What is first mover advantage — and is it really an advantage?

There are many ways to build successful products. One way is to simply be first — that is, first to win a market, innovate, or solve a pain point.

But while being a first mover can bring you a tremendous competitive advantage, it also comes at a cost.

In this guide, we’ll weigh the pros and cons of being first.

What is first mover advantage?

First mover advantage is a common phrase used by product managers and entrepreneurs. There’s a general belief that being first on the market (i.e., being first to serve a specific group of users or solve a particular pain point) gives a tremendous advantage over competitors.

While there’s some truth to that, and being the first mover does give you a competitive edge, it also comes with its own challenges. In some cases, being first might actually do more harm than good.

Let’s take a look at the advantages and disadvantages of being a first mover.

Advantages of being the first mover

There are numerous reasons why companies try to be first. Not only is it one of the most straightforward ways to innovate, but it can also help you build a strong position in the market.

Benefits of being first include:

• The comfort of a blue ocean
• Memorability
• An opportunity to raise barriers to entry
• R&D for other products

The comfort of a blue ocean

If you are first in a specific market or segment, it means there’s no relevant competition yet. This gives you an enormous amount of leeway to focus on what’s most important.

Lack of competition means you can focus on delivering value, exploring the best pricing strategies, experimenting with growth engines, and exploring your users’ needs in-depth without constantly playing ping-pong with your competitors.

Put simply, less competition means more time to truly care for your users.

Memorability

We tend to remember what comes first.

Ask a few random people what the highest mountain is, for example, and most of them will immediately say Mount Everest. Ask them to name the second-highest mountain, and very few will know.

That’s just how we’re built; we remember our first relationship, job, car, etc., more than we do the second or third.

The same goes for products. No matter what Pepsi does now, people drink “coke.” That’s because Coca-Cola was there first to establish the brand.

OK, now you try: name a car manufacturer that produces electric cars. Chances are, the first name that comes to mind is Tesla, even though it’s far from being the only producer of such vehicles.

You get the point.

The company that first establishes itself in customers’ minds is likely to stick there. This creates a very strong brand capable of supporting the company’s growth for years to come.

An opportunity to raise barrier to entry

The company that enters a market first can make it harder for second and third movers to enter, thus bolstering its own competitive advantage.

When you are first, you can start building your brand and community around your product from day one. The new entrants will have to not only provide similar value, but also outcompete you to compensate users for switching costs.

Moving first also gives you time to establish know-how. Your superior understanding of the market and customers will become a strong asset that new entrants won’t yet have.

Lastly, you’ll most likely have better economies of scale if you move first. While new entrants usually have to start from scratch, you will already have a user base, making the overall cost of maintaining users cheaper.

R&D for other products

Exploring new markets and trying out different solutions can often bring useful insights for your current products.

For example, let’s say you’ve experimented with a new market and, in the end, decided it’s not the right fit for you. Nonetheless, you can:

• Use your new understanding of the market to expand your current offering
• Use MVP concepts you tried to enhance products you have
• Adjust your product roadmap to capture a subset of the market

Even if trying to enter a new market doesn’t work for you, you still can get some advantage over competitors thanks to the new knowledge you have (and they don’t).

Disadvantages of being first

Being first is not all roses, though. It comes with some serious challenges that can make the idea of being first downright unfeasible for many companies, including:

• Higher risk
• Higher cost
• Potential to lower barrier to entry

Higher risk

While the first mover can reap the most from the new market’s benefits, they also face the most risks.

After all, no one has tested it before, and there are probably more questions than answers. For example:

• You don’t know how customers will react to your product
• You don’t know if the pain points you target are even valid
• You don’t know how various regulatory bodies will react to your entry or what unexpected laws might become applicable in your cases

Put simply, you don’t yet know what you don’t know. Often, there’s a reason nobody has done something before — and it’s not always because you are smarter than the competition.

If a market seems too easy and straightforward to enter, you’re probably missing something. You should be ready for unexpected challenges along the way.

Higher cost

Entering the market first is very expensive.

Research and development are very costly, including doing proper research to understand users and the market and developing an actual solution for their needs.

Educating a new market is also expensive. If there is no competition in a given market category, potential users don’t have any point of reference. They might misunderstand your product and value offering. Establishing proper positioning and a new market category is a time- and money-consuming endeavor.

Navigating the unknown isn’t cheap, either. You might need a full-time legal team to discover what’s possible and what’s not in that new market, market analysts to understand the market dynamics better, and so on.

Not having a point of reference in the form of existing competitors forces you to discover everything from scratch on your own.

Potential to lower barrier to entry

While one of the advantages of being the first mover is the possibility of raising the barriers to entry, it’s also possible to accidentally lower them.

You took a risk no one wanted. You invested heavily in finding a proper product-market fit and established a new market category in consumers’ minds. Great job!

But now, entering the market isn’t so scary anymore. Others know there is validated potential and you’ve already burned yourself on unexpected risks so others won’t have to. Now, all your competitors have to do is simply copy you.

When you are the first mover, you have to raise barriers to entry and build your competitive advantage very quickly. If you fail to do that, you just pave the way for others.

Is first mover advantage actually an advantage?

Being the first mover comes with its own set of advantages and disadvantages. So, is being first actually worth it?

Yes, but perhaps not in the way you think.

Ultimately, the company that is the first wins the market. But it’s the company that enters the market the soonest is not necessarily the “first.” In reality, the first mover is the company that establishes itself in customers’ minds before the competition.

Coca-Cola wasn’t the first ever soft drink, but it was the first one that actually built a memorable brand. IBM didn’t invent the computer, but it was the first company to get it into prospects’ minds.

Being literally first on the market increases the chance of being remembered as first, but it doesn’t always shake out that way. Sometimes, the first mover can accidentally pave the way for others without successfully establishing itself in customers’ minds.

To truly dominate a market, you do want to be first. Not the first to try out the market, but the first to do it well enough to establish yourself there.

Featured image source: IconScout