First Mover Advantage
The competitive edge acquired by a certain firm over its rivals as a result of being able to introduce the products first
What is the First Mover Advantage?
First mover advantage is the competitive edge acquired by a certain firm over its rivals as a result of being able to introduce the products first.
The term "First Mover Advantage" refers to the competitive benefits that a corporation can obtain by introducing a product first.
Taking home, a sizable portion of the first market is part of the first mover advantage. Because there aren't many rivals to contrast it with, the process of brand awareness and consumer loyalty is accelerated.
Additionally, even when buyers have superior deals, it is the one item that comes to mind. Additionally, the product has more time to strive for perfection and improve.
It's crucial to remember that the first-mover advantage only applies to big businesses that enter markets. For instance, Amazon was not the first business to offer books for sale online. However, it was the first enterprise to expand in that industry.
Key Takeaways
- Being the first to introduce a product can lead to a significant market share, brand recognition, and customer loyalty.
- Benefits include access to a wide range of suppliers, setting industry standards, strong retailer relationships, increased brand awareness, technology leadership, and economies of scale.
- Risks include competition from later entrants, changes in technology or customer preferences, rushed product development, and the possibility of introducing a product with no market demand.
- Coca-Cola and Kellogg's successfully gained the first-mover advantage in their respective industries.
- Second movers can learn from first movers' mistakes and potentially create better products or marketing strategies with lower costs.
Advantages of Being a First Mover
There are several advantages to positioning yourself as a first mover, including:
1. Numerous possibilities for suppliers
Your business will frequently have a long selection of vendors to choose from when it introduces a new product to the market initially.
To assure a cost-effective model that offers clients a high-quality product, you can bargain exclusive contracts with the top producers and other supply chain suppliers.
2. Establishing industrial norms
Your product will create industry standards when additional companies enter the market since you were the first to introduce it, along with the production procedures you develop.
Your firm will develop the production and marketing procedures for your market segment rather than depending on guidelines provided by another company or operating within the bounds of an already established market.
3. Building ties with retailers
As the exclusive provider of your goods in the market, you will develop strong relationships with a variety of shops.
More retailers will want to partner with you and put your goods on their shelves the more well-liked the product is. You'll already hold a strong position inside the retail framework when rivals enter the market.
4. Increased brand awareness
Since it will be the only one available, customers will soon learn to link your brand with your product. Sales growth and the creation of enduring customer connections are frequently correlated with brand recognition.
5. Technology leadership
First movers might make it more difficult for later entrants to imitate their technology, products, or services. For instance, the first mover will create an absolute cost advantage rather than merely a marginal one if they lower production costs.
Furthermore, the first mover will have the opportunity to file for patents, copyrights, and any other legal protections that may strengthen their position in the market.
When a company makes a significant advancement in its research and development (R&D), it might gain a competitive advantage through sustainable cost reduction if the creative concept is maintained and safeguarded.
It must be recognized that technological advancements are occurring at a breakneck speed.
As a result, patents offer little protection because of their poor transitory value. Patent wars could result in the demise of a first-mover company due to the short lifespan of any technical advantage.
6. Establishing economies of scale
Depending on the sector, the initial few months of production may be expensive until your company determines the most effective and cost-effective approach to produce your product and launch it.
Being the first to market provides you the opportunity to shape your micro-economy and create a system that is affordable before any rivals reach the market.
7. Customer loyalty
Due to the initial investment made in the product, certain businesses or goods attract repeat consumers.
If you offer computer software, for instance, it's unlikely that a customer will transfer to a rival after installing your product since the time and money required to migrate digital systems is not worth any possible cost savings.
This kind of consumer loyalty is fueled by need and is increased by being the first to market.
Disadvantages of being a first-mover
There are dangers associated with being a first-mover. Before racing to market, consider these drawbacks:
1. Competition
Being a first-mover has several drawbacks, but the greatest and most obvious one is the potential advantage it gives to your rivals.
For instance, after looking at your product, a rival could be able to reverse engineer your work and produce a virtually identical product much more cheaply, thus reducing your market share if your rival launches their product.
2. Changes in technology or client requirements
New entrants take advantage of technology disruptions to unseat incumbents. Sometimes late entrants might predict a market demand that will make an original offering appear inferior.
This can happen when a rival creates a better, more effective, and occasionally less priced product, the first mover fails to adapt or notice the shift in client demands, or both.
The older technology is frequently still developing when the new technology is presented, therefore the new technology may not be immediately perceived as a danger.
This disadvantage, which is closely connected to incumbent inertia, arises when a company fails to identify a change in the market or when a game-changing technological advancement is made.
In either scenario, the market creators are at a disadvantage since they must maintain it and risk missing opportunities to progress while attempting to protect what they already have.
3. Rapid design
Your organization could hurry the design and testing phases of product development to be the first to market with a brand-new product, resulting in a product that may not be as good as slower-moving rivals' offerings.
4. Overlooking pain spots
Despite thorough market research, some goods that businesses are confident would relieve client pain points end up selling poorly. Being the first to market a product that no one wants to buy might be an expensive mistake.
Example of First mover advantage
Some of the examples are listed below:
1. Coca-Cola
Even if Coke wasn't the first carbonated drink to be sold, it was the most popular. Vernors and Dr. Pepper did launch earlier. The reason why Coca-Cola still had the first mover advantage was due to its distinct flavor (Cola).
Around 1881, the first soda syrups were on the market. However, when Coca-Cola made its debut in 1886, it quickly rose to the top of the market. When Pepsi was introduced in 1898, Coke was already selling a million gallons annually.
To compete with its opponent, Pepsi rebranded and declared bankruptcy twice in the 1950s. And in the 1960s, they merged with Frito Lay, providing Pepsi the lifeblood they required to compete, as well as a substantial market share in the snack food sector.
However, Coke's best beverage brands have achieved sales of more than $1 billion, a figure Pepsi has never quite been able to match.
2. Kellogg’s
Granola is a breakfast cereal made from graham flour dough that was invented in 1863 by James Caleb Jackson. Despite being the first to market, he failed to attract many customers. Shortly after, surgeon John Harvey Kellogg created granola, a similar product.
However, their brand didn't start to take off and they didn't win the first-mover advantage until he and his younger brother introduced Corn Flakes, added sugar, and started mass marketing.
Although Post and Quaker Oats produced comparable cereals, it was no match for cornflakes that were introduced into the market by Kellogs.
After World War II, Frosted Flakes' reputation as the most popular cereal brand was further solidified by Tony the Tiger, television promotion, and other factors.
By purchasing Kashi in 2000, Kellogg's was able to keep up with the increase in natural and organic foods, which was essential to retaining their brand's success.
second-mover advantage
First movers don't always get the rewards of being the first. While businesses that are the first to introduce a new product to the market might earn a sizable market share owing to a lack of competition, occasionally their efforts fall short.
When a company follows the lead of the first-mover and manages to gain market share despite entering later, this is known as the second-mover advantage.
First-mover businesses sometimes incur substantial expenditures for research and development as well as marketing expenses required to inform consumers about a novel product category.
A second-mover company will spend less on R&D, less on market education, less on dealing with the risk of failing to acquire product acceptability, and less on customer acquisition since it can learn from the mistakes made by the first-mover company.
Because of this, the second mover may concentrate its efforts on creating a better product or out marketing the first mover.
Among the first movers whose market share was later reduced by second movers are the following:
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Nintendo against Atari
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Amazon.com vs. Charles Stack’s Online Bookstore (books.com)
Fast followers are another term for companies that advance quickly. Of course, each market is unique. As a result, although some markets may favor first-movers, others might not.
Example of second-mover advantage
Amazon.com was established in 1994 by Jeff Bezos as an online bookshop, and it went live in 1995. VHS, DVD, CD, computer software, video games, furniture, toys, and many more products were swiftly added to the product lines.
Many people are unaware that Book Stacks Unlimited, often known as books.com, was established in 1991 and went live online in 1992. The Books.com website ultimately attracted 500,000 visitors each month.
Charles M. Stack is credited with founding what is regarded as the first online bookshop, but Bezos and Amazon were considerably more successful because Bezos was able to recognize that web usage was rising by 2000% a year and promote Amazon accordingly.
Since then, Amazon has dominated the online book industry and has continued to grow into other product areas. On the other hand, Barnes & Noble purchased BookStacks in 1996. www.books.com now redirects to www.barnesandnoble.com.
late mover
A corporation that releases a new product into the market after its rivals have done so is considered a late mover.
To guarantee that their product is optimized to satisfy client expectations and can be manufactured as inexpensively as possible to save the firm money, late movers frequently consciously set their timetable.
Late movers have the chance to wait before participating to observe how well a novel idea, concept, or strategy is accepted by the broader consumer population. As a result, fewer risks are increased, and less research and development are required to determine public opinion.
In other words, when it comes to testing the market, late movers might benefit from what early movers learned the hard way.
A late-moving company has the chance to observe the struggles of early movers and make modifications before entering the battle. It also puts a late-moving company in a position to swiftly launch its own "new and improved version" of an early-moving product.
This lessens the risk of losing investment money. This strategy might make a late-moving company look more cutting edge or inventive, even when it is not a pioneer.
Examples of Successful Companies That Were Late Movers
A few examples of businesses that weren't market pioneers but have since developed into some of the biggest businesses in the world are listed below:
1. Google
There were search engines like Yahoo and Infoseek before Google. Google was able to modify its search engine, though, so that it operates more effectively and efficiently. They currently have a 65%+ share of search activity.
2. Starbucks
Before Starbucks opened, there were several locations to purchase coffee. But Starbucks succeeded in building solid brand equity by emphasizing its position as the place to go while you're not at home or work.
3. Spotify
There were several locations online where you could legally download music, like SoundCloud and Pandora.
Users who had previously accessed music illegally were able to convert to paying customers thanks to Spotify's user-friendly and on-demand streaming service. They currently hold 86 percent of the market for on-demand streaming.
4. Facebook
Friendster and Myspace came before Facebook, but even before those two, SixDegrees.com and Classmates.com established the foundation for later social media sites.
Classmates.com allows you to connect with former classmates, and SixDegrees was among the first users to create a profile page.
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