What is the first-mover advantage?
Definition: First-mover advantage is an advantage that a company achieves by being the first company to introduce a new product or service into the market, or market segment.
This refers to a company’s advantage in capturing a bigger market share and early customers, establishing brand recognition, locking in suppliers, and building and controlling distribution channels.
First-movers have the advantage of setting and controlling prices and creating a barrier to entry, making it more difficult for competitors to enter the market.
However, being a first-mover isn’t a guarantee for success. First-movers face risks of product failure due to insufficient product awareness, changing market conditions, increased competition from later entrants, and high marketing and development costs.
First-mover advantage vs. Second-mover advantage
While first-mover advantage refers to the benefits a company can receive from being the first to enter a market, second-mover advantage happens when the company following the first-mover managers to capitalize on their product or service despite coming later.
Some of the benefits second-movers gain are learning from the first-mover's mistakes, improving upon the first-mover's offerings, and capitalizing on the first-mover's market development.
While first movers have to establish and promote new solutions to people’s needs, second movers have the advantage of entering a market with already established demand and much clearer market landscape.
There isn’t a clear judgment over which move is more advantageous, as both depend on the company’s strategy and offering.