In the context of competitive markets, when does a firm typically encounter the 'chasm' between early adopters and the early majority?

• A. When the firm becomes a monopoly and faces no competition
• B. When the firm's product is adopted by the late majority and laggards
• C. When the firm achieves economies of scale and lowers its average cost
• D. When the firm's product appeals to innovators but fails to gain traction with mainstream customers

Answer: (D)

Verified step by step guidance

1. Understand the concept of the 'chasm' in market adoption, which refers to a critical gap between early adopters (innovators and early users) and the early majority (mainstream customers).
2. Recognize that this 'chasm' occurs when a product is initially embraced by innovators but struggles to appeal to the larger, more risk-averse early majority segment.
3. Analyze why this gap is important: crossing the chasm is essential for a firm to move from niche success to widespread market acceptance and growth.
4. Note that this situation is not directly related to the firm becoming a monopoly, nor to adoption by late majority or laggards, nor solely to achieving economies of scale.
5. Conclude that the 'chasm' typically appears when the firm's product appeals to innovators but fails to gain traction with mainstream customers, highlighting the challenge of expanding market reach beyond early adopters.