Overcoming the abyss

Overcoming the abyss book summary free

79 / 100

Overcoming the abyss Types of clients and the “chasm effect”

There are five types of customers in the technology market:

1. InnovatorsThey actively follow all the technological innovations, dream of getting them before the official launch, and love to explore new features of gadgets. Their market share is small, but they are the source of first reviews. Let’s say Musk announces the start of sales of a new generation of electric vehicles. The reaction of innovators: “I want to be the first owner!”

2. Visionaries. They love everything new, but are often far from understanding technological subtleties. These are the romantics in the business world, ready to believe in a dream if it seems to them a sufficiently tempting project and meets their vision of the future. They are not interested in the gradual improvements that the gadget brings, but in breakthroughs. That’s Elon Musk.

3. Pragmatists (early majority). Able to get carried away by new technologies, but practicality in them always wins enthusiasm. They are not in a hurry to buy, they do not like to take risks. Always check with reputable sources beforehand. Their typical reaction is: “Let’s see how comfortable it is for others to ride this electric car, and only then we will decide on a purchase.”

4. Superpragmatists (later most) are even more patient and wait until the product meets the generally accepted standards. Their reaction: “I won’t buy until the majority switches to electric cars … or even better, when it becomes completely inconvenient to drive a car on gasoline.” This is a third of all buyers in any market segment, so, despite the conservatism, it is profitable to get their support.

5. Skeptics are generally not ready to buy new items. They wait until the last moment, but even then they are in no hurry to go to the store. Their reaction: “I will drive an electric car only if the world turns upside down.” In a word, they are anti-buyers. Nevertheless, high-tech managers should be interested in them: the grumbling of eternally dissatisfied skeptics about the discrepancy between the promises of the sellers and the product received contributes to quality control.

What is the problem with the abyss? To understand it, we need to simplify the picture. In fact, we are dealing with two types of market – early (this includes innovators and visionaries) and mature (everyone else). The early market is the enthusiast market: they believe in the product’s capabilities. A mature market is a market for pragmatists: they believe in the company’s reputation and proven quality, while not wanting to take risks. 

There is an abyss between them. Launching a product and gaining success with enthusiasts is half the battle. After that, you need to enlist the support of much more skeptical buyers. The problem is that they are not yet in your list of clients. Moreover, they live in a different information universe, they expect something completely different from high-tech news. 

Most companies ignore the chasm, so the transition from the market of enthusiasts to the market of pragmatists is not given to them.

Getting ready to jump

The company is in the news about the first test successes, and the pragmatists want to know if the product is in production.

Overcoming the abyss

The main thing about the market

The invasion of a mature market is always an attack, an onslaught. Nobody is waiting for you there. Potential customers are distrustful of you. Competitors you – a bone in the throat. Get ready for a tough fight. In general terms, the plan is this: focus all your efforts on providing new customers with the highest level of support in a limited market niche.

  • The narrower this niche is, the easier it is to take possession of it, the faster information about you will be transmitted from mouth to mouth. It is better to be the biggest fish in a small pond than the smallest fish in the sea (pragmatic clients only trust market leaders). 
  • Offer customers a complete solution that inspires confidence.
  • It’s not the size of the market that matters, but the degree of complexity of the problem you’re helping pragmatists solve.
  • Aim for your chosen niche, but keep in mind access to adjacent market segments. This allows for a different calculation of projected returns in the process of crossing the chasm. It should not be about how much you earn in the first market niche, but about how much you earn in adjacent niches. This is the “principle of the bowling alley”: we count all the pins that can be knocked down with one throw.

Choosing a promising market niche is an art. When the Macintosh crossed the chasm, its target niche was the computer graphics departments of large American Fortune 500 companies. Not the biggest market, but Apple managed to establish a critical process – to provide presentation materials to management and marketers. By capturing this niche, Apple managed to give its platform the status of a corporate standard. And then go to foreign markets – enlist the support of designers, advertisers, publishers.

Overcoming the abyss


Choosing a market

Divide all possible customers into market segments. Rate the attractiveness of each segment. Determine the finalists and then evaluate the volume of these niches, their availability, competition in these segments. Make a choice.

If it looks so easy, why do so few succeed? Because at this stage you have a minimum of information. You are moving in a fog. After all, the market has never known your product, and the more modern it is, the more difficult it is to predict the reaction. At this point, many managers make a huge mistake: they turn to statistics. Today, there is no shortage of diverse data, but it is of little use: statistics speak of someone else’s past experience. Moreover, it is always approximate.

Your weapon is not analytics, but informed intuition. By preparing the product, you have already learned enough and formed a certain image of the buyer in your mind. He haunts you again and again (and this is a good sign: what is forgotten goes there). Focus on this show. Don’t try to create an image of the market – markets are abstract. Model future customers and their needs.


We model the image of the client

The plan for creating the image is as follows:

1. Title. What is your end user from an economic and technical point of view? When it comes to the corporate market, data about geography, the industry as a whole, departments and job titles matter. If about the consumer market, age, gender, social status are important.

In the consumer market, the roles of user, technical and economic buyers usually overlap. For example, if a child is a gadget user, then his parents will be the economic buyer, and he himself will be the technical buyer. But crossing the chasm in the consumer market is much more difficult than in the corporate market, where there are enough resources to solve problems with the maintenance of an immature product.

Overcoming the abyss

In a word, at this stage we are talking about how and by whom the product will be bought and used. The more detailed you work out this aspect, the better.

2. The life of the customer before purchasing the product. Imagine a situation in which a customer finds himself who has no idea about your product. What is the place of action? What does the client want to achieve and what can he not succeed without your product? What exactly is going wrong? Why? What happens if the client fails to cope with his task, what will he lose?

3. The life of the customer after purchasing the product. The same situation is replayed with your product in mind. How did the customer handle the situation when they got your product? Has it become more effective and in what way? What costs did you avoid and what benefits did you get?

Let each employee present their image of the client according to this scenario. But special attention is given to the opinions of those who, by the nature of their work, closely communicate with real clients.


Evaluation of the scenario in terms of market strategy

Such scenarios are not scientific studies, but models close to reality. When they are ready, evaluate the scenarios in two stages against two types of criteria.

Control criteria:

1) target buyer;
2) the decisive factor of the purchase;
3) holistic product solution;
4) competitors.

Desirable criteria:

1) partners;
2) distribution;
3) pricing;
4) positioning;
5) next target customer.

At the first stage, evaluate scenarios only by control criteria – they are fundamental in terms of market attractiveness. Assign a separate group of marketers to score against the benchmarks. Keep the number of participants to a minimum. All of them should have the right to veto the final decision. Individual scores are compared, and discrepancies in scores are discussed.

Control criteria are evaluated on a five-point scale. The criterion for success is the maximum score, but there is one subtlety: a very low score on any of these four factors already indicates that the scenario most likely will not work. 

Overcoming the abyss

In the second step, evaluate the past scenarios against the desired criteria. Scenarios with the highest score are potential target niches. But in the end you have to choose one niche. Only one! If none of the scripts are selected, give up trying to bridge the chasm, rather return to new projects in the early market.


Future income in the chosen market niche

What income can bring the selected market segment? The principle “the more the better” does not work here. In the pragmatist market, you need to become the de facto quality standard by getting at least half (and preferably more) of orders over the next year. If you plan to earn $6 million in revenue, then you need to earn $3 million in the selected segment, and this should be half of all orders made in this segment. Therefore, you should not attack a segment whose volume exceeds $6 million: choose production according to your size .

If your target segment is too large, divide it into segments. It is good if sub-segmentation is based on professional groups within the same community (it is better not to interrupt the interaction between clients).

Overcoming the abyss

At the stage of crossing the chasm, abandon the concept of “selling at any cost.” Quantity (sales growth) should not overwhelm the quality of your overall product.


Whole product

It is always worth considering the discrepancy between what was offered to the buyer and what he eventually received. To eliminate this discrepancy, you need to expand the product with a variety of services and related products. This is the whole product. Most of all, product support is needed by pragmatic customers, they immediately want to get a complete solution (enthusiasts themselves are ready to explore the possibilities of the new product).

In the analog era, it was quite difficult to create an effective product support system and constantly bring new versions to the market. Business digitalization allows you to immediately turn a product into a service. The first such product offered as a service was software, telephony, TV. Let’s say Adobe no longer sells Photoshop as a standalone product (“Version 5.0 is out!”)—instead, the customer subscribes to Photoshop. We’re getting closer to anything as a service, with hotels as a service (Airbnb), clothes as a service (Stitch Fix), and toys as a service (Nerd Block).

Overcoming the abyss

Remember that each additional target customer will make new demands on the whole product. This is another reason why you should not try to enter all markets at the same time.


Who will be your partner?

Drop strategic marketing partnerships. It’s fashionable, but the idea looks much better on paper than in reality. To what extent do the corporate cultures of the merging companies coincide? How similar are their decision-making cycles? Differences begin already with the solution of basic issues. Yes, successful examples of strategic partnerships are known (the alliance between Intel and Microsoft), but these are exceptions to the rule.

Crossing the abyss, bet on tactical alliances. They have one goal – to accelerate the development of a holistic product for a specific market segment. This goal is mutually beneficial: product managers satisfy the client’s request, the partner uses new sources of sales. 

The entire Internet is the result of many tactical alliances that together bring great benefits. First, Netscape merged with Yahoo!: the first company provided traffic to the second company, which in turn helped to search for sites and thereby created a need for Netscape products. Then Yahoo! turns into a major portal and becomes an Amazon partner, directing traffic to them. And so on… The result is virtual commerce.

Overcoming the abyss

Partnerships are varied. Let’s say you own a start-up software development company for the pharmaceutical industry. Your goal is a completely new product: computer simulation of clinical trials of a vaccine using neural networks. The target customer is clear to you – these are the leaders in charge of clinical trials. The benefit of the product is also clear: computer simulation saves pharmacists a lot of money, and you also offer a service based on the most advanced artificial intelligence technologies. 

But modeling clinical trials requires data, which is a valuable commodity. However, you can:

  • enter into partnerships with public health organizations. Unlike business structures, they are interested in exchanging information, especially when it comes to “economically unprofitable diseases” (for example, many of the largest pharmaceutical corporations have stopped sponsoring the search for drugs for Alzheimer’s disease in recent years, but the problem has not disappeared from this );
  • form an advisory council of scientists, laboratory staff. You offer them stock in the company, they help you with product development and connections.

The creation of a holistic product is accompanied by the creation of the first partnerships. This is the first and very important link in the value chain.


How to deal with competitors?

Competitors, of course, do not need anyone. And at the same time, competitors are vital, because a company’s high reputation will not arise without competition. How to be?

First of all, avoid artificial competition, do not pass off insignificant product features as competitive advantages.

Let’s say Geoffrey Moore once had a Ph.D. in literature, but if in the marketing marketplace he presents himself as the world’s best high-tech marketing consultant with a Ph.D. in Renaissance English literature, that sounds strange.

Overcoming the abyss

When developing the early market, it is important to demonstrate your technological advantages in every possible way (this contributes to the credibility of the product). Developing the market of pragmatists, it is important to demonstrate leadership in the market (this contributes to the credibility of the company). Focus all your marketing efforts on the “market-centric” merits of the product (quality of support, cost of operation, de facto standard, the largest number of installed systems, etc.).

If it’s hard to find a single clear market alternative, that’s a bad sign. This means that there is no specific idea of ​​the market segment, for the money of which it is necessary to compete.

Overcoming the abyss

Of course, the quality of the product should also matter, but don’t undermine the credibility of the old guard of competitors. Instead of mocking their backwardness, imply that big technological changes are coming, requiring new products to solve the most important problems. It is this technology, and very affordable, that you offer to pragmatists.

Jumping over the abyss

Subtleties of positioning

Positioning plays a key role in the buying decision. At the same time, people are very conservative and do not like to be manipulated. When positioning a product, think not about how it is easier to sell it, but how to make the product easier to buy.

The product is positioned correctly if:

  • it’s given a name and a category (and that’s enough for the early market);
  • it is determined who and why will use it;
  • customers can compare the product in terms of its capabilities and price (a criterion that is fundamentally important for pragmatists);
  • customers feel that the product is offered by a reliable company that will stay on the market for as long as possible (this factor will also win over inveterate conservatives to your side).

The message you send to the client has four elements.

1. Statement of your market leadership. Its essence should fit in a couple of phrases. A good statement passes the “elevator test”: can you fully convey the essence of the product to a stranger in the time that you take him to another floor? 

The formula for reducing an idea to a couple of phrases: “Our product: 

1) for whom;
2) who they are unhappy with;
3) our product is…;
4) he provides…;
5) unlike …;
6) we have gathered together … “.

Overcoming the abyss

This wording is not a key phrase for an advertising campaign. It is created by the marketing team, not by advertisers. If the essence of the advertisement does not match the essence of the positioning, change the advertisement, but not the positioning statement.

2. Evidence. It is not necessary to declare the undisputed leadership in the market – it is easy to challenge. It is better to collect enough convincing evidence that will discourage skeptics from arguing. The most powerful evidence for pragmatists: market share, the number of solid partners, the seriousness of your commitments.

3. Communication. Look for contacts with a solid business press, enlist the support of serious financial analysts. Hold a press conference attended by customers, partners, analysts, distributors. Arrange a conference on a key issue that underpins the development of your market segment. Specialized media, trade shows, meetings of professional associations are all your allies, arousing the interest and trust of cautious pragmatists. Gaining that kind of support takes time, but it’s worth it.

4. Feedback. Positioning is a process. Competitors will certainly put a spoke in the wheel, so along the way you will have to refine the wording, analyze the same audience many times.


Distribution

How exactly would a pragmatic buyer want to buy your product? Competent choice and reliable provision of the supply chain at the stage of overcoming the abyss is more important than profit, turnover, and media attention. Here are five key decisions:

1. Direct sales. As a rule, they are designed for corporate users who buy and pay a lot. An important role here is played by the consulting department, which analyzes the needs of customers and offers solutions that turn into orders. But there is a subtlety in the pragmatist market: it is very likely that your offer is simply not known, so the company or suppliers themselves must contact potential partners with a profitable offer (or they will contact you from the news of the business press).

2. Self-service portals (Web-Based Self-Service). Many users are willing to pay hundreds or tens of dollars per month, provided that they can make purchases or find the information they need on their own. The company offloads the support service by using chatbots.

3. Sales 2.0. This model is similar to self-service, but it is about larger deals and more personalized offers, so that potential buyers are not answered by a chatbot, but by a trained manager. At the same time, automation makes it easier to track customer needs and determine the prices they are willing to pay.

4. Two-level sales model. The oldest on the high-tech market, but still an important model. It is relevant for companies that are working on product promotion: there are many applications, few real orders, so this work is more convenient for two different employees to perform.

5. Value-Added Resellers (VAR). Practice shows that VARs are good at advising rather than selling: they are “experts” and not “salespeople”. But at the stage of creating demand, they can provide excellent support. In the 1990s, it was Internet technology VARs who created the first generation of small business websites.


Pricing

1. Customer oriented pricing. Enthusiasts are ready to overpay for a novelty, conservatives are waiting for low prices. Pragmatists, on the other hand, take an intermediate position: if they believe in market leaders, they are ready to buy more from them than from outsider competitors.

2. Supplier oriented pricing. This is an important factor, but not at the stage of crossing the abyss. Instead, focus on customer requirements.

3. Distribution oriented pricing. For distributors, two questions are important:

  • Is the selling price acceptable?
  • Is it really worth selling this product?

But there is another question behind this: Is there enough margin in the price to reward the distributor for all the efforts to promote the product?

The main principle of pricing is as follows. Set the price of your product at the level of the price threshold of the market leaders (this is your claim to leadership). Price a disproportionately high level of distributor compensation, but reduce it as the product gains a foothold in the main market.

Overcoming the abyss

The rest of the company at the time of crossing the abyss

And how does the rest of the company feel at the stage of crossing the chasm? What happens outside the marketing department?

Financial department

A company in an early market generally does not think in terms of profitability. Enthusiasts creating a product are ready to create a great product for a penny. Those who enter a mature market cannot afford to have their head in the clouds.

A popular way to raise capital from investors is to show hockey stick graphs of income growth: at first there is no growth in income, then the curve jumps sharply. Ideally, it might be. In practice, almost never. But investors will eventually demand not charts, but real money. Avoid “hockey sticks”.

Overcoming the abyss

There are two important tasks in money matters:

  • for financiers – to calculate the size of the abyss. How long will it take before a company earns a realistic return on investment if it enters a large enough market? The answer is simple: as much as it takes to create and officially recognize a complete product. No product, no market. By carefully analyzing the motivation of customers and all the components of a holistic product, you can get fairly accurate deadlines;
  • for company management to decide how quickly to spend venture capital and when to start thinking about profitability. The answer is also simple: it is important to think about profitability as early as possible, even at the early market stage. “External” money relaxes. If the source of your salary is the market, you are interested in taking possession of it as quickly as possible.

Yes, there are exceptions: Amazon was unprofitable until 2003, and now it is thriving, attracting new investments. However, Bezos has always sacrificed profits for the sake of long-term rapid development. It is important for him not to lose speed. 

For other companies, Moore advises not to throw money around until they are established in the early market, and not to take on such obligations that, at the stage of crossing the chasm, they will eat all the money.


HR service

While the company is working on creating a product, enthusiasts play the first violin. They are not interested in creating infrastructure. Administration makes them sad. Therefore, when a company is preparing to move into a mature market, such people become a hindrance. They must either leave or take on a new project. Otherwise, the promotion of a holistic product will slow down.

During the period of overcoming the abyss, two new (temporary) positions must be introduced:

1) manager for the target market segment;
2) holistic product manager.

The Target Market Segment Manager is an enthusiast. For this period, he has one goal – to turn relationships with visionary clients into a springboard for entering a mature market:

  • Take control of the execution of the visionary project, liaising with the holistic product manager to understand which components of the commissioned project are suitable for a holistic solution and which are not;
  • develop variants of a complete product that can be included in a product line or used as product extensions;
  • speed up the launch of the first installation of the system, at the same time introducing the account manager, the pragmatist, his replacement. At the same time, current issues related to the implementation of the contract should be scrupulously controlled by other employees. 

After the transition, this employee will become an industry marketing manager.

The whole product manager should not be confused with the product manager. The product manager is responsible for creating, testing, certifying the product (and he also belongs to the enthusiasts). In the early market, he has all the powers, because the early market is product-oriented. However, in the course of work there are a lot of reports of failures, errors, requirements for improvement. This is what the holistic product manager does. 

His important advantage: unlike the product manager, he is not bound by obligations to the first customers, he does not think in terms of the old corporate world. 

Overcoming the abyss

After the transition, this employee will become the product marketing manager.


Development Department

This is the heart of high-tech, it is here that key decisions are made. It is important, however, that at the moment when the chasm is crossed, the development department should be imbued with the idea of ​​a holistic product, the form of which is dictated by the market. The habits of customers, their behavior patterns – this is what should control the imagination of developers. 

No, creativity has not ended: the life cycles of the next version of the product may be getting shorter, but the cycle of the entire product is the same (think of Apple with new Mac configurations) .

Marketing 3.0?

So far, we have been talking about the interaction of companies and clients according to the B2B model, “business to business”, when the introduction of technologies requires institutional support. However, the examples of Google, Facebook, YouTube prove that you can play by other rules.

Strictly speaking, these digital giants did not cross any abyss. Their strategy is more like a new version of CPG (consumer packaged goods): offer a sample, then launch the product in the mass market, make sure that the shelves are not empty. The commodity is a seductive digital experience. The subtlety is that digital technologies help to launch CPG rapidly, involving a huge number of users in a short time, and then monetizing success. 

  • Apple client logic: “I don’t have to buy an iPhone, I can call using a push-button.”
  • Facebook client logic: “It’s impossible not to register on Facebook, all my friends are already there.”

Offering a digital experience, scaling it, and monetizing it works like gears clinging to each other.

Overcoming the abyss

This, of course, does not guarantee success. Facebook has taken off, but many other social networks have not. Gears can get stuck. The original offer may not scale. Or developers will not guess over time when it is worth introducing monetization (this measure always has a slowing down effect). It is not easy to determine the optimal pricing for profit – current and future. Marketing departments of companies like Facebook work in two directions – both B2B and B2C (“business for consumers”), with the second more important (otherwise what to monetize?). But that’s a topic for another book.

Top 10 Thoughts

1. The early market is the enthusiast market. A mature market is a market for pragmatists. There is a gulf between them that not everyone can cross.

2. Enthusiast customers believe in the technology and product, pragmatic customers believe in the market and reputation.

3. Crossing the chasm, focus all your efforts on providing new customers with the highest level of support in a limited market niche.

4. Can you fully reveal the essence of your product to a stranger in the time that you go up with him in an elevator?

5. When positioning a product, think not about how easy it is to sell, but how easy it is to buy.

6. A competent choice of a supply channel at the stage of overcoming the abyss is more important than profit , turnover, and press attention.

7. Price your product at the market leader’s price cap, price the highest level of distributor compensation , but reduce the reward as the product gains a foothold in the mainstream market.

8. Don’t be dependent on venture capital. Don’t throw money around until you’ve established yourself in the early market , and don’t make commitments that eat up all the money when you cross the chasm.

9. While crossing the chasm, the company will need two new but temporary roles : Target Market Segment Manager and Whole Product Manager.

10. For the experience of Google and other digital giants, the abyss metaphor does not work. Offering a digital experience, scaling it, and monetizing it works like gears. But this does not mean that such companies are immune from failure.

79 / 100

Leave a Reply

Your email address will not be published.

Related Posts

Begin typing your search term above and press enter to search. Press ESC to cancel.

Back To Top