[Read the entire chapter by chapter review of Crossing the Chasm.]

Pages  197 – 212; Amazon Kindle Locations 2545 – 2935

Best Quote(s)

“The number-one corporate objective, when crossing the chasm, is to secure a channel into the mainstream market with which the pragmatist customer will be comfortable.” Chapter 7, Location 2548

The organization has a very clear goal – win the beachhead, then win the following markets.

“Or, to put it the other way around, if the channel is not established, nothing further can be accomplished.” Chapter 7, Location 2548

This is the same point as above, but from a persuasion point, Moore is taking away the hope of any success without achieving this initial objective.

“Direct sales forces can bring lots of service to an account, but not if they lose the deal during the competitive procurement.”  Chapter 7, Location 2629

Even if we make the right strategic decisions about distribution and have a direct sales force – no one can sell a product that can’t be delivered.

“All other things being equal, however, direct sales is the preferred alternative because it gives us maximum control over our own destiny.”  Chapter 7, Location 2670

The organization must control its on fate.  Luck is not part of strategic planning.

“The greatest impediment to action in such situations is often a lack of understanding of the appropriate alternatives.” Chapter 7, Location 2931

The role of leadership is to develop options from the team and match the risk/reward of those options to the company’s capabilities.  Develop options.  Pick the best one.  Then create new options.

Page by Page

Distribution and pricing

2548

“The number-one corporate objective, when crossing the chasm, is to secure a channel into the mainstream market with which the pragmatist customer will be comfortable.”

“Or, to put it the other way around, if the channel is not established, nothing further can be accomplished.”

2553

“To sum up, when crossing the chasm, we are looking to attract customer-oriented distribution, and one of our primary lures will be distribution-oriented pricing.”

2558

The Structure of High Tech Distribution:

• Direct sales
• Two tiered retail
• One tiered retail
• Internet retail
• Two tiered VAR
• VAR roll ups
• OEM sales
• System integrators

2586

“Not planning for the Internet as part of your long-term distribution strategy will be fatal.”

• demand creators vs fulfillers
• Role in whole Product supply
• Potential for high volume

2595

“Channels optimized for whole product development are not effective for high volume delivery.”

2604

“First and foremost, does the channel already have, or is it optimized to create, a relationship with our target mainstream customer?”

“Second, how will this channel fit into our whole product mix—our partners and allies strategy?”

2609

Direct Sales

2619

“The direct sales force is optimized for creating demand. At its center is a consultative salesperson who works with the client in needs analysis and then, supported by a team of application and technology specialists, develops and proposes solutions, which, after additional interaction with the customer, and a competitive procurement, turn into purchase orders. This is a very expensive way to sell, with the cost of sales built into the product’s price. It works reasonably well when two conditions are met.”

2619

“For the customer, the key condition is that the vendor supply a broadly comprehensive and reasonably competitive set of offerings.”

Companies must think through the full cost of vendor education!

“For the vendor, the key condition is both the volume and the predictability of revenues.”

2624

“One underlying point here is that there is a price point below which this method of distribution cannot work.”

2629

Account Control / Cooperation

“Direct sales forces can bring lots of service to an account, but not if they lose the deal during the competitive procurement.”  Chapter 7, Location 2629

2634

“When functioning at its best, within the limits just laid out, direct sales is the optimal channel for high tech. It is also the best channel for crossing the chasm.”

2649

Direct sales force issues:

• Access – can the account get access?
• Can we grow an appropriate sales force?

2654

“A strong tactic to consider here is hiring a senior executive out of the target community to become your company’s ambassador back in.”

2670

“All other things being equal, however, direct sales is the preferred alternative because it gives us maximum control over our own destiny.”  Chapter 7, Location 2670

Retail Sales

2685

“First and foremost, the retail system works optimally when its job is to fulfill demand rather than to create it.”

2691

“Because it does not create demand, and because it does not help develop whole products, retail distribution is structurally unsuited to solving the chasm problem.”

2729

VAR-land or no-mans land?

• VARs don’t market
• There aren’t enough VARs
• Margins are labor driven

2760

“VARs are problematic as mainstream distribution channels.”

2765

Adaptations and Alternatives

2801

“Super- VARs”

2812

OEMs

2817

“Because it has no patience for the special demands of a chasm product, therefore, the OEM channel is not suited to solving the chasm distribution problem.”

2823

Selling Partnerships

2839

Outbound Retail

Domino’s Pizza was a great example of outbound retail already in 1991 – before the Internet and before their app.

2844

“Outbound retail sales forces, however, do not meet the chasm criteria.”

The Internet

2849

“As a future channel of distribution, the Internet represents the most significant change in computing to date, and maybe ever.”

“Moreover, for early-market offers targeted at technology enthusiasts, the Internet is a superb channel, for it gives visibility to no-name companies at very low cost. All that being said, what can the Internet do for a fledgling enterprise seeking to crossing the chasm?”

2854

“But while the Net is not the sales channel of choice, it can give a strong assist to coordinating the whole product team and to keeping in touch with the target segment.”

2860

So What’s the right choice?

2875

Pricing Options:

• Distribution oriented pricing
• Value based pricing…
• Cost based pricing…
• Competition based pricing…

Distribution oriented

“Is it priced to sell? Is it worthwhile to sell?”

2916

Recap: Invasion Launching

2922

1. Goal is to secure access to channel
2. Direct sales is the best option
3. Price carries a message – price like the market leader
4. Margin is how you reward the channel – incent the channel with money.

2931

“The greatest impediment to action in such situations is often a lack of understanding of the appropriate alternatives.” Chapter 7, Location 2931

2935

End of chapter.