Simple first mover advantage is quickly becoming obsolete, especially in the tech world. Being the first company to push a product out is not significantly more advantageous than being the first person to have an idea (which is not considered an advantage). However, I have observed that the first mover to satisfy a customer will have an advantage.
I see so many companies that came first (first movers) and still lost: MySpace (Facebook), Yahoo Search (Google), 50+ cloud storage companies (Dropbox) and god only knows how many ecommerce companies (Amazon).
On the other hand, Uber was the first digital hailing company I used and I immediately loved it, as did many people. Uber Taxi worked so well that I did not find any need to try other services such as Hailo, even though I heard good things about them. Once Uber satisfied me, I did not want to switch to a new platform. There are many apps that I download, try and find them to be “meh”. As soon as a competitor comes out, I try it. Having been the “first mover” does not affect my behavior. However, “first to satisfy” me does affect my behavior. This might seem obvious, but I still hear a lot of people talking about first mover advantage.
First to satisfy customer advantage varies in strength across industries and companies. The strength is related to switching costs. These costs include: time discovering a new service, time spent learning a new system, risk of failure, lack of a social graph, signup friction and any monetary fees. In order for someone to switch, their perceived marginal gain in value has to rise above the switching costs or else they will not try it. The goal should be to make a product that satisfies customers enough that they could not imagine a new product would be capable of giving enough marginal gain to offset the switching costs.
Many people and textbooks I have read focus on the importance of high switching costs as a barrier to entry and the need for an economic moat. However, if a customer expects the product or service they are using to be able to deliver significantly more marginal value than it currently does, they will be willing to bear fairly high costs. The goal is to get the perceived marginal value from switching to be below the costs associated with switching.*
Simply getting a customer’s attention first is not an advantage, unless you satisfy them – then it is a big advantage.
*Of course, I am not talking about early adopters who try things for the sake of trying new things. My observations are about regular customers who make decisions based on perceived value and costs.
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