors, while Kim and Mauborgne view it as a marketplace relatively free of competition.

Choosing a Niche for a Weld Inspection Product

As a hypothetical example to illustrate Moore’s strategy, imagine you have developed a revolutionary imaging technology for detecting defects in welds. When you reach the chasm, you decide to target inspection of welded pipe joints in nuclear submarines as your niche industry. This niche offers several advantages:

First, pipe joint failures in submarines tend to have disastrous consequences, as in the case of the USS Thresher. This gives your prospective customers a compelling reason to thoroughly inspect their pipe welds. Since your product makes it easier to assess weld quality, this also gives them a compelling reason to buy your product.

Second, the US Navy and its shipbuilding contractors are well funded. They can afford to buy your product.

Third, this industry is small and closely connected, since there are only a few shipyards in the United States that build nuclear submarines. As they start to realize the advantages of your new weld inspection probe, word will spread quickly.

Finally, once you dominate this niche, you’ll have access to adjacent market sectors. For one thing, you’ll have a foothold in the shipbuilding industry, allowing you to branch out into other weld-inspection venues at both naval and commercial shipyards.

For another thing, the stainless steel piping systems used in nuclear reactors are physically similar to the stainless steel piping systems used in food processing plants. Contractors specializing in welded stainless steel piping often provide services to both the nuclear industry and the food processing industry. Thus, inspecting pipe welds in nuclear naval vessels puts you in a position to branch out into inspecting pipe welds in food processing facilities as well.

In this way, by focusing on and dominating one small niche, you can, using Moore’s strategies, position your company to become a more mainstream provider of services to a wider swath of companies.

Chapter 4: Strategy Step 1—Choose Your Niche with Customer Profiles

As we discussed in the previous chapter, the first step to crossing the chasm is to select a niche market. In this chapter, we will discuss how you select an appropriate niche.

Intuition Versus Analysis

Moore observes that, prior to crossing the chasm, you can’t survey your early-majority customers or otherwise gather data on them, because you don’t have early-majority customers yet. This makes it difficult to commit to a decision that will determine the fate of your company, because you don’t have enough data to substantiate your choice analytically.

As Moore points out, without enough data to make a rational decision, you are compelled to make an intuitive decision. Moore observes that we’re often better at intuitively predicting the behavior of individual people better than we are at predicting the behavior of vague categories like “the electric vehicle market.” Thus, he recommends that you envision a target customer by generating hypothetical customer profiles, which we will discuss in the remainder of this chapter.

(Shortform note: Moore is not the only one to advocate intuitive decision-making in situations like this. Malcolm Gladwell encourages you to harness the power of “unconscious thinking,” which is his term for the mental processes that make up intuition. He contrasts “unconscious thinking” with “conscious thinking,” or analytical decision making. By comparison, unconscious thinking is faster, less susceptible to stress, and less sensitive to available data, having both the ability to operate with less information than would be necessary for analytical thinking and also the ability to automatically “thin slice”: filter out irrelevant information.)

Step 1: Generate “Customer Profiles”

A “customer profile” is simply a description of an archetypical customer. As we just discussed, you don’t have early-majority customers yet, so you’ll use characterizations of hypothetical customers to choose your niche.

Moore advises that you make your customer archetypes as lifelike as possible so your intuition can accurately predict their behavior. A customer profile should include characteristics like age, job title, industry, gender, race, and interests, especially as their interests relate to your product.

(Shortform note: Jack Matsen blogs about creating customer profiles for your current customers. Matsen breaks down his profile into four categories of characteristics: demographics (race, sex, age, income, education, job title, family status), psychographics (lifestyle, goals, interests, values), behaviors (purchase history, product usage, customer loyalty), and geographics (city, state, region). While certain behavioral characteristics, like purchase history, may not be relevant at this stage of the adoption cycle, Matsen’s organization could work well for Moore’s customer profiles.)

To develop your list of customer profiles, Moore recommends soliciting anecdotes from people in your company who have experience interfacing with existing customers. Make sure to capture all known customers’ uses of your product, plus any other uses that seem plausible. Moore estimates that after you generate 20 to 50 customer profiles, it will become apparent that some of them represent the same archetype, leaving you with about 10 unique characterizations.

Jungian Customer Profiling

Some sources suggest using the 12 standard “Jungian archetypes,” psychological profiles based on the work of Swiss psychiatrist Carl Jung as a starting or reference for developing customer profiles. In brief, the 12 Jungian archetypes are:

• The “hero” is on a quest to prove his worth.

• The “everyman” carefully follows the crowd.

• The “innocent” is naive and vulnerable.

• The “lover” values relationships above all else.

• The “caregiver” is someone whose life revolves around helping others.

• The “explorer” wanders through life looking for meaning.

• The “rebel” finds meaning in challenging the accepted norm.

• The “artist” wants to make a lasting impression on the world through creativity.

• The “jester” just wants to have a good time.

• The “sage” is on a quest for truth.

• The “visionary” is someone whose life revolves around achieving great things.

• The “ruler” is determined to maintain control of her domain.

Assuming that a couple of the Jungian archetypes don’t fit any realistic user of your product, that leaves about 10 unique characters, consistent with Moore’s estimate.

Step 2: Build Purchasing Scenarios Based on Customer Profiles

Once you have your list of hypothetical customers, you can flesh them out into purchasing scenarios. Each scenario ultimately represents a market niche. Moore suggests formatting each scenario as three sections, all of which should fit on a single page:

1. The first section is basically your customer characterization, with demographic information and so forth. Moore also notes that for some scenarios more than one person is involved in the purchase. He differentiates between the “economic buyer,” who approves funding for the purchase, the “technical buyer,” who sets up the product once it is purchased, and the end user, who uses it once it is set up. Depending on the scenario, these might all be the same person, or might be different people. If they are different people, Moore reminds you to include customer profiles for all of them.

(Shortform note: While the terms “technical buyer,” “economic buyer,” and “end user” are widely used, some sources refer to the “end user” as the “functional buyer” instead.)

2. The second section is a description of the scenario without your product. In the current market, what are your prospective customers attempting to accomplish, and how are they going about it? What problems do they have with this approach that your product could solve? What are the financial consequences of these problems?

3. The third section is a description of the scenario with your product. How can your customers use your product to achieve their goal? What features of your product enable them to succeed? What financial benefits will they reap as a result?

Sample Purchasing Scenario

For this example, we will assume you have developed a revolutionary weld inspection device, but have not yet selected a target niche.

• Demographics: Marvin is a male in his 40’s. He’s a small-business owner-operator who provides welding services to local farmers. He is therefore a combination of an economic buyer, a technical buyer, and an end user.

• Scenario without our product: Marvin drives his welding truck to a customer’s farm, where he repairs cracks and holes in aluminum irrigation pipes by welding them closed. He does a basic visual inspection of his welds and doesn’t notice any defects. The next day, the farmer calls him again and says the pipe is still leaking, so Marvin drives back out to his customer’s farm. He finds that a couple of his welds had hairline cracks that he couldn’t see, but that caused them to fail when the irrigation pipe was pressurized. He’s able to fix the pipe, but he loses half a day on rework, and his customer loses a day of irrigation.

• Scenario with our product: As before, Marvin drives out to a customer’s farm to repair irrigation pipes. After completing his welds, Marvin connects our weld inspection probe to his phone and scans them. He identifies hairline cracks in a couple of welds that might have been caused by impurities in the aluminum. He grinds out the cracks, re-welds them, and uses our weld inspection probe to verify that they’re solid. Relative to the scenario without our inspection probe, he saves half a day and the cost of making an extra trip. He also cultivates a better relationship with his customers, because he can guarantee all his welds are water-tight.

Customer Journey Maps

Business blogs describing how to create customer profiles and purchasing scenarios often advocate using “customer journey maps,” which chart your customer’s interactions with your company as they become acquainted with your product, decide to buy it, and finally, use it to achieve a goal. A journey map highlights every point of contact between the customer and your company, as well as the customer’s decision points along the way.

The second and third parts of Moore’s purchasing scenarios could be developed into a type of customer journey map, tracking the problem your customer needs to solve and how they use your product to solve it.

While customer journey maps are often used later on to identify pain points in the purchasing process and streamline the sales process, considering them up front as you select your niche could help you determine how easily your customer will be able to assemble the whole product.

We’ll discuss assembling the whole product in the next chapter.

Step 3: Select the Best Scenario

After you’ve developed a series of scenarios, present them to your niche market selection committee. According to Moore, this should be the smallest group of decision-makers in your company, consisting of every person who would be able to veto the decision. Have each member of the committee individually rate each scenario against four critical factors, five preferred factors, and the size of the market:

Four Critical Factors

1. Compulsion Factor: According to Moore, the most important factor is whether the financial consequences of the problem your product solves are severe enough to compel the economic buyer to make the purchase. If they aren’t, then Moore says they will probably express curiosity about your product but not actually buy it. In this case, the scenario can be eliminated.

(Shortform note: In The Way of the Wolf, Jordan Belfort argues that you can sell anything to anyone, provided you can bring them to a point of complete confidence in the product, the seller, and the manufacturer. However, Moore’s observation implies that Belfort’s model is incomplete. The customer could be confident in the quality of the product, the integrity of the distributor, and the company behind the product, but they still won’t buy it if they don’t believe they need it. Thus, before you worry about creating confidence in the product or the seller, you need to create confidence in the severity of the problem that the product solves.)

2. Accessibility Factor: Next, Moore questions whether the hypothetical customers, especially the economic buyer in this scenario, actually exist, and can be reached effectively through an available sales channel. If not, the scenario can be eliminated. (Shortform note: We’ll discuss distribution channels in Chapter 7, and which types of distribution work best for reaching different types of customers. In this context, we’ll also contrast the different types of customers that Moore identifies with the types of customers that Brian Tracy identifies in The Psychology of Selling.)

3. Completeness Factor: According to Moore, another critical factor is whether you can actually deliver the whole product. We’ll discuss how you deliver the whole product in more detail in the next chapter, but here Moore advises that if you can’t be ready to deliver it within three months, the scenario should be eliminated.

(Shortform note: Business bloggers often recommend keeping product launch schedules within a four-month time frame. Moore’s three-month limit on assembling the whole product implies a similar time frame for launching your whole product. While these numbers may seem arbitrary, the fact that different experts intuitively agree on similar time frames gives them more credibility.)

4. Competition Factor: Finally, Moore considers whether there are already direct competitors in this niche. If so, he says that puts you at enough of a disadvantage to warrant eliminating this scenario.

(Shortform note: Moore’s fourth critical factor for scenario selection is a key tenet of Blue Ocean Strategy, which advises that your product must provide unique value to your customers, implying there are no current competitors providing the same value.)

The Five Preferred Factors

1. Network Factor: Moore encourages you to consider to what extent you already have connections with other companies who would be involved in supplying the whole product in this scenario. The ability to leverage existing connections makes the scenario more attractive. (Shortform note: We’ll discuss corporate alliances that enable you to supply whole-products in more detail in the next chapter, where we’ll contrast Moore’s advice with Regis McKenna’s advice on maintaining alliances.)

2. Distribution Factor: Similarly, Moore asks whether you have existing sales channels capable of reaching the customer in this scenario. He notes that it takes time for a salesperson to become fluent in the language of a new industry, so existing sales channels make the scenario more attractive.

(Shortform note: If you don’t have existing sales channels, and you or your sales force must learn the lingo of your target market, Chris Slocumb has a few tips for you. In addition to seeking out industry publications and trade groups, which you’ll be doing anyway as you study your target market, he suggests signing up for professional development courses within that industry to get some inside exposure to the language. He also stresses the importance of pronouncing industry jargon correctly to avoid damaging your credibility when you speak with potential customers.)

3. Pricing Factor: Moore also directs you to consider how well the price of the whole product fits into your customer’s budget, and to what extent the price structure will motivate your partners and distributors to continue supporting the product.

(Shortform note: Moore’s third preferred factor resembles an inverted form of his first critical factor (making sure your product is compelling). If not buying your product costs your customer more than buying it (because it solves an expensive problem for them) then they can afford it. However, it still makes sense to examine the price structure in more detail, once you’ve narrowed your list of scenarios.)

4. Credibility Factor: Moore advises that you establish a good reputation in your target niche market. He notes although it’s likely that at first, while entering the market, you’ll likely not be very credible, you can build credibility very quickly within a specific niche. (Shortform note: Because of the ease with which this problem is overcome, and because Moore devotes little space to it, we can infer that this is one of the less important factors.)

5. Infiltration Factor: According to Moore, you should also evaluate the extent to which you can leverage sales in this niche to expand into other adjacent markets. (Shortform note: Given that expanding into adjacent niches is part of Moore’s high-level strategy, we can infer that this is one of the more important preferential factors.)

The Size Factor

According to Moore, the final factor to consider when selecting your niche is the size of the market that each scenario represents. The niche market that you choose must be large enough to provide meaningful revenue, but small enough for you to dominate.

Moore argues that to become the de facto standard, your product needs to account for more than half the total sales in the market. Thus, when you cross the chasm, he suggests targeting a niche that is worth one to two times what your current annual sales are. For example, if your sales last year amounted to $3 million, pick a market segment that is worth $3 to $6 million.

If the niche market your scenario represents is too large, Moore recommends focusing on a closely connected sub-segment of it, such as the market within a certain geographic region. If the market is too small, he recommends looking for a super-segment of it, or choosing a different scenario.

(Shortform note: Market size also plays an important role in managing the risk of competition. In The Innovator’s Dilemma, Christensen explains that disruptive innovations can allow small start-ups to displace large established companies partly because the market for new technology starts out small: Large companies need large markets to maintain revenue, and thus cannot afford to bother competing in niche markets. This gives small startups an advantage when targeting niche markets. As Christensen points out, once the startup dominates the niche and begins to expand into adjacent markets, incumbent manufactures of now-outdated products are often unable to recover from the loss of market share. This effect contributes to making Moore’s strategy effective, and highlights the importance of choosing a niche that is small enough for you to dominate.)

Scenario Elimination

Moore advises that you call a meeting of the selection committee to discuss ratings and reach a consensus as soon as everyone has had a chance to rate the scenarios individually. He observes that typically about two-thirds of the scenarios are eliminated in this meeting. At the meeting, everyone individually re-evaluates the remaining scenarios. Repeat until either you all agree on the best scenario to select your niche, or you eliminate all the scenarios.

If you eliminate all the scenarios, then Moore says you’re probably not ready to cross the chasm yet. Focus on the early market for the time being, and continue to brainstorm purchasing scenarios for future evaluation.

(Shortform note: This could depend on why they were eliminated. If you eliminated all your scenarios because there was too much competition, that might imply the opposite: You waited too long and missed the window of opportunity, while other companies carried the same technology across the chasm ahead of you.)

Moore observes that you don’t necessarily have to pick the best scenario in order to cross the chasm successfully. You just have to pick one that’s workable and make it work. However, he does caution that scenarios can be based on false assumptions. To mitigate this risk, he advises doing market research to validate the assumptions of your chosen scenario, but he also advises you to move forward while the research is being conducted, because, as we’ve discussed, lingering in the chasm is also a risk.

(Shortform note: For reference, business blogs report that a market research project typically takes six to 12 weeks to complete, depending on the methods used. As a rule of thumb, they also suggest that market research costs about as much as buying a new car. Just as cars vary in price, depending on the quality of the car, its capabilities, and its features, market research projects vary in cost over approximately the same scale. If you’re in the chasm, the risk of standing still for this time, while incurring these expenses, is greater than the risk of moving forward without the data, at least in Moore’s view.)

Exercise: Identify Your Selection Committee

Imagine that your current company has developed a revolutionary product and is choosing a niche that will propel you across the chasm. You’ll need a niche selection committee, which consists of the smallest group of decision-makers in your company—every person who would be able to veto the decision.

• Who would you include on your selection committee, and why? (What is each member’s role, or how could they block the decision if they’re not included?)

Chapter 5: Strategy Step 2—Provide a Whole Product for Your Niche

Now that you have identified a target customer who has a compelling problem your product can solve, you need to make sure your target customer can buy the complete solution. In this chapter, we will discuss Moore’s “Simplified Whole Product Model,” which we briefly introduced in our earlier discussion of the psychographic categories of customers. Here, we’ll explore Moore’s advice on how you can use the model to identify your whole product and how you can make sure the whole product is available to your target customer.

Understand the Whole Product Model

Levitt’s Whole Product Model

Moore starts his discussion by introducing Theodore Levitt’s “Whole Product Model,” which consisted of four nested circles:

• The center ring is labeled the “generic product,” and represents the core technology, or the core product that you produce.
• The next circle represents the “expected product,” or the solution that your customer expects to get once your product is set up.
• The third circle is called the “augmented product,” which represents the maximum capabilities of the product when combined with existing third-party add-ons.
• The outer circle represents the “potential product,” and represents the maximum capabilities of the system when combined with addons that could potentially be developed in the future.

Moore then introduces his own “Simplified Whole Product Model,” which focuses just on the elements of the whole product model that are relevant to crossing the chasm. Specifically, he leaves out augmented or potential products, which you won’t be concerned with when introducing a new technology. We’ll discuss Moore’s simplified whole product model next.

Moore’s Simplified Whole Product Model

(Shortform note: Like Levitt, Moore refers to the core product as the “generic product.” Today, however, the term “generic product” has come to mean an un-branded low-priced alternative, so to avoid confusion, we will use the term “core product” in place of Moore’s “generic product.”)

Moore presents his “simplified whole product model” as a pair of concentric circles with the outer ring divided into sectors, as shown below. The center represents the core product, and each sector represents one of the interfacing products or services that you add to it to assemble the whole product. Because of its shape, Moore also refers to this figure as a “donut diagram.”

For example, if the core product is a smartphone, one sector would be electricity to charge the phone, another would be the operating system that runs on the phone, and another would be a data plan from a phone service provider.

Shortform Commentary: Implications of Moore’s Sectors on the Whole Product Model

To derive Moore’s simplified whole-product model from Levitt’s whole product model, you first eliminate the outer two rings, leaving only the “generic” product in the center, surrounded by the “expected” or “whole” product. You then divide the remaining outer ring into sectors, reflecting the different interfaces or complementary products or services that your customer must have in order to make your product work.

If we were to add the third ring, the augmented ring, back into this model, the augmented ring could no longer be represented by a continuous circle—any additional products or services that would fall into the augmented circle would interface with only certain segments of the second, the expected, ring.

For example, if the core product is a smartphone, and we wish to augment its capabilities with a third-party app, the app has to interface with the phone through the operating system, which would be one sector of the whole product ring. Similarly, if we want to augment the phone with a hardware peripheral that communicates with the phone via wifi, then we would want to show it interfacing through the wifi sector. If we try to show this graphically, the augmented whole product model would begin to resemble a flower with petals extending from each sector, or looping across sectors, if a certain addon interfaces through multiple sectors.

We can illustrate this for our smartphone example below:

Why Whole Products Matter

Moore notes that when you make a sale, you’re typically only obligated to deliver the core product. However, recall that while innovators and early adopters are usually willing to take ownership of assembling the whole product for themselves, the early majority are not. As Moore points out, if you don’t arrange for the whole product to be supplied, you’re taking a serious risk: If your customer can’t get the whole product set up easily, they may feel cheated. Moreover, because early-majority customers are sensitive to reputations, one dissatisfied customer who tarnishes your product’s reputation can have a devastating effect on your sales.

(Shortform note: Regis McKenna also echoes this warning, in his book The Regis Touch, asserting that a customer who is impressed with your product will likely tell two or three other people about it, but a customer who is disappointed will probably vent his disillusionment to about 10 other people.)

Identify Your Whole Product

To identify your whole product, Moore advises that you draw a “donut diagram,” and label the sectors with everything that your product depends on or has to interact with in order to solve your target customer’s problem. For example, does it need electricity, fuel, or wifi? Does it need to “talk” to other software or machines?

Depending on how they intend to use your product, different customers may need different whole products. Thus, Moore advises that you focus only on the niche application of your chosen target customer. This allows you to keep the whole product as simple as possible, since you don’t have the resources to supply a whole product for every conceivable application.

For example, suppose your company has developed a new type of camera sensor with ground-breaking low-light image quality. You could design a security camera system around your core technology and market it to department stores. In this case, to deploy your system effectively, your customers will want to network a large number of cameras, and they’ll want advanced software features like automatic object-removal detection to help them catch shoplifters. On the other hand, if you select homeowners as the target customer for your security cameras, they’ll need a very simple installation procedure, and will probably want the system to interface with a phone app so they can view the camera feed remotely when they’re not home. Thus, your cameras will need to interact with different networking equipment and monitoring software depending on whether you target the commercial surveillance market or the home surveillance market. This, in turn, could affect which companies you need to partner with to supply a whole product.

Minimum Viable Products

Reinforcing Moore’s advice to keep the product simple, albeit in a slightly different context, Peter Theil introduces the concept of the Minimum Viable Product, or MVP. Theil’s MVP is not necessarily a functional product, but rather a rudimentary mockup that allows you to test your product against potential customers. As such, an MVP might be just an informational video or web page to gauge interest in the idea, or a mockup that allows you to demonstrate how the product would work, even though important functions of the product are performed manually by the person conducting the demonstration.

Theil’s focus is primarily on the early market: He discusses MVPs in the context of marketing to early adopters and technology enthusiasts. However, his emphasis on using the simplest product possible to test your assumptions can be extrapolated to whole-product design.

Your customer profiles include assumptions about how your product could solve your target customer’s problems, giving them a compelling reason to buy it. What is the MVWP (Minimum Viable Whole Product) that would allow you to test these assumptions?

Determine How the Rest of the Whole Product Will Be Supplied

Once you’ve identified every component of your whole product, and listed it on your donut diagram, you need to figure out how to supply each of those components. Based on Moore’s observations, there are essentially three possibilities:

1. In some cases, the interfacing product or service is readily available, and the risk of the customer struggling with setup is low. For example, if your product uses 120V AC electricity, your customer can just plug it into an electrical outlet.
2. Some interfaces may be specialized enough to warrant supplying the component yourself and bundling it with your product. For example, most smartphones ship with the operating system already installed.
3. Finally, you may be able to partner with another company that will deliver part of the whole solution. For example, maybe you want to deploy a hydrogen-powered car, and you coordinate with another company that can supply hydrogen fuel to set up fueling stations for your customers.

(Shortform note: When Moore stresses the importance of making sure the whole product is readily available and discusses the above options, he doesn’t explicitly compare and contrast the benefits of each method. However, he spends much of the chapter talking about how to manage corporate alliances, implying that he considers partnerships a particularly important method or resource for supplying the whole product.)

Partner Up to Deliver the Whole Product

Moore notes that partnering with other companies to deliver a whole product can be mutually beneficial: You benefit by ensuring that the whole product is available to your customers, and your partners get new customers without the cost of additional marketing.

(Shortform note: McKenna stresses the importance of relationships with other companies not only for supplying the whole product, but also for establishing your company’s reputation by association. He says securing an alliance with an established, reputable company can give a startup instant credibility with customers.)

Strategic Alliances Versus Tactical Alliances

Before getting into the mechanics of partnering with other companies, Moore draws a contrast between “strategic” and “tactical” business alliances. He goes on to assert that tactical alliances are useful for crossing the chasm, while strategic alliances are not.

Moore describes a “strategic alliance” as a merger or a formal agreement to engage in large-scale coordination between companies, and cautions that these often seem attractive in theory but don’t work out well in practice. He says they work best between peer companies of similar corporate culture, but even in a best-case scenario, managing them consumes a lot of resources.

By contrast, Moore describes a “tactical alliance” as a simple agreement between companies to cooperate in delivering the whole product to the target customer.

Alternative View on Strategic Versus Tactical Business Alliances

Not all authors share Moore’s view on the difference between “strategic” and “tactical” business relationships. Regis McKenna argues that “strategic relationships” with other companies are crucial to the success of high-tech start-ups. In contrast to Moore, he asserts that relationships between small start-ups and large, well-established companies can be particularly beneficial.

McKenna states that “strategic relationships” can take many forms, including joint ventures, equity purchases, agreements to share information or technology, and agreements to manufacture or distribute a product or component. However, he emphasizes that a strategic relationship is not a merger or an acquisition, and asserts that when a large, established company acquires an innovative startup, the merger often kills the startup’s culture of innovation, hindering its development work.

Thus, McKenna’s “strategic relationships” resemble Moore’s “tactical alliances.”

Creating and Maintaining Tactical Alliances

Having warned against “strategic” alliances, Moore goes on to offer advice on creating and maintaining tactical alliances.

When choosing your partners, Moore advises you not to solicit partnerships with companies that would be directly competing with each other. A partner tends to be less willing to cooperate with you if you’re also partnering with their rivals.

(Shortform note: In Good Strategy Bad Strategy, Richard Rumelt argues that the best way to gain an advantage over a competitor is to pit your strength against their weakness. If you look at your alliance from your partner’s point of view, their partnership with you gives them a specific strength, and a rival without that partnership then has a weakness that your partner can exploit. However, if you also partner with that rival, you essentially give a similar strength to the rival, so that, in your partner’s eyes, your partnership is no longer a unique strength. The company partnering with you will then be less motivated and committed to making your partnership work, because their efforts in making it work won’t bring them as much return on their investment.)

According to Moore, it’s crucial that you make sure your alliances benefit all parties, and that the benefits are equitable. In his experience, partners back out if it looks like the partnership would benefit you more than them. However, he also notes that if the partnership favors the other company enough to be equitable, and to motivate productive cooperation, someone at your own company will inevitably think it’s too generous.

(Shortform note: In this situation, you may have to defend the fairness of the terms of the partnership to critics within your own company. In Never Split the Difference, Chris Voss discusses negotiation tactics, including tactics based on the concept of fairness. Voss observes that people’s aversion to unfairness is so strong that it can drive them to make irrational choices or agreements. In this case, though, you could refer to fairness to encourage rational thinking, by arguing that demanding a larger share of the profits might prove demotivating for the partner company, which ultimately will hurt, not help, you.)

Moore also advises you not to rush formalization of your alliances, and to use formalized alliances only as communication channels, not as leverage to enforce coordination. In his view, this promotes mutual trust, which is essential for the alliance to work. He also advises trying to communicate with partner companies at the level of management whose decisions most directly affect your customers. With large companies, this is often the staff at their local sales office, while with small companies, it may be their corporate executives.

McKenna’s Advice on Maintaining Alliances

According to McKenna, there are two keys to making corporate alliances, or “strategic relationships” work:

• Adequate separation. Both companies retain their autonomy, identity, and culture. He warns that when one company becomes dependent on another, it sets itself up for failure, should the other company eventually decide to switch suppliers.

• Adequate communication. There should be a clear understanding up front about objectives, expectations, allocation of responsibilities, and the timeline over which each company will fulfill its responsibilities.

McKenna’s point about adequate separation resonates with Moore’s advice, as well as with his aversion to “strategic alliances” that involve mergers or excessive coordination between companies.

However, McKenna’s point about communication contrasts with Moore’s perspective: Moore cautions not to formalize alliances too soon, while McKenna advises formal delineation of responsibilities up front.

Exercise: Identify Your Whole Product

Recall Moore’s simplified whole product model, which shows the core product in the center, with the outer circle divided into sectors, each of which represents another piece of the whole solution. Think about the most recent product your company started selling. If you’re not involved in selling anything, think about a product you recently purchased.

• Briefly describe your core product.

• Now make a list of sectors that you would show on a whole product diagram. What other products or services does your customer need in order to make your product work?

• Think about how the product might be improved by adding or adjusting sectors in the outer circle. Are there elements of the product that customers (or you, if you’re thinking of another company’s product) have noted are missing, or is there any aspect of the user experience that could be enhanced by partnering with another company or adding another product?

Chapter 6: Strategy Step 3—Position Your Product

Once you’ve selected your target niche market, you can begin to develop your marketing strategy. Product positioning drives your marketing strategy because, according to Moore, positioning is the most significant factor in a customer’s decision to buy your product.

Recall from Chapter 1 that “positioning” refers to where potential customers place your product on the market landscape, or how they view it in relation to the competition. Also recall that innovators and early adopters tend to position your product based on its technical qualities, while the early majority position it based on its reputation and market share.

Thus, as you enter the mainstream market, your product’s positioning will depend substantially on its reputation with key influencers and on the perceived competition. In this chapter, we’ll discuss Moore’s advice on how to identify your competition, develop a clear positioning statement, provide evidence to back up your claims, and communicate your message to your target customers or the key influencers who can reach them.

The Dynamic Positioning Cycle

Regis McKenna echoes Moore’s assertion that positioning is the most important factor in marketing, and goes on to define a “Dynamic Positioning Cycle.”

In the first stage of this cycle, you decide how to present and market your product. Then, in the second stage, the market reacts to your product and marketing campaign, and people form their opinions about your product.

In the third stage, your product’s position in the market reflects on your company, establishing your company’s position. Finally, your company’s positioning affects how people view your products, completing the cycle.

McKenna points out that because of the cyclical nature of dynamic positioning, problems at any stage of the cycle affect every other stage. This highlights the importance of getting the positioning cycle going in the right direction from the outset, which is the focus of Moore’s advice in this chapter.

Step 1: Identify Your Competitors

According to Moore, early majority customers position your product mostly based on how it compares to competing alternatives. Thus, he remarks that if your product is so revolutionary that you cannot identify any clear competitors, you’re probably not ready to cross the chasm.

(Shortform note: The general premise of Blue Ocean Strategy is that finding new, un-competed markets through innovation is the key to success in business. However, if Moore is right that mainstream customers won’t register your product in a position on the market landscape until they can compare it to a competing product, then, strictly speaking, blue ocean strategy only works in the early market.)

Moore classifies competing products into two categories, both of which play important roles in your product positioning:

1. A market alternative is what your target customers are currently using, the product you intend to displace.
2. A product alternative is a product that is based on similar technology but used in a different application.

Moore explains that market alternatives provide something for your customers to compare your product to. If you can show them that your product is better than the alternatives, you can establish yourself as the market leader. In the case of innovative products, you can often argue that your product is better than the market alternatives because it’s based on a new technological breakthrough.

However, Moore notes that while breakthrough technology can provide a convincing argument, it can also backfire because the early majority don’t like to take chances with unproven technology. This is where the product alternative comes into play: If the same new technology is also being used in other applications, that implies that other people trust it.

Worthy Rivals

In The Infinite Game, Simon Sinek argues that you should view competing companies not as enemies, but as “worthy rivals,” because competition drives you to be better at what you do, and helps you define your own company identity more clearly by comparison.

This reinforces Moore’s assertion that your customers will assess your positioning based on the competition: By highlighting differences, competition makes the unique elements of your product and company stand out, both to you and to your customers.

By extension, if you have no visible competition, customers may assume your product is poorly designed and overpriced, just because you have no competitors to keep you accountable.

Step 2: State Your Positioning Claim

Moore points out that to design an effective marketing campaign, you need to know what you want to communicate. Moreover, he advises that your message should be concise enough to pass the “elevator test,” that is, to explain to a stranger during an elevator ride.

As Moore notes, a successful elevator pitch implies your message can be conveyed effectively by word of mouth. Furthermore, it’s simple enough to give customers and partner companies a clear picture of your product, so customers know what to expect and partners can see how your product would complement theirs.

Has the Elevator Pitch Become Irrelevant?

In contrast to Moore, in his book To Sell is Human, Daniel Pink argues that the “elevator sales pitch” is no longer relevant. If Pink is right, then Moore’s elevator test becomes more of a hypothetical test instead of a practical one.

Pink argues that the elevator pitch was designed to present condensed information to influential people who were difficult to gain a formal audience with long enough for a full sales presentation. However, according to Pink, executives are more accessible today but are also overloaded with information. Thus, modern executives find impromptu, information-dense presentations both unnecessary and overwhelming.

This does not undermine Moore’s point that your message needs to be simple and clear enough to be communicated by word of mouth, but if the format of effective word-of-mouth messages is changing, that could have implications for how you present your message.

Create a Product Positioning Statement

Moore advises you to make a simple and definitive positioning claim for your product. He clarifies that your claim is not a slogan for your ad campaign, but rather a reference message that you design all of your marketing communications to agree with. He suggests you develop your claim by answering the following questions, expressing your answers in two or three sentences.

1. What is your product name?
2. Who are your target customers?
3. What is your target customer’s compelling reason to buy your product?
4. What is the market alternative you are seeking to displace?
5. What is the product alternative?
6. How are you as a company credible and reliable?

Template for Positioning Statements

In Pitch Anything, Oren Klaff recommends introducing your product with a standardized statement to the effect of “For [you target customers] who are unsatisfied with [the market alternative], [your product name] provides [the customer’s compelling reason to buy]. Unlike [the product alternative], [your product name] provides [these key features].”

A statement like this concisely captures your answers to Moore’s position questions, and Moore’s theory tracks closely to this template, providing a straightforward and clear way to communicate the most important aspects of your product.

In The One-Page Marketing Plan, Allan Dib provides a similar template for creating what he calls a “Unique Selling Proposition,” or USP. Dib emphasizes that a concise problem-solution statement that compares your product to the alternative is important for effective positioning.

Step 3: Substantiate Your Claim

As Moore points out, once you have stated your claim, you need to identify evidence that makes it indisputable. As we discussed in Chapter 1, each psychographic category of customer looks for a different type of evidence to position your product.

In this case, your target customer is in the early majority. Recall that the early majority places a lot of weight on reputation and market share. Moore advises that since you don’t have the largest market share yet, the evidence that you soon will is your commitment to delivering the whole product through alliances with other companies. This becomes especially convincing if your allies are among the leading vendors that your target customer already respects.

Financial Success Is Strong Positioning Evidence

Regis McKenna asserts that the strongest evidence for a positioning claim of market leadership is financial success, corroborating Moore’s assertion about market share. Like Moore, he also advises partnering with leading vendors to substantiate your positioning claim.

However, building on the theme of financial success, McKenna also points out that some customers will consider the reputation of your financial backers when assessing your positioning. Thus, relationships with prominent venture capitalists can be another piece of evidence to support your positioning claim.

Step 4: Communicate Your Claim and Evidence

Now that you’ve formulated a clear message and identified evidence to support it, you need to communicate that message to your target customers.

In discussing how to communicate your message, Moore warns against using manipulative tactics. This could involve bombarding potential customers with every possible reason they should buy your product through an overbearing ad campaign, or selectively comparing your product to alternatives that make it look good, while omitting other alternatives. However, as Moore points out, people tend to recognize these tactics for what they are.

(Shortform note: In Start with Why, Simon Sinek similarly condemns manipulative advertising, saying that it may generate sales in the short term, but it prompts the customer to make poor decisions, which results in poor customer relations for the company. He points out that in some cases, these poor decisions can also have serious consequences for the industry or even the economy in general. As an example, Sinek argues that the “Great Recession” of 2008 was ultimately caused by manipulative advertising on the part of banks, which led people to take out excessive loans and make poor financial investments.)

Instead, Moore advises building mutually beneficial relationships with key influencers in your target market, so that their positive impressions will build a “word-of-mouth campaign” within your industry. He acknowledges that it takes time to identify these people and establish an ongoing dialogue with them. However, he argues that once these relationships are in place, they help to secure your position, because the early majority prefer to do business with people they know.

(Shortform note: In Perennial Seller, Ryan Holiday says the key to effectively influencing the influencers in your industry is to see things from their perspective: Influencers are typically people who have earned a reputation by being the first to recommend products that are genuinely valuable. They want to maintain that reputation. Thus, if you can present them with sample products that exceed their expectations, or show them how your product provides a better solution to their followers’ compelling problem, you can turn them into advocates for your product.)

Communication Channels

According to Moore, you have two primary channels available to you for communicating your message, or for reaching the key influencers in your industry to get word-of-mouth started.

The first channel is the business press. Moore points out that the established business press has a strong reputation with the early majority, and they are careful to safeguard it. As such, it’s harder to get their attention as a startup, but doing so boosts your reputation significantly.

Moore’s strategy for garnering the attention of the business press relies on leveraging your whole-product partnerships. He says that when companies come together to supply an emerging market or address a market issue, the business press is often interested in covering these stories. As such, he recommends holding a press conference or sponsoring a trade conference with representatives from your partner companies, as well as customers and independent analysts all present, to initiate relationships with business press editors over your whole-product story.

The second channel is what Moore calls “vertical media,” which includes publications for the specific industry niche you are targeting, as well as conferences and trade shows where vendors can participate almost like consultants, presenting solutions to customers’ needs. Establishing a presence within the “vertical media” of your target niche allows you to connect with influencers in your industry.

Additional Communication Channels

Like Moore, McKenna discusses the business press and direct interaction with potential customers at trade shows. Additionally, he points out that the venture capitalists backing your company are often influential people, whose word can be indispensable for getting your word-of-mouth campaign started.

He also advises getting the people in your distribution network on board with your positioning claims, as they can influence customers directly.

Finally, he points out that everyone who interacts with your company in any way will develop an impression of your company, which will ultimately influence your positioning. This could include people who provide services to you, interview for jobs, or visit the company for some other reason. He says that all these people can become advocates for your company’s positioning if you treat them right.

Since Moore and McKenna published their advice, online social media has opened up new communication channels as well. For example, your company can start a YouTube channel to tell your own story in your own words. If you make content that’s in the same vein as what your target customers are already watching, YouTube’s video suggestion algorithms will help them find it. Similarly, you can tell your story on Facebook, LinkedIn, Twitter, or any number of other sites.

And on almost any platform, if people like the content you post, they can share it with their friends just by pressing a button. That said, in Contagious, Jonah Berger cautions that even today, only about 7% of word-of-mouth communication takes place online, with the remaining 93% resulting from in-person contact. Thus, even with social media communication channels, it’s important to make sure your message is clear and simple enough to be passed on by traditional word of mouth.

Exercise: Identify Your Competitors

Recall that Moore identifies two types of competitors: A market alternative is a product that directly competes with yours for a share of the same market. A product alternative is a product based on the same core technology, but not being used for the same purpose or competing in the same market.

For this exercise, think of the product your company most recently started selling. If you’re not involved in selling anything, then think of a product that you recently purchased.

• Briefly describe the product.

• Name at least one market alternative. What else could someone buy in place of your product?

• Name at least one product alternative. What other kinds of products rely on the same basic technology as yours?

• How might you position your product against either of these competitors to showcase its advantages?

Chapter 7: Strategy Step 4—Set Up Distribution

The final step in Moore’s strategy for crossing the chasm is to secure a distribution channel that can actually sell your product to your target customer. Note that in this chapter, a “distribution channel” is what you use to distribute products to your customers, in contrast to a “communications channel,” which you use to tell people about your product or positioning claims, as we discussed in the previous chapter.

Noting that different types of distribution systems are better able to reach different types of customers, Moore advises that your choice of channel and your pricing are the most significant factors in the effectiveness of distribution.

In this chapter, we will first discuss Moore’s advice on the most effective distribution channels for reaching different types of customers, and then consider his advice on pricing.

Defining a “Distribution Channel”

It is worth noting that Moore seems to use the term “distribution channel” in two slightly different ways:

Most of the “distribution channels” that he describes when contrasting different types of customers seem like systems you would typically set up internally, so your “distribution channel” would be a part of your own company. (The exception to this is when he suggests using value-added resellers to reach small businesses.)

However, when discussing pricing, he focuses on using “distributor-oriented pricing” to motivate your distributor. This tends to imply that your “distribution channel” is an external entity, since this would be less relevant if you are handling distribution yourself.

Thus, in Crossing the Chasm, the term “distribution channel” can refer to either a distribution method in use by your own company or another company that distributes your product for you, and either approach may be appropriate, depending on your situation.

(Shortform note: Regis McKenna advises that getting an established, reputable distributor to carry your product gives your company more credibility with prospective customers, implying that for a start-up crossing the chasm, external distribution channels may be preferable whenever this is possible.)

Use Your Customer Profile to Identify Your Preferred Distribution Method

Moore insists that setting up distribution should be your top priority, above profits, publicity, or even customer satisfaction. He argues that deficiencies in these other things can be remedied, but without a distribution channel that can reach your customers effectively, you won’t be able to cross the chasm.

(Shortform note: In contrast, McKenna asserts that positioning is the most important thing, presumably regardless of whether you’re in the chasm or not. He points out that if nobody wants to buy your product anyway, then a distribution channel that can reach your customers doesn’t help you.)

At one point, Moore also says you only get one shot at setting up distribution, but later advises that sometimes you may need a secondary distribution channel, implicitly recanting this assertion. Nevertheless, we may infer that selecting an effective distribution method up front is of great importance when crossing the chasm.

Moore advises that different types of customers can more easily be reached through different distribution channels. He identifies five different types of customers based on job titles: engineers, enterprise executives, department managers, small-business owner-operators, and end users. (These are not to be confused with the five psychographic categories of the TALC, since all of these customers should be part of the early majority.) Moore then recommends a method of distributing to each.

(Shortform note: In The Psychology of Selling, Brian Tracy identifies six types of customers, based on their psychological profiles rather than job titles: the reluctant customer, the certain customer, the analytical customer, the relationship customer, the directive customer, and the social customer. Of the six, Tracy’s “reluctant customers” and “certain customers” seem to correlate to the “laggards” and “early adopters” of the TALC, respectively. Based on Tracy's descriptions of the remaining four categories, there is probably significant overlap between them and Moore’s job-based categories. We will discuss this overlap for each category.)

Engineers

As Moore explains, engineers usually don’t have corporate purchasing authority themselves, but if a company’s engineers decide to use your product as a component of a product they are designing, it could result in a long-term multi-million-dollar contract supplying products to their company. This makes them potentially your most lucrative type of customer, in terms of value per sales contract.

Thus, if your target customer scenario involves engineers integrating your product into theirs, Moore recommends a two-phased distribution channel:

First, you make your product specifications available online where engineers can find them. As you present this information, Moore advises sticking to the facts, as engineers don’t respond well to promotional marketing.

(Shortform note: Moore is not the only one to observe this. Allison Woodbury of Precision Marketing Group blogs that to sell to engineers you have to take a direct, brutally honest approach, presenting detailed information, and avoiding any claims that you can’t objectively substantiate.)

Second, once the engineers express interest, you send salespeople to their company to demonstrate your product, provide samples, or facilitate testing. If the engineers are satisfied, then they can connect your salespeople to their purchasing department to negotiate the sales contract.

Engineers and Analytical Customers

One of Tracy’s categories is the “analytical customer,” who loves details and insists that you prove all your claims, as they move slowly toward a buying decision. This is sufficiently similar to Moore’s description of engineers that we can infer there is significant overlap between engineer customers and analytical customers.

Tracy advises you to be patient with analytical customers and thoroughly answer all of their questions. This advice would apply to Moore’s scenario of selling to engineers as well. Indeed, sending people to demonstrate your product and facilitate testing, as Moore advises, would be one way to accomplish this.

Enterprise Executives

As Moore points out, corporate executives can be lucrative customers because they are capable of making purchasing decisions for entire companies: He estimates their sales contracts are typically worth hundreds of thousands to millions of dollars.

According to Moore, the best distribution channel for reaching high-level executives is “relationship marketing.” Your senior staff connect with customer executives at leadership conferences and develop a consultant-like relationship with them, allowing you to show them how your whole-product solution will meet their company’s needs.

Executives and Relationship Customers

Moore’s enterprise executives could potentially overlap several of Tracy’s categories, depending on the individual executive’s personality. In the case of an early-majority executive, arguably the largest overlap would be with the “Relationship Customer.”

Tracy describes the relationship customer as someone who values her reputation and needs to develop a relationship with you before committing to purchase. These qualities coincide with Moore’s characterization of the early majority and his recommendation to use relationship marketing.

Tracy advises taking your time with relationship customers, and asking lots of questions. He also recommends talking about other customers who’ve been happy with your product. Again, this agrees well with Moore’s advice to develop a consultant-like reputation with executives.

Department Managers

If your target customer is more likely to be a department manager than a corporate executive, Moore advises using a “Sales 2.0” distribution channel, which combines digital marketing with human marketing—when a prospective customer visits a website and clicks on a link, they’re directed to a human representative instead of an automated service. The human rep, however, is online as well, so that the whole experience is digital.

Moore notes that department managers can only make department-wide purchases, so their orders tend to be smaller than those of executives, which is why he recommends a Sales 2.0 approach—it’s a cost-effective way to manage a larger number of sales contracts from initial inquiry through final sale and ongoing support.

(Shortform note: The term “Sales 2.0” was coined by Nigel Edelshain, CEO of a company by the same name that trains salespeople. He developed the “Sales 2.0” approach in recognition of the fact that the era of cold-calling, where a salesperson essentially interrupts a prospective customer to ask for a sale, is coming to an end.)

Department Managers and Social Customers

Moore’s department managers could potentially overlap several of Tracy’s categories, depending on the individual manager’s personality. However, Tracy identifies “Social Customers” as being social, extraverted, and often in a position that requires coordinating teams of people, such as a project manager or a business executive. As such, this category arguably offers the largest overlap with Moore’s department managers.

Tracy asserts that social customers are prone to forgetting that they agreed to purchase your product, and thus advises you to get their purchase agreements in writing immediately. While Moore makes no such allegations about department managers, using a “Sales 2.0” system as Moore recommends would provide a record of communications that would document the customer’s purchase decision automatically.

Sales 2.0 versus Sales 2.1

Since Moore originally wrote Crossing the Chasm, relationship marketing and “Sales 2.0” have arguably merged into a single tactic.

On the one hand, relationships are increasingly maintained through social media and electronic communications. On the other hand, CRM (Customer Relationship Management) software has become so prolific, and provides such a powerful resource for keeping track of individual customers’ needs, preferences, purchase history, and so on that even automated communications can be highly personalized.

Thus, the greater integration of software into relationship marketing methods and the greater efficiency of personalized communication with customers that software now facilitates have blurred the distinction between the two. Some analysts are referring to the new integrated sales tactic as “Sales 2.1”.

Small-Business Owner-Operators

If your target customer is likely to be the proprietor of a small business, Moore recommends using Value-Added Resellers (VARs) as your product distribution channel.

Moore describes the typical VAR as a local technology enthusiast who makes a living by assembling high-tech whole products for his less tech-savvy neighbors and providing technical support. He further asserts that the typical small business owner needs high-value solutions and is not very tech-savvy, making him a natural customer for the VAR.

(Shortform note: Moore is not the only one to make these assertions. Small business marketing bloggers like John Jantsch attest that small business owners usually need a sales channel that can educate them on both why the product is useful and how to implement it effectively, provide prompt, personalized service, and continue to support them long term. While Jantsch doesn’t mention VARs per se, it is easy to see how a local technology-enthusiast VAR such as Moore describes would be in a good position to meet these demands.)

Small Business Proprietors and Directive Customers

Moore’s small-business owner-operators could potentially overlap several of Tracy’s categories, depending on the individual’s personality. However, the most probable overlap would arguably be with Tracy’s “Directive Customers.”

Tracy characterizes directive customers as busy, businesslike people who want to understand the practical benefits your product can provide, but aren’t interested in developing an ongoing relationship with your company. When dealing with them, he advises dispensing with small talk and showing them the bottom line up front.

Moore highlights small businesses’ tight budgets, which could promote the abrupt, businesslike attitude of directive customers, and if they buy your product from a VAR instead of dealing with you directly, that implies they don’t care about developing a relationship with you.

End Users

If your target customer is likely to be an end user capable of making only low-cost purchases for himself or his immediate work-group, Moore identifies web-based self-service as the preferred distribution channel, with email, banner ads, or other forms of promotional advertising to raise awareness of your product and provide links to your website. He remarks that targeted advertising is making it easier and easier to reach your specific target customers with this method.

(Shortform note: In 2013, a study reported that the average advertising cost of getting a prospective customer to click on a link was $0.72 per click with traditional mass advertising, but only $0.16 per click with targeted advertising. This statistic helps to quantify just how much easier targeted advertising makes it to reach your target customers.)

Moore explains that in this case, your objective is to keep costs down by minimizing personal interaction with customers. He also asserts that with attention to web design, self-service can provide a better customer experience than dealing with salespeople. He suggests integrating FAQs and community-based help forums into your web service to minimize the burden of product support.

End Users and Directive Customers

Of Tracy’s six categories of customers, the only one that doesn’t rely on a relationship with the salesperson is the “Directive Customer.” As we discussed in the context of small business proprietors, directive customers are businesslike and benefits-focused. They want to understand how the product meets their needs, but they don’t want to interact with salespeople any more than necessary.

Thus, when Moore recommends web-based self-service as a distribution channel to sell products to end users with a minimum of human contact, he implies that the end users tend to be directive customers.

Tracy estimates that directive customers, analytical customers, social customers, and relationship customers each make up about 25% of the population. Since end users tend to comprise a larger fraction of the population than executives or other job-title categories, this begs the question: Are end users disproportionately directive customers? Or is web-based self-service only effective at reaching about 25% of end users, while a more personal approach could reach the other 75%?

In the latter case, it may not be practical to reach out to the other 75% at this time, because of the low profit per sale to end users, and the time required to build a relationship with a customer. However, as AI (artificial intelligence) becomes more sophisticated and more prolific, this may change in the near future. Companies are already using AI “chatbots” as force-multipliers for their sales force. Perhaps it won’t be long before AIs become capable of developing convincing customer relationships, and begin to blur the distinction between web-based self-service and relationship-based marketing.

Price Your Product to Sell

Once you’ve selected a distribution channel that can reach your target customers effectively, the final element of Moore’s strategy for crossing the chasm is to set your product’s price such that it motivates the distributor to sell your product.

When you’re crossing the chasm with a disruptive innovation, salespeople may initially have to put in some extra work to close sales. Thus, Moore advises building enough profit margin into your product’s retail price that it’s worthwhile for your distributor to go out of their way to sell it.

He also cautions you not to set your price too high or too low. He says your price is too high if it becomes a sticking point with prospective customers. However, he also asserts that early-majority customers expect the market leader to charge up to 30% more than their competitors, because the leading product should give the customer a competitive edge and keep whole-product costs down. Thus, if you are trying to position yourself as the market leader, your pricing should be consistent with your positioning claim.

Finding the Market Price

According to Charles Wheelan, author of Naked Economics, the market price of a product is the price at which supply and demand are in balance.

If you set your price too high, the high profit margin per sale gives you incentive to produce products for sale, but people aren’t likely to buy them: High prices create excessive supply and inadequate demand.

If you set your price too low, everyone will want to buy one, but there’s little incentive to produce or distribute the product: Low prices generate excessive demand and inadequate supply.

Thus, as Wheelan explains, companies tend to adjust their prices until supply and demand are equal: The profit margin is just high enough to motivate the producer (and distributors) to make and sell the number of products that people want to buy at that price. At this point, the market price has been reached.

Wheelan’s explanation is consistent with Moore’s recommendation not to set your price too high. However, if you set your price too low, Wheelan’s simple supply-and-demand model predicts that everyone will want it, while Moore asserts that the early majority won’t want it at all, because your low price undermines your claim of being the market leader.

Conclusion: Post-Chasm Strategy

In the preceding chapters, we’ve discussed Moore’s strategy for crossing the gap from the early market into the mainstream market. Just as you have to transition marketing strategies to cross the chasm, there are other changes that need to take place as your company transitions into the role of a mainstream vendor. In this chapter, we’ll discuss the changes to company financial structure, personnel, and the role of R&D that Moore identifies as necessary to survive in the mainstream market.

Financial Structure

As Moore explains, start-up companies in the early market often run on investment capital from venture capitalists. In this environment, the company’s survival depends primarily on managing investment risk. He explains that sales in the early market are not so much a source of funding for the company, but a way of demonstrating that the product is marketable, which gives the financial backers a sense of security.

However, he points out that companies in the mainstream market must be able to sustain themselves on their own profits.

Furthermore, he identifies two pitfalls of depending on venture capital for your company’s operating budget. First, he warns that companies running on venture capital can develop a “welfare mentality,” losing their sense of focus and urgency.

Second, Moore points out that start-ups often use “hockey-stick forecasts” showing no revenue for a period of time, followed by exponential growth of profits. When sales start to pick up in the early market, these forecasts briefly appear to be coming true, but the growth cannot be sustained indefinitely. Thus, if you make promises to investors based on hockey-stick forecasts, you may not be able to keep them, especially when you come to the chasm.

(Shortform note: In Pitch Anything, Klaff observes that most venture capitalists are well aware of the unbridled optimism that goes into generating hockey-stick forecasts, and thus put little faith in them. He advises that you can set yourself apart and increase your credibility by abstaining from unrealistic projections.)

Consequently, Moore advises companies to become self-sustaining on profits as soon as possible, preferably before they reach the chasm. He asserts that assembling the whole product is the most expensive part of a startup venture, and thus advises you to save the bulk of your investment capital for assembling the whole product during the chasm crossing.

Self-Actualization in the Early Market

In High Output Management, former Intel CEO Andrew Grove explains that employees are motivated by a hierarchy of needs, with the highest tier being “self-actualization,” or the sense of achieving your highest potential in life.

This perspective, combined with Moore’s warning about a corporate welfare mentality, helps to illustrate an important point about employees’ mindsets in the early market: In the early market, your employees may feel they’re achieving their highest potential simply by taking a revolutionary idea and turning it into a working product, regardless of how well it sells. Their sense of self-actualization comes from advancing the state of the art, not from building a profitable business.

This works at first, when you’re running on venture capital and doing the initial development work, but, as Moore warns, it can drive the company into a welfare cycle: You’re more interested in developing new technology than making money, so the technology you develop isn’t focused on a profitable market sector. Thus, you don’t bring in enough sales revenue to become self-sustaining, so you continue to run on venture capital, which allows you to continue to focus on developing new technology instead of making lower-tech refinements that would make your product more marketable.

To break this cycle, employees need to view the profitability of the business as a higher purpose than simply developing innovative technologies. As we’ll discuss more in the section on personnel, this shift in mindset is not easy for most people to make.

Personnel

When you transition your R&D department to its new role as Moore describes, some engineers may complain that they’ve been relegated to “polishing cannonballs,” that is, making refinements that are trivial and superfluous. Because of this, according to Moore, there’s usually significant turnover throughout the company during or immediately after crossing the chasm as employees’ roles change.

Moore explains this by contrasting the pioneer mindset that brings success in the early market with the settler mindset that brings success in the mainstream market. Pioneers thrive on innovation, while settlers thrive on managing what’s already been invented. Settlers thrive on following the rules set by industry standards, while pioneers ignore the rules, or find them overly constricting. Moore asserts that most people have either a pioneer or a settler mindset, and very few can transition between the two easily.

Pioneers and Settlers on the TALC

The psychographic categories on the TALC (technology adoption life cycle) were developed to describe the different types of customers who adopt a new technology at different stages of maturity. However, the same psychographic profiles could be applied with minimal modification to the population of technology producers. We could adapt the categories as follows:

Innovators: These are people who love technology for its own sake and develop new inventions just to see if their ideas will work.

Early Developers: Corresponding to the early adopters, these are producers with the vision to identify exciting applications for new technological discoveries, and the influence to drive development from initial proofs of concept to products that can actually be deployed.

Standardizers: Corresponding to the early majority, these are pragmatic producers whose interest lies in refining and standardizing existing technologies so they can be produced, deployed, and supported on a larger scale.

Replicators: Corresponding to the late majority, these are producers who have no interest in doing their own development work, but are happy to mass-produce copies of a standardized product for which there is predictable demand.

Laggards: On the producer side, a laggard would be a company that continued to manufacture products after they were obsolete and the demand had tapered off. This might be a rather small population, since companies practicing this would have trouble staying in business. However, niche markets for products that have been superseded in the mainstream market may sustain a few small producers almost indefinitely. For example, automobiles thoroughly supplanted horses in mainstream transportation by the mid-twentieth century, but professional horse breeders and horse traders still serve a variety of niche markets today.

As with customers on the TALC, psychographic differences between producers would lead to gaps that might impede the development of a product, and the largest gap is likely between the early developers and the standardizers.

Compensation

Because of the turnover that usually happens at the chasm, Moore advises that it’s better to give pioneers cash bonuses rather than equity in the company, since they are likely to move on as the company makes the transition. However, he concedes that this can be difficult, because the company is usually short on cash during the chasm crossing.

(Shortform note: Moore’s rationale here seems to be that pioneers’ role in the company is functionally temporary, almost like a contractor who provides services you need to get the company going and then moves on to another project. Opinions on paying contractors in equity are varied, but most commentators seem to agree that equity is best reserved as compensation for long-term commitment, while cash is more appropriate for short-term services. Moore’s recommendation echoes this perspective.)

Research and Development

In the early market, your research and development (R&D) department started with an innovative idea and turned it into a revolutionary product that would appeal to early adopters.

Moore points out that as you cross over to the mainstream market, your R&D department must refocus from developing a revolutionary core product to developing a whole-product solution based on your core technology.

At first, this may mean developing or integrating some new features to make your product appeal to your chosen niche market. However, Moore notes that as the technology matures, your R&D focus increasingly shifts from new capabilities toward refinements that make the product easier to service and support.

Defining Research and Development

When Moore discusses refocusing R&D on product refinements that enhance serviceability, some engineers might take issue with calling this new focus “R&D”.

In Chapter 1, we discussed using the TRL (technology readiness level) system to measure technological maturity. The TRL system also illustrates the different phases of engineering work that take place as a technology matures.

At TRL-1, you conduct basic research. Basic research is when you study principles of science or engineering to better understand them, without a specific application in mind.

At TRL-2, you identify a possible application for the scientific knowledge you’ve gained, which serves to focus your studies. At this point, you transition from basic research to applied research.

At TRL-3, you transition from research to development: You’ve done enough research to understand the theoretical operating principles of your design, but you need to design components that can turn your theory into reality. Thus, product development continues from TRL-3 up through TRL-9, where the official TRL scale ends.

As we discussed in chapter 1, you would typically reach TRL-9 in the early market. At TRL-9, initial product development is complete, and so the term “research and development” arguably does not apply to subsequent refinements that don’t add new capabilities.

Instead, after reaching TRL-9, you must either find a new technology to develop, or transition from “research and development” to “production support engineering.” This is the transition that Moore describes, even though he still refers to it as “R&D” afterward.