Crossing the Chasm

Product Life Cycle

Too often today's managers equate marketing with sales when, in fact, sales are only a small part of marketing. While many pay lip service to the concept of marketing, few understand the steps that are necessary to tackle a given market. One of the problems that arises is in the manager's relationship to the company's customers. He or she may get into the mind set of myopic vision when considering the company's offering, whether it be a product or a service. The manager may look at the market one-dimensionally without considering other possible segmentations. He may also concentrate on the product itself without paying attention to the way in which it may be changed to appeal to different customers. If the manager forgets the total marketing mix, it is tantamount to pushing on a rope or stuffing the toothpaste back into the tube.

The marketing mix is a very important concept in marketing. It defines the total offering from a company to a market segment. The marketing mix is defined as (1) the product or service, (2) the place at which the company/market interaction transpires, (3) the promotional activities that surround the offering, and (4) the price that the customers pays. These are euphemistically referred to as the 4 Ps.

I will do a separate newsletter on the 4Ps later this winter, but I want to focus on a particular aspect of the marketing mix that frequently eludes managers. The marketing mix must change over the life cycle of the product and must be designed to match the specific dynamics that are active at a given time. The life-cycle phenomenon effects both consumer goods and high-tech products. Depending on where the product or service is in its life cycle, the market dynamics for it varies.

Moore's Product Life Cycle

In this paper, I will outline the approach to this subject taken by Geoffrey Moore in his book, Crossing the Chasm. Moore wrote his book in 1991, but he has recently republished it in a completely modern edition. Moore posits that the type of customer who buys in each of the different phases of the product life cycle is fundamentally different than the type who buys in the other phases. Each phase carries with it a different psychographic makeup. I will describe his model below and how it might affect your business in the real world. I will focus my discussion on high-tech products, although the concept of phases in the product life cycle is quite applicable to consumer products.

One definition that must be offered before we begin will prove to be invaluable in the understanding of the marketing mix and its relationship to the product life cycle. It is the definition of the market. Moore defines the market as:

A set of actual or potential customers,
For a given set of products or services,
Who have a common set of needs or wants, and
Who reference each other when making a buying decision.

Moore.gif - 3284 Bytes It is the last component of this definition that is often missing in other marketing texts. Moore emphasizes that one of the fundamental qualities of a common marketplace is that its members communicate with each other. We can see in the diagram that there are 5 basic regions to the life cycle with spaces in between each one. These regions are (1) the innovators, (2) the early adopters, (3) the early majority, (4) the late majority, and (5) the laggards. You also see that the space between the early adopters and the early majority is larger than the spaces between the other regions. This extra large space is significant. It is the Chasm.

The relative sizes of the segments are not really known and may differ significantly from market to market. But as a thumb rule it is not too inaccurate to assume the split to be at the standard deviation points. The Early Majority and Late Majority will fall within one standard deviation from the norm, the Early Adopters and the Laggards will be within two standard deviations, and the Innovators will be at 3 standard deviations. Thus we can see the importance of the Early and Late Majorities; between them they share approximately 68% of the market.

Innovators: The Technology Enthusiasts

These individuals are the first to adopt any new technology. They are characterized by Gyro Gearloose, those who wore sliderules on their belts at college (Am I dating myself?), pocket protectors, and propeller caps. In other words, Nerds. When you are developing a new technology, it is paramount that you find a couple of these individuals to first try your product. The earliest version of the product is sometimes referred to as the Beta System. The Innovators will test it, push it, tweak it, and otherwise put it through the mill. They will enjoy talking to you about it, advising, suggesting, and complaining about how your forgot this or that. Their input is invaluable.

Innovators are usually in the bowels of your customer, working in R&D - not even in pilot lines. You will find them at technology seminars, often giving papers on advanced, esoteric topics. They tend to be reclusive, except when it comes to other technologists. They generally avoid anyone who has "marketing" or "sales" associated with their title. They are motivated by the shear joy of technology.

Early Adopters: The Visionaries

These are the pilot line and production line managers who realize the strategic benefit of leap frogging technology. They are looking for a competitive advantage and are very comfortable in their ability to manage new technology. They are not interested merely in an improvement; they want a breakthrough. In contrast to the Innovators, the Early Adopters are really the drivers of technology because they prove it in a production environment.

Often, these are younger managers who are looking for a way to make a name for themselves, who are climbing the corporate ladder. These are the pioneers that are willing to take a chance. As such, they do not pay much attention to an existing infrastructure, such as field service and local warehouses. In return, they will hold a supplier's feet to the fire by requiring stringent product specifications and quick response to unscheduled downtime. They are hard to satisfy because it is very difficult to achieve that illusive "breakthrough;" there are always tradeoffs.

You will find the Visionaries also at industry technical seminars. They go there to talk to the Innovators. While they are not very interested in existing technology, they are always on the lookout for those solutions that are being tested in the R&D environment. This is what links the market and provides that communication link in Moore's definition of the market.

Early Majority: The Pragmatists

It is with the Pragmatists that many companies lose their momentum. Having successfully introduced the Beta System, and having found a few early adopters, a company may continue to market the product in the same manner to the market-at-large. But the Early Majority is much different psychographically than the earlier customers. While these managers are comfortable with technology, they want some guarantees. They want a service infrastructure, maintenance contracts, manuals, training, and user friendliness. These managers will operate the system in a production environment which demands reliability. They are interested in making the numbers, increasing yields, and minimizing variances. They avoid risk.

Here you will find seasoned managers who have earned their reputation for seriousness and a no-nonsense approach to business. You will find them "kicking the tires" at the trade shows and seminars but they are very suspicious of the Innovators. They tend to communicate with others like themselves in their industry, often through users' groups. There is a "catch-22" with them: You need to be established to have credibility with them and you need to have credibility in order to get established. Later I will discuss the differences in marketing to Early Adopters and Early Majority segments.

Late Majority: The Conservatives

It takes a conscious effort on the part of a company to change marketing tactics from the Early Adopters to the Early Majority. But frequently, a company fails to continue its momentum and market to the Late Majority. These managers are probably most unlike the corresponding managers in your own company. They are against discontinuous innovations and will cling to current technologies that have earned their trust. While the Early Majority are willing to implement new technology, the Conservatives are not. As a group, these buyers comprise approximately 34% of the total market, an equal share with the Early Majority.

Laggards: The Skeptics

These buyers do not want anything to do with technology. If they buy new technology, it is because it is buried inside another product, one that has been accepted already. Their motivation is based on margins; they are looking for the best deal. The Skeptics do not really believe that a new technology can deliver its promises. They believe that the training and complications that arise from new technology actually decrease any benefits that might accrue from the benefits that are promised. At any rate, they argue that any benefits that do come from a new technology are far short of those that were promised from the outset.

Marketing to the Product Life Cycle

As I explained at the beginning, a company must change its strategy and its marketing mix as the product moves along the Technology Adoption Life Cycle. It is not appropriate to begin marketing a new product with a brand spanking new technology into the mainstream market. You will loose credibility before you ever get a beach head established. The first step is to nurture your relationships with the Innovators in your market place. The Innovators will not pay top dollar because they know that they is providing the benefit. There should be on-going and frequent communication between your company - the technologists, engineers, and marketing personnel - and the Innovator.

When most of the errors and miscues have been remedied, it is time to begin marketing to the Early Adopters. These individuals comprise a niche market of sorts. The marketing effort involves nurturing your relationships with them. They are confident, production-oriented technologists who can help you improve the product. Now is the time to work on the bells and whistles. The marketing effort should be one-on-one selling, often involving upper management. The contract and specifications are not a trivial matter because the Early Adopter will ask for everything and expect it. Those expectations must be brought within the reasonable boundaries that can be delivered by your company. It will always involve on-going support, on-the-job training, and much hand holding. But at this point, you can obtain a very high price for your product because the Adopter is sold on the technology and believes he will get a leapfrogging technical advantage.

The Chasm

The size of the market up to this point is only about 16% of its eventual size. All of the hard work with the Innovators and Early Adopters can now pay off if you can adjust your marketing mix to sell to the Early Majority; the Pragmatists. Now the features that appeal to this production-minded segment must be fully developed and reliable. In many cases, especially with international markets, channels of distribution must be developed in order to reach them. Often these channels are able to engender the trust that must be part of the selling formula for this segment. Selling tools must be developed and the sales force must be trained to deliver the message of the benefits of the product and how it satisfies the needs of the Pragmatists. Field service engineers and technicians, systems analysts, programmers, all must be trained on the products. The service structure must be put in place. Finally, the pricing model, replete with discount policies and sales promotions, must be worked out within the competitive environment that exists at the time.

If you are successful in crossing the chasm and selling to the Early Majority, the Late Majority and the Laggards will not be far behind. The Late Majority trust the Pragmatists more than any other segment of the buying cycle and your success will help in the promotion to the later segment. After the Late Majority, the Laggards still will contribute about 16% to the eventual size of the market. It would be a mistake to leave this segment to a competitor, especially one who is looking for some way to penetrate an otherwise difficult market. The Laggards also point out the discrepancies between your sales pitch and the actual benefits of the product; it is wise to listen to them.

Summary

The above model is played out over and over again throughout the world. Companies that adopt a marketing culture will pay attention to the customer and adapt the marketing mix to the product life cycle. Other companies will take a hit-and-miss approach, going with their guts on how to market their products. In the long run, it is the marketing driven companies that will win.

Robert McGeary

REM Enterprises

At REM, we are experienced at the steps involved in creating the strategy and the marketing mix that defines it. It begins with a situational analysis whereby the existing and easily obtained data on the client company and the market are compiled and analyzed. From there, the appropriate segments of the market are identified and matched with the client's core capabilities and competancies. We create a marketing plan that puts the strategy into a time-line with the marketing mix, action plan, and controls to monitor and change it if necessary.

If you are planning a new product introduction or if your marketing strategy needs to be revisited, REM would like the opportunity to help you. It is important that companies frequently perform a total marketing audit whereby the marketing program is analyzed and brought up to optimum status. A marketing audit often will suggest areas for immediate improvement that would otherwise go unchanged. Call us today for a free consultation.