What Is First-Movers Advantage? Definition and Benefits
By Indeed Editorial Team
Updated September 2, 2022
Published January 22, 2021
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Being the first company to enter the marketplace has such a strong correlation with success that this practice has its own term—the first-mover advantage. As with any strategy, however, being a first-mover is not without its corresponding disadvantages. Knowing how to balance the benefits and downsides of performing as a first-mover can help the company you work for maximize its market impact.
In this article, we define the first-mover, explain what the first-mover advantage is, describe the benefits of being a first-mover, highlight the disadvantages of being a first-mover, provide examples of first-movers and review late movers and fast followers.
First-movers introduce new products and services to the market.
When you're the first to introduce a product, it may allow other businesses to re-create your product.
Being a first-mover can help create strong brand loyalty and recognition.
What is a first-mover?
First-movers are companies that introduce a product or service to the market. When a company introduces new services or products to the market, it often means that service or product is the only option for customers seeking it. It can also introduce innovation or unique approaches to customer problems.
What is the first-mover advantage?
The first-mover advantage is the benefit of increased brand recognition, customer loyalty and increased sales that often accompany a business that is the first to enter the marketplace with a new product. In most cases, companies achieve the first-mover advantage through savvy marketing and advertising that positions their product not only as the first in its field but also as the best option for consumers when competitors inevitably arrive on the market.
Examples of first-movers
First-movers can occur in any industry, but they're often more prevalent in some fields than others. Consider these general examples of successful first-movers:
The technology space is full of first-movers. This field is constantly innovating and finding new methods for achieving goals and creating entirely new products. Consider technological innovations like smartphones, tablets and smart speakers, all of which had an initial first-mover that dominated the marketplace before competitors arrived.
The automotive field is another that's benefited from first-movers over the years. There was the introduction of the first car, and since then, various car makers have designed new types of vehicles and engines that entirely changed the automotive space and customer desires. Consider the first minivan or the fully electric vehicle. A single manufacturer initially created these products before competitors joined the market.
Convenience products also impact the first-mover space. For example, consider luggage optimized for airplanes. Before air travel was ubiquitous, most travelers may have used large suitcases or chests to transport their personal effects from one place to another. As commercial plane travel increased, a luggage manufacturer added wheels to their suitcase to make it easier to pull through the concourse. Eventually, competitors followed suit, changing the luggage landscape.
Benefits of being a first-mover
Positioning yourself as a first-mover may provide several benefits, including:
Extensive supplier options
When your organization is the first in the marketplace with a new product, your company may have an extensive list of suppliers to work with. You can negotiate exclusive contracts with the best manufacturers and other supply chain providers to ensure a cost-effective model that provides customers with a high-quality product.
Defining industry standards
As the first in the market, your product, and the manufacturing practices you establish, can set the industry norms as other businesses enter the marketplace. Rather than relying on standards set by another company or working within the confines of a pre-established market, your organization can define the manufacturing and marketing practices for your segment.
Developing retailer relationships
You can build excellent relationships with a wide range of retailers as the only company in the market with your product. The more popular the product is, the more stores may want to work with you and feature your product on their shelves. When competitors enter the market, you likely already have a solid position within the retail framework.
Increased brand recognition
Customers can quickly learn to associate your brand with your product since it is the only one on the market. Brand recognition often leads to increased sales and the development of long-term customer relationships. When other companies introduce similar products, customers may not realize they're the same or prefer to continue purchasing the original.
Establishing economies of scale
Depending on the industry, the first few months of production can be costly until your organization has found the most efficient and economical way to manufacture your product and bring it to market. Being the first in the marketplace gives you time to mold your micro-economy and establish a cost-effective system before any competitors enter the sector.
Defining customer loyalty
Some industries or products produce loyal customers because of the initial investment in the product. For example, if you sell computer software, it's unlikely a customer switches to a competitor after installing your product because the time and expense of migrating digital systems are not worth any potential cost savings. Being the first to market increases this type of necessity-driven customer loyalty.
Disadvantages of being a first-mover
Being a first-mover is not without its risks, however. Consider these potential disadvantages before rushing to market:
Superior competition: The biggest and most prescient disadvantage of being a first-mover is the potential advantage it offers to your competitors. By creating a high-quality product priced correctly for your customer base, you can avoid losing consumers to competition.
Rushing design: In an effort to be the very first one to sell your new product to consumers, your company might rush the design and testing stage of product development, leading to a product that's not as optimal as slower-moving competitors' products might be. Focusing on proper production and creating a high-quality product can help you avoid this potential drawback.
Misreading pain points: Some products that companies assume address customer pain points turn out to be low sellers. Investing in proper and thorough research can help you avoid this potential disadvantage.
Education costs: As the first company to introduce a new product, you likely spend a substantial amount of time and money educating your customers about the product, its uses and its benefits. Using effective marketing and creating an intuitive product can help to lower education costs.
Frequently asked questions about first-movers
These are the answers to some common questions about first-movers:
What is a late mover?
A late mover is a company that enters the marketplace with a new product substantially after its competitors have debuted new products. Late movers often choose their timing purposefully to optimize the product to meet customer needs and produce it as cheaply as possible to save the company money.
What's the likelihood of getting a first-mover advantage?
How likely a company is to gain a first-mover advantage depends on which market they operate within. Some markets allow more space for innovation, technological advancements and new products than others. For example, new products may be more likely for a computer company than for one that creates crafting materials.
What is a fast follower?
A fast follower is a company that quickly imitates a first-mover and enters the marketplace with a competing product as fast as possible. Fast followers hope to capitalize on the initial consumer interest in the new product and earn some of the first-mover's market share without investing substantial time or money in marketing or customer education.
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