What Is First Mover Advantage?

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The old saying “If you’re not first, you’re last” doesn’t ring true in the business world. Companies can enter the market late and still see significant success. However, being first can come with distinct advantages.

What is first-mover advantage? It’s the benefit a company gains when it’s the first to introduce a product or service. Companies such as Amazon, which opened the first online bookstore in 1994, and Hoover, which introduced the first handheld vacuum cleaner in 1930, outpaced their competitors after breaking new ground in their industries. But not every first mover is as successful.

Here’s a look at some of the advantages businesses see when they’re first movers in a product or service category — and some challenges that could come with the territory.

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What Is First Mover Advantage and Its Benefits?

When a business is the first to introduce a product or service category, they often gain several significant advantages, according to Indeed.

  • Brand name recognition. When a new product becomes a hit, it often wins lasting brand name recognition. Kleenex introduced the first modern facial tissues in 1924, and the brand name has since become synonymous with the product. Even when competitors enter a product space, many customers will continue to choose the first mover because they recognize the brand name.
  • Customer loyalty. A first mover is more likely to keep early adopters over the long term. When customers have latched onto the first mover’s product or service, they’re less likely to switch to a competitor’s product. Sometimes, switching will incur some cost, even if the cost is just the customer’s time to find and learn about a new product.
  • Development time. Being first also means plenty of time to develop and perfect a product, whereas competitors often scramble to reverse engineer and produce a product of their own. With extra development time, a first mover can focus on cost efficiency issues well before having to sweat competitors.

What Kind of Challenges Do First Movers Face?

But first movers often experience challenges, too. These challenges aren’t insurmountable; they just mean that first movers must stay on top of changes in their industry and continuously refine their products or services.

Here are two things to remember if you’re starting a new business and introducing something groundbreaking to your industry.

  • Competitor improvements. Just because a company offers something first doesn’t mean it will always be the best. Netscape Navigator, introduced in 1994, was the first widely used internet browser. But competitors like Microsoft and Google improved Netscape’s product and eventually overshadowed Netscape. To avoid a similar fate, first movers must keep their products fresh and keep close tabs on what their competitors are doing.
  • Education burden. When they introduce a new product or service to the market, first movers must educate potential customers about how they use it and why they need it — often at great expense. Later entrants to the market will benefit from the first mover’s efforts because customers already know how to use and why they need what’s being offered. First movers can overcome this challenge by learning what their customer base wants — and then delivering it to them.

Understanding first mover advantage might convince you to develop that exciting idea that’s been percolating in your head. Building a new product or service category could give your business an advantage — and could set you up for long-term success.

Learn how National Funding can provide financing for your business so you can be a first mover in your industry. Visit National Funding’s small business loans page for more information or apply for a loan now.

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