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First Mover Advantage

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What is the first-mover advantage?
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What is the first-mover advantage?

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Definition of the first-mover advantage

First mover advantage refers to the competitive edge a business earns by being the first to launch with a certain product or service.

By launching first, a business often becomes synonymous with that product or service, thereby securing a place in consumers’ minds and lives, even when newer offers arrive on the scene.

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A good example of first-mover advantage involves Netflix. When Netflix launched video streaming in 2007, it offered consumers an entirely new way to enjoy entertainment. Today, even with Amazon Prime, Hulu, and other streaming services trying to keep up, Netflix retains an unbeatable market share and dedicated customer base through their competitive advantage. Being a first-mover can also come at a cost which is called the first-mover disadvantage.

General FAQ

What is the first-mover advantage in economics?
First mover advantage is first and foremost a marketing strategy, but that doesn’t mean that economists should ignore its potential. After all, the economic benefits of being a first mover are substantial — these businesses will reap the reward of large market share, high profits, loyal paying customers, and a level of commercial untouchability that rival brands will struggle to reach.
What is the first-mover advantage in marketing?
Marketeers use ‘first mover advantage’ to define the competitive edge a business achieves by beating other rivals to launch a product or service first. Marketing can really help a business succeed as a first mover, as adverts and other brand communications can help customers understand what the product is, how to use it, and why they need to buy it. This is especially important if the first mover is introducing an idea that requires new or different customer behavior, for example Netflix.
What is the first-mover disadvantage?
First movers will almost certainly come across some challenges during their rise to success — known as ‘first mover disadvantages’. This could be having high Cost of Goods Sold (as lack of demand hasn’t enabled them to negotiate with suppliers yet), or needing to educate customers on how to use their product or service (especially if the idea requires new ways of thinking or behaving). There’s also risk of ‘free-rider effect’ when, once the first mover has invested in establishing the market place and readying customers to purchase, new rivals swoop in to launch with much less effort.

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