Targeting the Point of Attack
The first step to implementing the chasm crossing is targeting the point of attack. The vital principle for crossing the chasm is to target a specific niche segment as your point of attack and focus your resources on achieving market leadership in that segment as quickly as possible. First, you need to divide the possible mass of customers into segments. Then you need to examine each segment based on its attractiveness. After the segments get narrowed down to a small number as the finalists, you need to develop estimates for such factors as the market niches’ size, their accessibility to distribution and the extent to which competitors will protect them. Then you need to pick a segment and fight to win it. Unfortunately, nobody seems to get this right. Most companies don’t come to the chasm with a market segmentation strategy; if they do have one, they are not usually confident about it. It’s not because of a lack of knowledge of market segmentation as most of these individuals have been to business school. Instead, they have a natural hesitancy and lack confidence in making a high-risk, low-data decision.
High risk, low data decision
We already know that crossing the chasm is a hazardous attempt where you march right into the competitor’s kingdom. We will either win or lose a significant amount of equity value in our company. Since you’re trying to choose a segment you have not penetrated to a great extent, you also lack experience in that target market segment. Moreover, as you’re introducing a discontinuous innovative product to the market, no one has experience with what will happen. By definition, the market you’re entering has not experienced your product type before. The early adopters who have experienced your product before are so unique in their psychographic profile compared to your new target market customers, who happen to be pragmatists, that you should be careful about assuming your results until this date. This means you’re in a high-risk, low-data situation.
If you go through established case studies in market segmentation, you will see that they’re based on issues on market share in an existing market. There are few valuable models on how to proceed when you cannot evaluate market share data, and you cannot even conduct a detailed interview with an existing customer for the type you’re trying to succeed in. The biggest mistake anyone can make in this situation is relying on numeric information to save them. Numeric data are made up of millions of assumptions on the market for a promising future, but all hell breaks loose when something terrible happens. You need to accept the lack of data as a condition of this chasm process. To be sure, you can collect highly focused data on your own. However, you cannot expect to transform a low data situation into a high data situation just like that. Since you must act fast, you must decide on your viewpoint. For this purpose, informed intuition instead of analytical reasoning is the most reliable decision-making tool.
Unlike numerical analysis, informed intuition isn’t based on processing a statistically significant sample of data to achieve a particular confidence level. Instead, it includes conclusions based on separating a few high-quality images, and these images are unique from the mass of mental material that goes around our heads. Moreover, these images are memorable ones. Thus, the first rule of working with an image is that if you can’t remember an image, don’t try to, as it’s useless. Instead, work with memorable images.
In marketing, the target market segments can be imagined as Gen X, Gen Y, goths, geeks, Biebers and so on. Bieber’s can be seen shopping at a mall, wanting peer approval and not liking parental control, which means that specific marketing tactics can win their money. Early adopters, pragmatists and the late majority represent a set of images which are like goths or geeks. Each segment represents different marketing behaviours in adopting a discontinuous innovation from which you can predict the success or failure of marketing tactics. Target customer characterization thus makes these abstract segments more target market-specific.
Target customer characterization
Most chasm crossing market segmentation efforts get into trouble at the start, where they focus on a target market or segment instead of a target customer. You need to work with something that gives more signs on how to proceed when real people are present with complicated motives. However, as there are no real customers, you’ll have to create them. After you have their images in mind, you need to let them guide you to build a genuinely responsive approach to their needs.
Target customer characterization aims to create as many characterizations as possible, one for each type of customer and application for the product. Once you have built basic information on possible target customer profiles, you can apply a set of techniques to minimize the data into a ranked list of desirable target market opportunities.
Let’s consider how we would market a 3D printer to demonstrate an example of target customer characterization. 3D printers were getting a lot of attention from the press when Geoffrey A. Moore was working on his book, ‘Crossing the Chasm’. You input a 3D CAD file of the object you require, and the printer builds one up by manipulating a polymer stream or laying down layers of substrate. Let’s assume that 3D printers will continue winning an early market of techies and early adopters in the next few years. Invisalign, which happens to be the leader in the next generation of orthodontia, has normalized 3D printing to create its products and is revolutionizing the industry. Next, it is time to target the mainstream market, so where will you begin? This is a simple case of “so many segments, so little time” for which target customer situations are suitable for. Thus, let’s consider a sample situation below for our understanding.
Sample situation –
1. Header information – in the header, you need thumbnail information regarding the offer’s end-user, technical buyer, and economic buyer. For business markets, the primary information is industry, geography, department and job position. Regarding consumer markets, demographic information such as sex, economic status and social group are needed.
Assume, in this sample situation, a lighting designer is introducing new lighting fixtures for homes. She plans to sell these fixtures through wholesale distributors to interior decorators and designers acting as agents for their wealthy clients. In this situation, the critical header information is:
- Economic buyer – the client who finally pays for the lighting fixtures.
- End-user – the interior designer who encourages the client in making a choice.
- Technical buyer – the home maintenance provider or building contractor who installs the lighting fixture.
It’s important to note that in ready-made consumer situations, the three users merge as one or two. For example, if the end-user is a child, the economic buyer is a parent, and the technical buyer is the child. One issue is that it’s difficult to cross the chasm in a consumer market. Still, most successful chasm crossings occur in the business markets where the economic and technical resources can fight against the challenges of an immature product and service offering.
On the other hand, consumer markets can operate with no chasms if the technology is already adopted, and the obstruction is coming from the new business model. Turning back to our example, the idea behind the header information is to make the marketing and R&D teams focus on a specific situation on how the product will be bought and used. This is known as the use case. You don’t have to worry about being overly focused on the three roles of the users at this point because the more specific you are, the better!
2. Life before 3D printing
The aim here is to describe a situation where a user is stuck with significant consequences for the economic buyer. There are five elements you should capture:
- Scene or situation – you should focus on the moment of frustration. What is happening? What is the user going to do?
- Desired outcome – what does the user want to achieve? Why is this important?
- Attempted approach – How does the user proceed with his work without the new product?
- Interfering factors – what is going wrong? How and why is it going wrong?
- Economic consequences – so what? What is the outcome of the user failing to achieve the work productively?
Let’s use the lighting fixtures example and implement it into the elements:
- Scene or situation – Sam is an interior designer who has a wealthy but highly demanding client who requires the perfect fixtures for her renovated dining room. Sam has high demands, and both are committed to finding the perfect fixtures.
- The desired outcome is finding and buying the lighting fixtures that enhance the dining room’s theme. The goal is to combine an attractive shape and subtle colours, which vary the theme across several other fixtures. This means a designer must come up with many designs of different sizes and scales using the same set of materials.
- Attempted approach – Sam has been approaching all his reliable sources by collecting pictures and catalogs. He has examined them with his client leading to a specific idea of what they want but cannot find it.
- Interfering factors – the problem with this approach is that Sam and his client want to “co-design” the fixtures to integrate them perfectly with the other design themes at the house. However, fixtures have already been designed, and the industry must select what is available. Moreover, the number of inventories that should be displayed to represent a complete selection of fixtures is expensive.
- Economic consequences – Sam and his client are upset. It seems they’ll have to settle for something fine but not perfect, which damages Sam’s brand promise and his client’s confidence in his ability to do what was required. Moreover, the wholesaler who gets the business doesn’t gain the customer loyalty that he wants from Sam because he is also a part of the chain of compromise.
3. Life after 3D printing
Three elements need to be captured here:
- New approach – How does the end-user complete the work with the new product in hand?
- Enabling factors – how does the new approach allow the end-user to be free and productive?
- Economic rewards – what are the avoided costs or benefits achieved?
- New approach – Sam and his client have been going through catalogs and pictures over the internet for a week and have finally settled on a design. This is a variation on a few products that Sam has sketched out with the client’s help. First, the design is taken to a fixture wholesaler who supports 3D printing. Next, the wholesaler works with a freelance designer who can scan Sam’s drawing and convert it into a CAD file. Meanwhile, the wholesaler works with Sam to choose a suitable material and finish for the fabricated fixture. Finally, the CAD file and material are fed into the 3D printer, and the outcome is a finished fixture. If the client wants to make more changes, it can be quickly done by updating the file and printing it again. Moreover, by adjusting the parameters in the CAD file, fixtures of various scales can be produced that all share the same design.
- Enabling factors – 3 printers can manufacture when needed. This prevents the expense and the compromise of choosing from the premanufactured inventory. 3D printers have special flexibility as their CAD files, and printing materials are easily adjustable to satisfy various design requirements. CAD software systems operating on PCs are now mighty as they can adapt designs quickly and the 3D printers priced at the same value as PCs are faster in producing the artifacts in a few hours.
- Economic rewards –Sam’s client is happy with the outcome. She pays the mark-up on the fixtures and his consulting designer fee. Now, she wants to redo the fixtures in the rest of the house. The wholesaler is happy that he didn’t have to carry a large inventory of products to support a small number of sales. The lighting fixture manufacturers see a threat and are publishing designs suitable for 3D. These have lower prices but higher margins, so they expect to make more money with less capital compared to the past. Since the designs are software, putting them virtually on the web is easier, cutting down expensive trade shows.
Market development strategy checklist
Let’s assume you have spent a day with a group of ten members from a 3D printing company collecting 20-40 scenes. You have collected actual use cases from customers and interesting prospects regardless of whether they won, lost, or are waiting. This isn’t a survey based on formal segmentation as it takes too long, and their output isn’t valuable. Instead, we are exploring these stories of different customers, which will incorporate stories, prejudices and lies. However, they are the most valuable and correct data to gather at this point in the segmentation process.
The market development strategy checklist consists of a few issues around which go-to-market plans are made where each contains a chasm crossing factor:
- Target customer.
- Strong reason to buy.
- Whole product.
- Partners and allies.
- Next target customer.
Processing the scenarios includes rating each scenario against each of the factors of the market development strategy. The process happens in two stages, where in stage 1, all the scenarios are rated against 4 “showstopper” problems. Low scores in any of the scenarios eliminate them from being considered in the future as the beachhead segment. This means that the niche might be a good one to go after the chasm crossing but isn’t a good target for the crossing.
Scenarios that pass the first four issues will be rated against the last five factors (stage 2). In both stages, scores are given for each factor, ranking the scenarios. At the end of the process, the top-ranked scenarios are the top chasm crossing targets. Therefore, they will be discussed further until the team decides which ONE beachhead target to pursue. Remember, you cannot pursue more than one target as you cannot cross the chasm by pursuing two target markets simultaneously, where you cannot brush your teeth and fix your hair simultaneously.
Now let’s explore the four factors that raise the showstopper problems:
- Target customer – is there one identifiable economic buyer for the offer, easily accessible to the sales channel we want to use and sufficiently wealthy to pay for the full product? If such a buyer doesn’t exist, the sales team wastes time evangelizing groups of people by trying to gain a sponsor and the project will be dismissed at any time.
- Strong reason to buy – are the economic outcomes sufficiently severe to make any practical economic buyer anxious to solve the problem expressed in the scenario? Pragmatists can live with the problem for another year, but they’ll be interested in learning more about the product. Thus, the sales team will be continuously invited, and they won’t be coming back with any purchase orders. Instead, they’ll state that the customer said, “amazing presentation on the product”, whereas the customer said, “I learned more about the product, so I didn’t have to buy anything”.
- Whole product – can the company get help from the partners and allies to find a complete solution for the target customer’s strong reason to buy in the next three months so that we can be in the market by the end of the next quarter and dominate the market within 12 months after that? Time is running, and you need to cross the chasm now, which means you need to have a problem that you can solve.
- Competition – has the same problem been discovered by a company already that they have crossed the chasm ahead of you and pursued the target customer you were eyeing? If that’s the case, don’t target that market.
When scenarios are rated against these four factors, out of 1-5, the worst aggregate score they can achieve is 4, and the best is 20 with preferable high-rated scenarios. If you’re unsure, favour scenarios with a highly rated strong reason to buy. If a competitor has already been attracted, check whether you can outsmart them.
The remaining five factors fall into the “nice to have” category. This means that low scores can be resolved considering time and investment. However, as time and investment are scarce, cheaper and sooner are desirable features in a target market scenario.
- Partners and allies – have we already established relationships with other companies to complete the entire product? If so, it’s usually through a single early market project, or you’re just lucky.
- Distribution – is there a sales channel that can call on the target customer and satisfy the complete product requirements in distribution? If you’re fluent in the language of the target niche and have already established relationships with targeted customers and users, the process will increase significantly. If not, companies hire a well-reputed customer who isn’t related to the target industry and use them to lead the sales force back in.
- Pricing – Does the whole product’s price comply with the target customer’s budget and the value adapted by fixing the broken process? Are the partners and distribution channel partners compensated enough to maintain their loyalty and attention?
- Positioning – can the company be trusted as a provider of products and services to the targeted niche? Usually, the answer is not really. However, this can be solved quickly if one genuinely commits to a full product that can fix the broken process.
- Next target customer – if the niche is successfully dominated, does it have a good “bowling pin” impact? That means will these customers and partners help you enter adjacent niches?
Chasm crossing is, therefore, not the end but the start of mainstream market development. Consequently, it’s essential to have more follow-on niches that can be fruitfully addressed. If not, you’re going to fail.
After gaining the data from this process, it’s time to take the high-risk, low-data decision.
The point of attack
When crossing the chasm, you don’t have to pick the most desirable beachhead to succeed, as you must win the beachhead you have chosen. The target customer will desire you if there’s a problem in the segment. If it’s a complicated problem and the segment is small, you won’t have a competition to distract your focus. You can thus focus on the whole product, which is where it needs to be.
What makes you change plans? Mostly, it’s the scenario driving the effort based on wrong assumptions. To protect you from this, you need to have conducted market research early in the process, especially to validate the winning scenario. However, you shouldn’t expect this research to be complete before moving forward, as the enemy in the chasm is always time.
Finally, when you’re almost committing to the target customer, the point of how much revenue the segment might generate comes up.
As stated by Geoffrey A. Moore, to become profitable and a continuous entity in the market, you need a market segment that will commit to you as its current standard for enabling a critical business process. To become the current standard, you need to secure at least or a lot more of the new orders from the segment over the following year. This is what makes pragmatists notice you a lot. Simultaneously, you will be taking orders from other segments.
Assume that you can get half of the following year’s orders from the target segment. Suppose the total revenue target is 10 million USD. This means 5 million USD from the target segment, and this same 5 million USD implies that it must represent at least half of the total orders from the target segment if you are to have the impact of a market leader. I.e., if you’re going to be a 10-million-dollar company the following year, you shouldn’t target a segment more than 10 million USD. Meanwhile, the segment should be sufficiently large to generate 5 million USD.
Suppose you discover that the target segment is too large, sub-segment it. But be mindful of the word-of-mouth limits here. The best sub-segment is special interest groups in the community. Special interest groups are tightly networked and are usually formed due to having special problems. If there is no special interest group segment, consider geography as a sub-segmentation variable if it impacts how communities gather.
If the target segment is too small to generate the following year’s expected revenue, you need to augment it. Once again, it would help if you were mindful of genuine segmentation boundaries. If there is no suitable super segment to target, you’ll have to pick another target segment.
We have finally come to an end to this article. Always remember that the first step to implementing the chasm crossing is to target your point of attack. You need to make a high-risk, low-data decision, have an informed intuition, target customer characterization and a market development strategy checklist to rate target customer scenarios against the nine factors. After successfully rating these scenarios, you must select the target market by appointing a sub-committee.