What Is First Mover Advantage? Pros, Cons & Examples

Being the first company to enter a market offers a strong advantage, known as the first-mover advantage. This strategy can help businesses gain an early lead, capture market share, and build consumer loyalty before competitors have a chance to act. However, while being the first can bring many benefits, it also comes with challenges. 

The early mover advantage can allow a company to set the standard, shape consumer preferences, and enjoy a head start in a new market. However, it also requires a careful strategy to avoid pitfalls, such as high initial costs or the risk of competitors improving upon your ideas.

This article explores the benefits of being a first-mover, highlights some disadvantages, and shares real-world examples of first-mover companies that have successfully used this strategy.

What Does Being a First Mover Mean?

The term “first mover” refers to the first company to introduce a product or service to the market. This position often allows the company to set the standard in its industry and attract attention as the only option for a particular need. By addressing customer challenges in innovative ways, first movers can establish themselves as leaders in their field.

This advantage goes beyond simply being first; it includes getting early loyalty from customers and creating strong brand recognition before competitors enter the space. For instance, companies that achieve large-scale success after introducing a new product or service can shape customer preferences and expectations, giving them an edge over others. 

Early entrants also have time to refine their offerings and set prices that align with the market. They gain opportunities to learn from their initial rollout and improve their products or services while competitors are still trying to enter. The first mover often sets trends that others follow, giving it a competitive edge in cost, innovation, or efficiency.

However, the benefits of becoming first can only last if the company continues to grow and adapt. In an effort to acquire market share, competitors usually seek to build on the first mover’s success.

Real-Life First Mover Examples

Here are some examples of first-movers that capitalised on this strategy.

1. Coca-Cola

Althoughfirst-movers brands like Dr Pepper had already entered the market, Coca-Cola wasn’t the first to produce carbonated drinks. However, when it debuted in 1886, it quickly became the dominant force in the beverage industry. The company’s timely entry helped it capture a large share of the market, making it one of the most iconic first-mover examples in history.

2. Kellogg’s

The commercial cereal market began in the 1860s with the creation of Granula, a graham dough breakfast cereal. Despite being the first to market, Granula didn’t see much success. However, John Harvey Kellogg and his brother Will Keith Kellogg refined the idea, introducing a flaked cereal and sweetening it for mass appeal. This move allowed Kellogg’s to rise as a dominant force in the cereal industry.

3. Apple

Apple revolutionised the smartphone market when it released the first iPhone in 2007. While mobile phones existed before, Apple’s iPhone changed the game by combining functionality with design. HTC had already launched Android phones, but Apple quickly acquired a larger share of the market, with iOS becoming a preferred operating system for millions. A Consumer Intelligence Research Partners report shows Apple’s iOS has a 90% loyalty rate, compared to Samsung’s 70%, helping Apple maintain its early mover advantage.

4. Netflix

Netflix dramatically entered the video rental market by offering video streaming, disrupting traditional rental businesses like Blockbuster. As a first mover in streaming, Netflix quickly built a strong customer base. Despite growing competition from companies like Amazon, Apple, and Disney, Netflix has maintained its position at the top. The company continues to innovate with personalised recommendations, a global reach, and a diverse range of content that appeals to various demographics. 

Why Being First Can Be Advantageous

By taking the lead, a company can enjoy numerous advantages of being a first mover, which can help it establish dominance and grow.

1. Access to Suppliers

As the market pioneer, you can negotiate exclusive contracts with top manufacturers, ensuring a cost-effective process while maintaining high product quality. This early positioning gives you the flexibility to secure the best deals, which can set your brand apart from others.

2. Opportunity to Set Industry Standards

When you are the first to introduce a product, your methods and practices become the benchmark for others in the industry. You no longer need to follow standards set by other companies; instead, you get to shape the market’s manufacturing and marketing approaches.

3. Build Retailer Relationships

With no immediate competition, stores are more likely to feature your product, knowing it is unique. The popularity of your product increases its demand, leading to more retail partnerships. As competitors enter the market later, your company already enjoys a solid position within the retail network.

4. Boost Brand Recognition

When you are the only brand offering a certain product, customers quickly associate your name with the product. This association builds strong brand recognition. Over time, customers grow loyal to your brand, making them less likely to switch when competitors emerge. The familiarity with your product creates a lasting connection, leading to sustained sales and customer trust.

5. Customer Loyalty

Some products require a significant investment, making customers hesitant to switch to a competitor. Software that requires installation and setup often leads to customer loyalty, as the time and effort spent on switching are not worth any potential savings. By being the first to market, you can foster this type of customer loyalty, ensuring that your customer base remains stable even as competitors emerge.

Disadvantages of Being the First Mover

First movers often gain attention by entering the market early, but this position has challenges. Here are some disadvantages of first movers.

1. Stronger Competition

Entering the market first can unintentionally help competitors. They can observe and improve your strategies, offering a more refined product. If your product isn’t priced or designed well, competitors can quickly attract your customers. This makes it important to focus on delivering standout value.

2. Rushed Product Development

The desire to launch first can lead to cutting corners in design and testing. This often results in a product that falls short of expectations, leaving room for competitors to introduce better versions. Taking the time to develop a polished product helps avoid these issues and builds customer trust.

3. Misjudging Customer Needs

Sometimes, businesses assume they understand what customers want, but their product doesn’t address real problems. This can lead to poor sales and wasted effort. Investing in detailed research to identify actual customer needs can prevent this issue.

4. High Costs for Customer Education

As the first to introduce a new product, companies spend heavily on educating consumers about how to use and benefit from it. As a result, resources may be strained, particularly for smaller enterprises. Making the product easy to understand and using targeted marketing can reduce these expenses.

Successful Companies That Weren’t First Movers

Many successful companies today thrived despite not being the first mover in their industries. They entered established markets and created unique value, transforming their late entry into a competitive advantage.

1. Google

Google entered the search engine market after platforms like Yahoo and Infoseek had already gained traction. Despite being a late entrant, Google revolutionised the way search engines worked by focusing on delivering faster, more accurate results. 

2. Starbucks

Coffee shops existed long before Starbucks appeared on the scene. However, Starbucks set itself apart by developing a unique brand identity. Starbucks’s global expansion, consistent product quality, and emphasis on customer experience have helped it maintain its position as a leader in the coffee shop market, with a revenue of 36.18 billion USD worldwide.

3. Facebook

Before Facebook, platforms like Friendster, MySpace, Classmates.com, and SixDegrees.com introduced social networking. Facebook, however, took a fresh approach, focusing on creating an intuitive and engaging user experience. It quickly became the go-to platform, leaving its predecessors behind and redefining online social interactions.

4. Spotify

Before Spotify, legal music services like Pandora and SoundCloud existed. Spotify’s on-demand streaming made music more accessible and encouraged users who once relied on illegal downloads to become paying customers. Its seamless interface and personalised playlists allowed Spotify to dominate the music streaming market.

Conclusion

Being the first mover in the market offers significant advantages, including the chance to set industry standards and make a lasting impression on both consumers and competitors. However, first movers must stay vigilant, observing and adapting to the actions of those who follow. These businesses can strengthen their position by fostering open communication and continuously improving their products. This approach helps build a resilient brand, making it challenging for others to surpass.

Ultimately, success for first-movers comes from being first and staying ahead with innovation and strategic planning. If you have trouble managing your sales channel, inventory, and catalogues, Shiprocket can help.