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SHOULD YOU BE THE FIRST IN A MARKET?

When I was studying for my MBA, in one of the marketing courses, the professor said: if you have the choice, it is better to be 3rd to market than to be first. His expression was: "Let us be the first to be the third".

This statement was a little against what I was reading or hearing at the time. Being first allowed the company to grab a significant market share and to build a strong and recognizable brand. There is even a well-known expression for those first to market: first movers (for a more in-depth definition, read here). All of this is true. But there are important nuances.

The logic was:

  • The first develops the interest in the product/service. This is true when the product/service is innovative, which is usually the case for first movers. Unless you are opening a new market for a product that has been developed but remains new to that market.
  • The second develops the process/application. They can see what was done for the first version and build on it, either by improving performance or by reducing costs.
  • The third arrives at the right time to benefit from the development of the other two dimensions and can offer a superior product/service to a knowledgeable clientele.

    • This is a little like what Tesla cars have gone through. Based on the article "Was Tesla The First Electric Car?", Tesla cars are not the first to use electric power motors. Of course, there are a lot of innovative elements in Tesla cars and for some of these, they are the first, but not for the use of a battery as an energy source. In the 1990s, the GM brand sold battery-powered cars and they were very efficient. But the project was abandoned because of political interests protecting the oil industry.

    Then, there were hybrid vehicles that used a combination of gasoline and electricity. Perhaps the most "successful" option in this category is the Prius, which was launched in 1997, in Japan, and 2000 in the United States. But is a hybrid car a precursor to Tesla cars? I leave it to the car experts to answer this, but if we look at the battery, its development has certainly been impacted by this option. There might be other models that could be put here, but the idea is not to give a detailed overview of the evolution of the electric car, but rather to underline the fact that Tesla arrived with a good amount of information already available because of past efforts. So, the company was certainly able to greatly improve what existed, but it was also able to avoid some pitfalls and past mistakes.

    That is what my teacher was saying; Being first to market involves a series of risks that can be difficult to overcome. Who could have anticipated that politics would have come into play against GM's electric cars? Being first to market often means dealing with situations that can be difficult to anticipate.

    So, if you want to be first to market, it is better to have good financial resources. Because in addition to paying for the development of something new, you will have to explain the advantages and work on a production process that is sometimes unique.

    But not all first movers are large companies. I have experienced this reality myself. In 2004, I had the idea of a web application allowing professionals/SMEs to put an agenda online so that their customers could make an appointment directly on their website in a secure way (no one saw the names of the other appointments). Today many options are available, but in 2004, I was the first; I was the first mover.

    For years, I tried to market this new way of doing things to people who were still using a paper notebook and who often did not yet have a website. So, I was able to see the reality of my teacher's statement: the first develops the interest.

    And over the years, more advanced, elegant options with more suitable features have emerged. Different business models were proposed (free use, inclusion in a community, pay-per-appointment, etc.), in short, both the process and the application have developed. While I, unfortunately, not having been able to recuperate the initial investment, I had to abandon the commercialization and the upgrades.

    So, if you have an innovation to introduce to the market, think carefully about the advantages and disadvantages of being the first. And if you want to be first, consider another important point: do not put all your money into developing your product. Save a good amount for your marketing. Otherwise, you risk having an excellent option that no one will know about.

    If you have any questions, comments, or if you want to share your experience, do not hesitate to contact me.

     

    Stéphane Elmaleh-Riel, B.Ed., MBA
    Marketing consultant