As we know that the world of business is full of competition and competitors. Businesses and companies always look for new opportunities and ideas to gain a competitive advantage over competitors and win the customers’ market share. Today, we’re going to discuss the concept of making the first move in terms of getting a competitive edge.
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What is First Mover Strategy?
A first-mover is a marketing strategy where a firm firstly launches the product/service in the market and then gains the competitive advantage of being the first. It enables the company to develop a strong database of loyal customers and brand recognition among them before the arrival of the competitors. It also provides the company enough time to develop the product/service and set the market price accordingly.
Competitors always follow the first-mover and exploit the market success of his product/service and try to increase their market share. The first-mover strategy usually establishes a strong database of customers and wins the market share and maintains its position for a long time.
Here are some points to remember about the first mover strategy;
- A first-mover in the business that earns a competitive edge by introducing a new product into the market.
- It helps to develop strong brand recognition and a database of loyal customers.
- The first-mover becomes cost-efficient over time by using the economies of scale.
- The competitors would come after the first-mover and copy its product/service.
First-mover advantage Vs. Second Mover Advantage
A First-mover is a business that does a lot of market research about the product/service and then launches the marketing and promotional activities to spread awareness. The first move usually manages to set the price of its choosing, develops loyal customers, and increases the market share.
The Second mover is the business that follows the success lead of the first-mover’s business. The second mover doesn’t have to incur a lot of research and development costs. It can win the market share despite entering the market late.
Advantages of First-Mover Strategy
Technology Leadership
The first-mover has the advantage to pave the way for later entrants to lean the usage of technology. Often it’s very difficult for competitors to copy it. As the firm gains experience and understands how to produce the product at a lower cost. In the meantime, when competitors are gaining experience to reduce the cost. Companies that follow this strategy can enjoy the benefits of cost-efficiency.
Sometimes, it’s easier for the competitors to learn and understand technology than the first-mover. However, he can protect himself by getting the patents and copyrights. The focus is to set the standards of the industry very high that customers won’t accept others.
Control of Resources
The first-mover also gets the advantage of controlling the resource for the operation of its business. For instance, Walmart was the first-mover in the market and it chose and bought all the best locations. It also established discounted stores in the small towns.
It can also control the raw material suppliers and shelf spacing/racking of the products. It can also establish more manufacturing lines and facilities that won’t give enough for competitors to enter the market.
Buyer-Switching Cost
The first-mover doesn’t give the customers an advantage of switching to other brands because there’s no other brand. It could enjoy the benefit of buyer switching costs. If the product isn’t good, then the business may lose customers permanently. Often the first-mover sets the standards and preferences of the customers. Once customers accept the standards, it develops brand loyalty.
Loyal and satisfied customers won’t switch to other brands, because it involves the risk of uncertain results. That’s why the brand preference decision is more important for the customers than the product.
Brand Name Recognition
When the first-mover launches its product/service in the market, then it would have the advantage of being the sole provider. The customers would tend to remember the brand name of the company if the brand satisfies their needs repetitively.
Disadvantages of First Mover Strategy
Competitors
The first-mover attracts the attention of a lot of competitors. If the product is good, then many competitors would start coming after the first-mover. Everyone would target and try to copy its product/service.
Expensive
It’s not easy being the first-mover; you have to spend a lot of resources on research and development to come up with something new. Even when you have developed the product, launching the product into the market also covers a lot of costs. The first-mover has to pay for all of these costs without any certainty of success.
No Experience to Rely
When the first move is developing something new, then it doesn’t have the experience to fall back on and avoid mistakes. Whatever it learns, it learns through first-hand experiences. It may seem cool, but it’s very expensive.
High Risk
Most importantly, the first-mover takes a huge risk of investment in developing something new. It’s because it involves a lot of uncertainties whether the product/service would work out or not, and how the customers would react to it. It’s either a win-or-lose situation, and there’s no middle ground.
Regulations
The product of the first-mover firm also attracts the attention of the politicians and government officials. Sometimes it results in the form of very strict regulations and legislations that the first-mover has to pay for. If the company doesn’t reply accordingly, it shuts down everything.
Examples of First-Mover Strategy
Coca Cola
Coca-Cola was the first soft drink brand and the company launched it in 1886. Dr. Pepper had already debuted the drink in 1881, but he launched the Pepsi in 1898. Coca-Cola has always had the advantage of being the first-mover in the market.
Pepsi being the second mover went to bankruptcy twice. The market share of the snacks plus the drinks is keeping the company alive.
Amazon
Amazon used to sell books online a long time ago. The online sales and fast delivery kicked the physical book stores like Barnes & Noble out of the market. They couldn’t pace up with the fast trend of the online shopping world.
Amazon being the first-mover gained the advantage of cost efficiency, premium membership, and fast delivery. It has helped the online retail store to accumulate a large database of loyal customers. It took a lot of time for competitors to reach the level of Amazon. It has become too big to fall by that time.
eBay
eBay is the world’s leading online buy and sell platform. The company had faced a tough competition of Amazon Auction earlier. But the brand has always had the advantage of being the first-mover in the market.
The brand made some of the best acquisitions and sales to stay on top of the market. PayPal and iBazar are some of its major acquisitions.
Apple
Apple was the first brand to introduce iPhone and smartphone into the market in 2007. HTC was also the first company to introduce android devices. The operation system of Apple and Google both have acquired worldwide customers’ market share. The brand loyalty of Apple’s iOS and Google’s Android system is almost the same. Apple has always maintained a unique position in the market and the company has millions of loyal customers across the world.
