First-Mover Advantage
The First-Mover Advantage refers to the advantage gained by the first company that enters a certain market. This advantage is exacerbated for digital products and markets. There are a number of reasons this advantage exists. A company that is able to increase sales quickly is able to reduce the average cost of the product, over other competitors. This allows the first company to have more flexibility with pricing, either reducing the price to make it less attractive for new entrants (increasing barriers to entry) or increasing the margin and therefore profit while prices remain fixed, this additional profit can then be used for further innovation. The first-mover can also take advantage of the learning curve effect. First-mover advantage can be further successful if the company is able to achieve lock-in of its installed-base. Thus once lock-in occurs, it is more difficult for other marketers to attract those customers away from the first marketer. Risks of being the first mover include the opportunity for others to imitate and follow best practices (learn from any mistakes).
Maximizing Business Potential
