IN THIS ARTICLE
Why do SaaS companies boom and bust? 30+ years after Crossing The Chasm, these are 7 big questions to understand your market's growth stage.
The realities of successfully ringing a product to market are sobering; 9/10 tech start-ups fail, and only 1% become unicorns.
The difference between success and failure isn't venture capital or stumbling across some ground-breaking technology. It takes traversing a market's peaks and troughs.
The high-tech marketing illusion is the belief...that new markets unfold in a continuous smooth way.
Geoffrey Moore
The blueprint exists - Geoffrey Moore's "Crossing The Chasm" - but how can you take Moore's model and apply it to understanding the growth stage of your market?
Let's answer that question.
What Does It Mean To Cross The Chasm?
The first step is to consider what it is to cross a chasm.
In "Crossing The Chasm" Geoffrey Moore explains the patterns that every tech company faces on its way to becoming a market leader.
In that explanation, Moore introduces a concept that is built around user adoption of technology. These stages bring their own characteristics and challenges for businesses to attract, engage, and convert the audience to a customer.
The model - the technology adoption lifecycle - is a bell curve, indicating groups that adopt technology at different rates:
In the context of B2B software these are:
- Innovators - those people who are willing to take a risk on the unproven for the clout of being the first to use a tech product.
- Early adopters - those people who are visionaries with the insight and risk appetite to get their organization bought into their way of thinking and the tech that comes with it.
- Early majority - those people who are pragmatic in choosing tech, meaning they need to see clear improvements from usage.
- Late majority - those people who are more conservative in their tech choice, adopting products because they want to keep pace with peers.
- Laggards - those people who are truly reluctant to use new technology and only do so after everyone else, typically by mandate from their organization.
This all matters because it's the gap between early adopters and early majority where you'll succeed or fail - the chasm.
The chasm is where tech companies hire countless sales reps and attempt to expand their territory, all the while doing so without a plan built around connecting the adopters and majority. Failure here means stagnating growth and leads to finger pointing.
You can avoid that with a plan. That's why you need to ask these seven big questions to grasp where you sit in the market's growth.
Do We Have An Ideal Customer Profile?
This is a strong place to start. You should have built an early customer profile early in your company's growth, but eventually you would have seen traction and revenue (pull) to consider this your ideal customer profile (ICP.)
Your ideal customer profile is a snapshot of the type of company that you best work with. It's something like "Mid-western insurance providers with 51-200 heads."
If you have an ideal customer profile it means that you've enough market and customer data to see that a particular segment is attracted to your product.
By looking deep into your ideal customer profile, you can start to see whether there are niches within that you're getting strong customer lifetime value from, for instance.
This is something crucial to Moore's model, as it will help you to find more people like your ICP and then, once you've won that niche, expand to an adjacent one, and so forth. That's how you cross the chasm.
If you don't have an ICP, it's likely that you're still with innovators.
Are We Happy With The Quality Of Our Pipe?
Marketing has a central role in measuring the marketing funnel and that extends through to the sales pipe. With your ICP to hand, you can add in buyer personas, and start to score your pipe based on your positioning.
The quality of the pipe is a question that can be answered with two views:
- Subjectively: How do sales and success reps feel about the deals in the pipe?
- Objectively: How do each of the deals in our pipe align to our ICP and personas?
If you sense that the quality in the pipe isn't where it should be, you'll need to ask hard questions about why. That may be because your messaging isn't working or it could be that your demand generation isn't targeting the right audiences.
Sit in on pipe reviews with your sales and success team and gauge how they talk about discoveries, trials, and deals. If you hear that your reps are spending large amounts of time on leads that are outside your ICP, it's likely your market is still nascent.
Be prepared to critically review what you're doing.
Is Our Sales Pipe Predictable?
Predictability is something every tech company wants from its sales pipe.
It's more than being confident that you're going to create enough discoveries or deals this month. It means going beneath the service and examining velocity and variety.
Peaks and troughs in leads can sometimes be explained by seasonality. The period of Thanksgiving through New Year, for instance, is a barren period for B2B tech. But, for the rest of the year, are you observing that some months are stronger than others?
As a marketer, it's your job to go out and learn why - it could be that your buyers plans in a particular month and that's when you need to ramp up campaigns.
Variety is the real killer. Most companies use organic and paid ads to drive demand. More mature companies use lead generation and account based marketing to create in a way that control the quality. But, if you're seeing companies come in that are way outside your ICP, it's likely a sign that you're stuck in the chasm.
Do We Have Random Traffic?
Expanding on the predictability of your pipe, look towards your organic traffic too.
While you can control traffic with paid ads, demand generation, and account based marketing, doing so with organic traffic (from search engines) is harder.
Search engines, without being directed, believe you're a global company. To help, align your backlink strategy and content distribution to your ICP. That will help Google see that you're from the countries that you want, and funnel more relevant traffic from results into your marketing engine.
Even with this in place, if you continue to see traffic from those locations outside your ICP, it's likely you've found more innovators in markets you perhaps hadn't considered. If more of these come in than your ICP, you're looking at the chasm.
Are We Organically Generating Leads?
Continuing from sources of traffic to your site, the word of mouth growth you're seeing is an indication of having crossed the chasm.
You'll be able to understand this with proper tracking of your lead sources and cost per lead. Tracking pays. Word of mouth (or referrals) are signs that you have a product, service, and brand that people can get behind.
That virality is something tech companies strive for, and the great ones turn it into the likes of HubSpot's INBOUND and Canva's Create. Beyond merch and events, it's also cheaper to grow your revenues with people who champion your cause.
If you're struggling for G2 reviews, case studies, customer guests on your podcast, or seeing very little growth from customer recommendations, you've not struck upon an ICP that's right for you... and you're likely in the chasm.
Are We Losing More Deals?
There's nowhere that failing to cross the chasm hurts more so than your P&L.
Whether you're losing more deals - to competitors or apathy - or increasingly being driven down on your cost, it's a sign of two things:
- You've yet to cross the chasm, and more players are entering the market which is causing little loyalty and more confusion in the marketplace, or
- You're into the early majority, but you're not the leader - this isn't a doom and gloom situation, but it will require you to look at paths of innovation to carve out space.
Your sales reps are those who get closest to the market. They represent a good source of gauging how the market is growing. Keep track of competitors in your CRM, regularly run competitor review sessions, and track every deal's closed lost reason.
Are We Regularly Changing Product Direction?
This question immediately reveals if you're still at the early parts of the market.
Innovators are the sorts of people who want to have a say in the direction of a product.
There's an idiom that consultants "follow the money" because they're able to - they're selling their services and ideas, not a product.
But, if SaaS founders look long and hard in the mirror, they've likely done the same.
If you're being pulled in every which way by your customers, and they require hand holding and a strong case of TLC, you're still at the beginning of the adoption curve.
Consider how you can break this cycle and productize what you're doing and you'll draw closer to the early majority.
What You Can Do Now
Asking these questions is the first step towards structured growth.
There are several paths to take:
- Talk to an analyst at Gartner or Forrester to understand the space
- Put in place regular review sessions to answer these questions
- Consider re-running a market sizing exercise
- Review your current positioning and messaging
- Re-build your go to market plan based on an ICP that you can grow with, and then hop into an adjacent ICP that the first ICP will happily recommend to the second.
Are You Tracking The Marketing KPIs That Answer These Questions?
Despite first releasing 30+ years ago, Geoffrey Moore's "Crossing The Chasm" remains a blueprint that few tech companies follow.
The inertia to change and to think that you're different is strong, understandably.
But, with these seven big questions, you can take the first step towards Moore's advice - and such self-reflection is critical to your success.
To keep the momentum, be sure to download a copy of our free marketing KPI tracking scorecard - ready to customize within Excel.
Want to talk about your market and its growth? Talk to me anytime, here.
