What is a First Mover?
A first mover is a product or service that gains a competitive advantage by being the first of its kind to market. This favorable position is commonly referred to as the first mover advantage and it can make or break the long-term success of a product, a service, or even a firm.
This critical competitive advantage can create a real edge that competitors struggle to replicate or keep up with.
Being a First Mover Pays
In the business world, being first is often more than an accolade. There are many benefits that breaking away from the herd can confer.
Brand Recognition and Customer Loyalty
The first company to successfully bring a product or service to market typically enjoys the ability to create strong brand recognition and customer loyalty without having to react to competitive pressures.
Being fresh and new is exciting and can make a lasting impression. This impression can have a durable effect and often persists even when other competitors inevitably produce their own substitute offerings.
First-mover-inspired recognition and loyalty can also produce the secondary benefit of attracting new customers to other products the company offers. In short, a strong first-mover advantage with one product can produce a revenue snowball effect for other products.
Economies of Scale
This early period of time with comparatively little competitive pressure gives first movers valuable room to maneuver. In addition to strong brand recognition and customer loyalty benefits, companies can use this time to develop robust economies of scale.
Economies of scale are the cost savings and efficiency that come with an increase in production. These cost savings can produce a crucial barrier to entry that postpones the introduction of substitute products from competitors, as well as building a strong business foundation.
Increased Switching Costs
It is inevitable that competitors will follow a first mover in an attempt to capitalize on the success of a trailblazer.
When this happens, the company that acted first has an advantage. For the customers the first mover has already won over, switching to a rival product may be cost-prohibitive.
Being first is a powerful way for first movers to “build a moat” around their business and increase the lifetime value of their customers.
First Mover Disadvantages
In business, as in life, nothing is guaranteed. In the case of companies that aspire to be first movers, there is a significant risk/reward consideration.
The biggest risk comes from agile and opportunistic competitors. A company that releases a new product or service in an attempt to be a first mover would see little benefit if a competitor was able to effectively copy their product or service right away.
In a worst-case scenario, a sharp-elbowed competitor copies and improves on the product that was meant to reap the benefits of being a first mover.
In this case, the company attempting to act first would have sunk significant costs into development and distribution, only to lose their competitive edge.
Additionally, companies have to move fast to achieve first-mover status.
Hasty product development in the race to market can consume resources, create inefficiencies, and result in misalignment between the benefits of the product and the needs of the consumers in the target market.