Case Study Crossing The Chasm Marketing Essay

Case Study Crossing The Chasm Marketing Essay Crossing the Chasm by Geoffrey A. Moore is one of the most authoritative books on high-tech marketing, and best-selling book of the influential business publishing houses Business Week. It is dedicated to marketing and sales of high-tech products for the mass market and related issues. In particular, the author argues that early and major high-tech product markets are divided by a gap or chasm, and all the forces of high-tech enterprises should be directed on overcoming it. The existence of the chasm is determined by the significant differences between the participants in early market (technology enthusiasts and visionaries) and the participants of the mass market (pragmatists). Tips for overcoming these differences, correct positioning and the correct choice of market segments all these can be found in Geoffrey Moores Crossing the Chasm (1991). Generally, if one has read Geoffrey A. Moores book, one has probably learned the main lesson: shifting from one segment of product life cycle to another, the company risks falling into a deadly trap. Crossing the Chasm is actually talking about changing the type of market (from One-For-All to All-For-One), in which companies are functioning. Such changes happen all the time, and the task of a good manager is to know about them and manage them. At first, when the software or complex computer products are at the stage of development and first tests, and are claimed only by fans or advanced industrial customers, we have the All-For-One market. In this market, the seller must do everything possible to meet the demands of individual customers. For the cycle of complex products creation, this first stage is factually the time for finding the few who will see something valuable for oneself or ones business in the new product. They will be ready to suffer disadvantages of the product as long as the seller (the creator) is surrounding them by additional services (like delivering defective parts, creating missing programs, etc.). It is clear that in this cycle stage, the seller cannot satisfy thousands or millions of users (Moore, 1991). As soon as the goods are ready to meet the mass market, the situation changes. Now, it is necessary to respond to any reaction of the first buyer, and make millions of people who know nothing about the product invest into the packaged solution. One should understand that its impossible to sell the products unless they meet customers needs. But having created such, there is no other way, but to make customers buy these goods through advertising pressure, promotions in stores and so on. Finally, we get the One-For-All market. As rightly written by J. Moore (1991), this market uses completely different laws from the All-For-One market. Buyers do not want the anticipatory care, but guarantees that it works for others. They are not interested in adjustment of the product on demand, but a stable operation or a non-stop service center. They do not want to boast that they bought something no one has, but be sure that they will not be fired because of that purchase. In general, the One-For-All market is a mass market with all the consequences connected with it. Moores main merit for the developers of all new products is the formulation of the phenomenon of the chasm that lies between the different psychological types of consumers, the product meets moving along the life cycle curve. Through the images of innovators, followers and conservatives, who face the goods in turn, Moore (1991) showed why the success of the product within one audience means nothing to another one, and therefore, why a successful product actively spinning up can suddenly stop in its development, or even disappear from the sight. In addition to the revolutionary idea of the abyss, Moore (1991) has formulated a lot of other ideas deserving individual pedestal. Its in his work that we can find one of the first references to such a phenomenon as the ecosystem of the product; the reasoned conviction to why the main reference for decision making should be based on informed intuition, rather than quantitative research; and niche strategies of market penetration. Moore (1991) predicts that in future, the markets skeptics and conservatives (and not innovators, as it has been commonly believed until now) should become a major battleground for technology companies, and also suggests what should be the main weapon of this struggle for the audience. However, far not every change creates a chasm. For example, the juice from PepsiCo for teenagers is a new idea, but it does not require a new type of refrigerator or new glasses. The criterion for classification of the product to a model of the chasm is the effect of interruptions caused by its appearance on the market. If a new product makes people refuse their habits and change their behavior model, then it surely faces a chasm in the market, because despite all the advantages, its adoption requires sacrifice. Here the gap occurs: some enthusiastically adopt the technology, and others equally strongly reject it. The chasm appears in any community, which, having faced discontinuous innovation, breaks up into groups of early adopters, pragmatists, late followers and skeptics. Thus, when a company buys a new technology, therell definitely be a chasm, first of all, among companys staff: some are willing to accept it, others do not. What should be done in such a situation? Moore (1991) argues that skeptics should simply be told that this technology can solve the problem they cannot solve in any other way. But if it is quite easy to overcome the gap within the company, the chasm in the market carries much higher risks. The chasm also occurs when new resources appear. The reason for the chasm in the computer market was that the chips became faster and more powerful; it allowed creating products that previously could not have been even imagined. Todays interest in alternative energy reminds the computer industry 30-40 years ago. The interruption effect is explicit here. For example, a very traditional sector, the automotive industry, for a long time was very conservative. However, in the 1990s it began progressing. An attempt to bring to market electric car was unsuccessful. But hybrid cars that use both gasoline and electric motor seem to have managed to overcome the chasm. According to Moore, the best indicator of the industry moving over the chasm is a community of venture capital (Moore, 1991). In general, in the IT field the support for new products have become the so-called visionaries. Occupying high positions in their companies, they are interested in competitive advantages of the new technologies. This category of customers helps young companies to cope with the chasm. But in the FMCG-market there are no such characters. So, what should the small companies do with innovative ideas for consumer markets? According to Moore, the chasm models can be applied to consumer markets only with serious reservations. These are very conservative markets, here the gap between the wealthy few visionaries and the rest of the audience is almost insurmountable. There is a notion of enough, the main barrier to interrupting innovations in consumer market. It strives to ensure that innovations are not interrupting; it makes them less daring trying to simplify them. Business will overcome the chasm, if it gives the opportunity to solve problems. But there is no competition between the custom ers in the store, you cannot help the customer to solve a problem with your change. The only way to success in consumer market is not to create gaps (Mohr, 2000). However, what to rely on, starting the process of overcoming the chasm? Moore writes that the quantitative analysis cannot help, because it requires facts, and facts appear when something happens. Therefore, the results of quantitative market research are completely useless for predicting of how the product will overcome the chasm. Businessman needs a model for the future. He should be able to rise above the business process and detect the sample. None of the life situations may be exactly taken for the sample. To determine whether this model is sufficient for the situation, can it be put as basis for future actions, or it is the wrong model and it should be eliminated, one should have informed intuition. None of the cases of quantitative analysis changes the model, but it is needed, because the world is constantly changing. High-tech companies, which have to overcome the chasm, in fact, create it themselves. On the one hand, it would be advantageous to choose the expectant tactics and to watch other fall into the chasm, but on the other hand, attitude to chasm depends on the size of the company. If it is small, it tends to pass the chasm as soon as possible not to let big companies to grab them while they are fixed on the other side. For big companies, on the contrary, it is advantageous to use the expectant strategy. Large companies are not inclined to engage in interrupting innovation within themselves. But they can buy companies that overcame the chasm, and raise them to a new level (Mohr, 2000). A good example: Apple invented graphical computer, and Microsoft waited a bit and captured the market. However, Moore (1991) believes that the rule running that in order to succeed in the technology market, one must first capture a niche, is not absolute. The opposite situation is often observed: the winner in the mass market is not the winner of a niche. Niche market surely does not always lead to the capture of the major one, but at least allows entering it. Typically, a young company dealing with technologies initially has few buyers who cannot provide it with a steady income. But until the company has a loyal group of buyers, it shouldnt even try to enter the prime market. The company finds itself in the conditions of fighting for each sale, but when a niche market is captured, the company can be considered successful. The purchase of a new product ceases to cause a surprise among major players. Thus, a niche market is the gateway to the core market; and if the company wins there, a number of new niches are formed around it and finally, the company will be with higher probability successful in them. At the same time, Moore (1991) says that the chasm is difficult to predict. Most often, companies find it only when they stand over it. So, what decisions should be made in this case? According to G. Moore (1991), if a company has found itself hanging over the abyss, the best solution is to retreat. When the product is too immature and cannot bridge the gap, it is necessary to postpone the work on it until better times; otherwise it will drag the whole company into this chasm. The company can also try to become a consultant or service company. After all, it still has ideas beside the product. Instead of selling a product, the company can personalize the technology for the solution of each specific task, and thus selling not products, but projects. However, in this case, all the people who cannot be engaged in consulting services (administrative and technical staff, product sales managers, marketers) are to be downsized. Attempts to cross the chasm actually create chasms within the organization itself, presented by the conflict between start-up generation and generation of mature business. Often, companies have to sacrifice the creators of the technology for the sake of survival. This may seem unfair, and when the market is at an early stage of development, the leader really must be a fan of the technology, attracting a certain type of customers (fans). But when the chasm is overcome, the company needs other customers pragmatists. And here it becomes clear that visionaries cannot find common language with them and begin to push the company back into the abyss. At this stage, the company has to change its leaders: most often, they become technical directors, as technological vision is required even in the mature market. Thus, though the main objects of desire of IT companies have always been buyers-innovators, already in the early 1990s Moore claimed that that the conservatives are the future of the IT market. Today we see how the compass of many technology companies turns in their direction. The whole point is that the conservatives are afraid of the responsibility for the new technology. They are happy to use it when it runs by itself. Therefore, in the mature market conservatives are the most fertile audience, they are very loyal to products they purchase. Most buyers of FMCG-market are very conservative in giving preference to one and the same brands (Mohr, 2000). For example, today most buyers choose cell phones by their color and shape, rather than because of technical characteristics, although until recently these people did not believe in the usefulness of the phone and basically did not buy it. Selling products to conservatives, companies face the fact that at this stage all the technologies are similar and competitive differences are minimal. Companies still have to be creative in design, small modifications, and service development. This seems to be a paradox: conservatives need to sell creatively. On the other hand, according to Moore (1991), the fact is that the process of innovation does not end after overcoming the chasm, but simply its essence is changing. At the early stages, it was connected with the essence of technology, and later with the appearance of the product. Conservatives do not need new technology, they need superficially attractive technology; they welcome only two changes in the product: when it gets cheaper and when it becomes seemingly more attractive. Therefore, a more advanced manufacturing technology is needed to make it cheaper, and the efforts of marketers to make it more vivid. On the whole, the more mature the market becomes, the less the essence of technology changes. Here automobile can be a good example. The majority of innovations are connected with style, interior and decoration of the car, aimed at making it more beautiful and comfortable, at reducing its size and price (Mohr, 2000). For example, the Chinese offered Chery, which will cost about $ 10Â  000 in the USA, while Mercedes and BMW are focused on comfort: climate control, leather seats, automatic doors and stuff. But all this does not deal with technologies; it is rather a supporting innovation. Such innovations make the existing products better, but do not create new technologies and do not change anything in their essence. As a result, the product becomes more convenient to consume. During most of the products life cycle the innovations are supportive, while disruptive innovations are much less common. Surely, in the world of high-tech, they should occur permanently, but now the technology as such becomes more mature and the intensity of intervenient innovations declines. Moore also says that the model of disruptive technologies in high-tech should also be interesting for other industries. The logical question is if principle of turning market will work for those who do not work in IT, where the author drew inspiration for his book. No less logical question is whether once turned over the market can make a turn again. The answer to both questions is yes. First, IT market is just one of many markets in the world, and it would be strange to consider it an exception to the rules. Digital technologies have transferred significant gaps to the entertainment industry. When Sony created the videotape recorder, people became accustomed to viewing home videos. In finance and airline industry, the effect of interruption can be seen today in the decentralization process and the change of aviation model. Thus, traditional carriers adhere to the nodal model, with several towns through which they conduct their main operations. The nodal model is good for long hauls, but for short distances is much more convenient to fly from point to point. Young companies like Southwest Airlines have adopted cost-effective aircrafts, which are easy to fly at medium distances. As a result, their clients were able to fly without transfers. Big companies have not noticed this niche and now its captured by small entrepreneurial companies, which is a real breakthrough. The second question is much more interesting, because a developing company will at all times meet on its way markets in both states. Moreover, it is constantly working in a situation where both types of market are taking place in one and the same market. For example, any seller of any goods in retail outlets is simultaneously working with both types of market. For those networks that are important in terms of sales and product image (class A network) the seller selects a special team, which is occupied by only the satisfaction of the vagaries of purchasers of such networks (All-For-One market). For all other networks that do not bring considerable profit, the seller holds a general division (One-For-All market). Thus, drawing out practical advice from Moore, in order to obtain maximum profit from both types of markets, a company has to divide its sales into two parts in compliance with the type of market. These departments should also be divided geographically, then the sales are to grow significantly in at least 3 months. However, the markets should be divided accurately, as the incorrect operation cannot contribute to the development of sales. If it turns out that one of the markets is just a tiny fraction of companys turnover, it should be eliminated in order to concentrate on the remaining market and increase it at times. Nowadays, it rarely happens when a bestseller contains practical, applicable to life lessons. Geoffrey A. Moores Crossing the Chasm is surely one of such rare works; it teaches both IT-companies and non-high-tech sector to separate markets and manage the gap when shifting between their types.