What is first mover disadvantage?

A First Mover is a company that is first to bring a product or service to market, so the company’s product or service is a first-of-its-kind offering in a new or existing market segment. For example, Tesla is a first-mover company in the US EV(Electric Vehicle) consumer market segmentation. While Tesla is not the first maker of consumer-ready electric cars, the company is the first to offer affordable mass-market EVs.

First Mover Market Realities

Defining First Mover Disadvantages requires understanding market realities surrounding first-mover products/services. First-mover status has universal appeal because of two associated competitive advantages, namely:

Brand Recognition and Loyalty

Consumers who encounter a first-mover product/service quickly associate the brand with its market-focused capabilities/features. This initial impression morphs into long-term brand recognition and affiliation when consumers become users of a first-mover product/service.

Economies of Scale

A company offering a first-mover product/service has ample time to discover/develop, and implement resource-efficient production/service processes and cost-efficient distribution approaches.

However, an array of market-centric conditions can prevent the first-mover company from realizing a profit-centric competitive advantage.

First Mover Market Disadvantage

First Mover Disadvantage is typically the outcome of product/service development strategies that emphasize the speedy entry into the market with a first-mover product/service. The array of first-mover market disadvantage scenarios that can emerge:

Unsustainably High Marketing Costs

High marketing costs typically follow a first-mover product/service launch in a new or existing market segment. Consumers generally are oblivious of the first-mover offering before its unveiling, thereby necessitating a considerable investment to create customer awareness, i.e., physical/digital signage, social media marketing, email marketing, etc. Once sufficient product/service awareness is attained, a first-mover must spend more money to realize actual sales.

Sales-focused marketing plans essentially revolves around significant financial investments to secure the various distribution channels needed to avail consumers of the product. Due to budgetary oversights arising from hasty product/service deployment, unsustainable initial marketing costs can doom a first-mover product/service.

Product/Service Displacement

In a rush to be first-to-market with a first-mover offering, development teams can skip, overlook, and outrightly ignore essential steps in product/service design, development, and deployment. Resulting shortcomings in product/service functionality, features, and capabilities can severely impact customer reception and the first-mover product/service.

Furthermore, significant first-mover deficits make it considerably more accessible for a competitor to launch a product/service capable of supplanting the first-mover offering. The likelihood of this market reality occurring is fostered by the competitors’ lower post-launch marketing costs. The reason is that the competitor doesn’t have to spend as much money in realizing customer awareness as the first mover has already achieved this market objective.

Outdated Product/Service Offering

The emergence of new production and distribution techniques/processes can allow a competitor to unveil a product/service that supplants the first-mover offering. This market reality often results from relying on new resource-efficient and cost-effective production and distribution approaches. Furthermore, competitors can capitalize on the mistakes a first-mover makes in designing, developing, and deploying a product/service offering.