Or is it? In the wake of the excess of the late ‘90s where in the name of market shares acquisition colossal amount of money were spent, one can seriously doubt it. What happened to the like of pets.com, eToys.com and the infamous Webvan?
As always the truth is not as simple. Being first usually confer a serious advantage to companies but also brings its share of problems. The whole intent to be the first mover in a new market segment is to capitalize on the lack of competition to capture mind shares and market shares.
Position your brand in customers’ minds
From a marketing point of view, this is a unique opportunity to establish your brand as the dominating player in a new field. Who has the best cola? Coca-cola. Who has the best car rental services? Hertz. And so on. By building customer loyalty early on with great customer service and establishing a superb reputation, a savvy product manager has the opportunity to strengthen his brand and create a formidable barrier to entry for potential competition.
However there are risks as well in being a pioneer. The market may not be established yet, and prospects may reject your value proposition because it does not match conventional assumptions. Therefore a lot of the marketing budget will go into educating the prospects and having a few –not too formidable- competitors can help you create the market place. Other typical issues include having miscalculated the target audience or the pricing might be incorrect. Finally distribution channels might be inexistent and will need to be created from the ground up.
Establish product leadership
From a product point of view you get a chance to set the standard and be seen as the market reference and thoughts leader. By setting the bar high enough and emphasizing your unique approach and technology, product manager can slow down competition and force them to play catch up with you.
Similarly, being first market mover and first to come with a product induce risks. Competition can capitalize on your customers’ feedback and mistake to improve your product. By the time they start developing their solution they typically have a much better understanding of the problems and needs in the market . Furthermore developing new technologies is expensive and a lot of trial and errors go in the process. By observing your attempts, mistakes and success, competition can innovate in a must cheaper and most effective way. They might even hire some of your experienced staff away or reverse engineer your solution to benefit from your inventions.
Apple’s Newton, a market failure
Apple with the Newton is a perfect example of a first market mover that was not able to capitalize on their ground breaking device. Apple was able to capture public imagination with the first version of “PDA” and basically invented a new market segment. However the product was not technically fit, too bulky, and was targeted to the wrong audience with a price tag too high. Apple had a chance to fix all this, but they were too slow in the process and the quality issues start catching up with them. A few years later, PALM that benefited from Apple mistakes and experience – and their own experience building the Zoomer with Casio- revolutionized the PDA with a cheaper, smaller and simpler solution appealing to a broader set of users.
Weigh pros and cons
Thus, product managers should carefully weigh the pros and cons in being the first mover in new markets. This is a strategy that with proper management and marketing can result into long terms advantages but that also involves a fair amount of risks.