Marketing: First-mover advantage - or is it? - Anthill Online

Marketing: First-mover advantage – or is it?

December 1, 2006
By Renee Hancock
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Marketing: First-mover advantage - or is it?

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Being the first mover can offer some advantages but does it determine a company’s success?

In marketing there’s a term called the ‘first mover advantage’. It’s based on the premise that the first firm to establish itself in the market is the firm that will be successful. The term was particularly popular during the internet boom and such advantage has proven real for some companies that started their businesses at that time, including Amazon, eBay and Google. While these firms weren’t necessarily the first to create their product or service (for example, Amazon didn’t invent selling books on the internet), they were the first ‘significant’ firms to enter their respective markets.

GETTING TO MARKET FIRST…

While being a first mover has its advantages, not all first movers are good at capitalising on their position. If you’re a first mover, here are some ways to take advantage of your position:

  1. The first mover writes the rules of the game. It sets the standards for things, such as quality and price. Set your standards high enough and it may help to deter competitors from entering the market.
  2. The first mover can dominate the distribution and supply networks. It has the opportunity to lock-in the best distribution and supply networks early in the game. Think about your options when setting up these networks. Some distribution channels will only support one brand, particularly when products are technically complex and require extensive training. Develop good relationships with your suppliers and ensure that you are their number one priority.
  3. The first mover has a head start on building brand awareness. It has the opportunity to link the product or service with its brand in the minds of customers. Build customer loyalty early on with great service and quality. If possible, introduce high switching costs to deter the customer from changing the product or service when competitors emerge in the market.

…OR LET YOUR COMPETITORS GO FIRST

There are also some advantages to letting your competitors go first. That way, you can sit back and observe their mistakes. They will also help to educate the market for your product or service and you may be able to identify niches that they haven’t captured. Here are some advantages to letting your competitors go first:

  1. The follower can treat the first mover as a pilot. Use the first mover as a pilot to test the product or service in the market. Research the customers’ reactions and use the results to make enhancements to your product or service. This will help you to differentiate your product in the market.
  2. The follower can take advantage of the first mover’s marketing mistakes. Observe the first mover carefully. Are there any mistakes that you can take advantage of? Was the marketing strategy successful? Did they target the right audience? Was the product’s price amenable to customers? Did they use the best distribution channels?
  3. The follower can identify market niches. Finally, it’s possible that the first mover may have taken a mass market approach, leaving niche markets open for competitors. Target these markets with an improved product or greater levels of service.

Whether you’re a first mover or a fast follower, it’s important to take advantage of your position. Customers will determine the success or failure of a product or service. Ultimately, the firm that offers the best product or service, continues to innovate and adapts to customers’ changing needs will be the one that is successful over the long term.

Renee Hancock is a marketing and communications specialist, whose experience spans finance, government, education, not-for-profit, telecommunications and law. She has consulted for two of Australia’s most prestigious public relations agencies and now works in-house for a leading financial services organisation.

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