First Mover Advantage

During the holidays, I had the chance to re-read one of my favorite marketing books: The 22 Immutable Laws of Marketing by Ries and Trout. While many people seem to think that the book is no longer relevant, I was more than a little surprised by how of much of the book I remembered and how much it still applies 15 years later.

Over the years, I’ve frequently cited the Law of the Category: “if you can’t be first in a category, set up a new category that you can be first in.”  The classic example comes from the early solo flights across the Atlantic. While many people remember that Charles Lindbergh made the inaugural flight, very few of us know that Bert Hinkler was the second person to cross the Atlantic solo. Counter-intuitively, we all know the third person: Amelia Earhart.  We remember her because she was the first in a new category – the first woman to fly across the Atlantic solo.

Creating a new category is a way of exploiting first mover advantageScientific studies have shown that companies that enter a market first are more likely to succeed than others that enter the same market afterwards. This advantage stems from the ability to establish technology leadership, to pre-empt scarce resources, and to create high switching costs for the competition. But more than anything else, the advantage stems from brand loyalty. There are lots of commonplace examples: with virtually no differences in ibuprofen products, the market shares of Advil, Nuprin, and Medipren match the order that they entered the market.

Silicon Valley software start-ups seem fixated on the law of the category. After one company establishes a new category, lots of copycat competitors pile into the same market trying to benefit from the halo effect. After a short while, many of the companies recognize that there isn’t room for all of them and attempt to create sub-categories or near neighbor categories that they can become first in. Unfortunately, many entrepreneurs mangle this law by inventing new categories that don’t really exist.  In this case, size does matter.

While being first in category helps, it doesn’t guarantee success. Atari was the first video game, Visicalc the first desktop spreadsheet, and Mosaic the first Internet browser. None are leaders in their categories any longer. This is not just a technology phenomenon. Gablinger was the first low-calorie beer but lost the market to Miller Lite.

Why didn’t these products win even though they had first mover advantage? In my opinion it’s because marketing is not just the battle of products; it’s the battle of perception. This is Ries and Trout’s Law of Perception which I’ll cover in a subsequent post.

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10 Responses to First Mover Advantage

  1. Oski December 28, 2009 at 11:34 am #

    First mover advantage strikes me as one of those business myths that is perpetuated by our selective memory biases. For each successful company you name that supposedly benefited from a first mover advantage (Cisco, Coke, etc), I’m pretty confident I can name another that bombed – IBM, Apple (first time around), Friendster, AT&T, etc.

    Being the first mover confers, at best, a greater margin of error. The most important thing is to have a strategy that is relevant to the market and execute it like crazy. It doesn’t matter that you’re the last to the party if you can deliver a product or service that the customer still needs at the right time, place and price. Everything else is wishful thinking. (Anyone want to guess how many search engines existed before Google, retailers before Walmart, airlines before Southwest, talk shows before Oprah?)

    As for the pharmaceutical examples, you can easily explain the difference in sales by the advertising budget behind each drug.

  2. Robert E January 5, 2010 at 10:03 am #

    I agree that a lot can be said for creating a new category. Marlboro cigarettes were targeted at women in the 1920’s, it was in the 1950’s that marketing developed the Marlboro Man – tough guy smoking filtered cigarettes.

    Abercrombie & Fitch was very big in outfitting people for the great outdoors at the beginning of the 1900’s. After going bankrupt in the 1980’s the brand was acquired by the Limited and transformed as clothing store for young hipsters.

    Both organizations reinvented themselves with a new category. Amelia Earhart wore an Abercrombie & Fitch leather jacket when flying her solo Atlantic flight, she’d probably be wearing a Hollister t-shirt now.

  3. Andy Hasselwander February 11, 2010 at 11:46 am #

    Will and Vision (2002) by Tellis and Golder tries to debunk some of the first mover myths. They explain some of the earlier studies showing first mover advantage by showing that the researchers succumbed to “survivor bias”–only looking at companies in the category that were still around. Turns out, many of the first movers went out of business. They explain category success as a function of “will” (stubborness) and “vision” a unique take on the market. An obvious critique of the book is that “vision” is just a more specific definition of category, and thus you really could say first-movers won.

  4. Serafina Mousseau September 6, 2011 at 6:24 pm #

    I do not even know how I finished up here, however I assumed this put up was once good. I don’t recognize who you’re however definitely you are going to a well-known blogger in case you are not already 😉 Cheers!

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