The First Mover Advantage: Do You Need a Unique Product to Succeed?
Includes our step-by-step process how we position products
There is a common myth I hear from entrepreneurs.
“I need a unique business idea that no one has done before.”
Here’s the truth:
- You do not need a new idea to have a successful business.
- You do not need to be first to market to be first to someone’s mind.
- And you do not need a new business model.
Facebook wasn’t the first social media network. MySpace, LinkedIn, and hi5 all came before Facebook.
Google wasn’t the first search engine. Remember Ask Jeeves, Lycos, and Dogpile?
Apple wasn’t the first computer company. IBM and Hewlett-Packard came decades before.
Even a company like Uber borrowed its idea from taxis.
How have these companies become so successful in competing in saturated markets?
In a word: positioning.
Yes, some companies which were first-to-market are now quite successful.
- The founder of Mercedes-Benz invented the first gas-powered car.
- Thomas Edison founded many electric products. He began as the Edison Company, which later became General Electric (GE).
- Intel created the first commercially available microprocessor in 1971.
But though these companies were first-to-market, they made sure to be first-to-mind by positioning themselves well.
If you’re an early-stage business, you need to learn how to position your product. If you hire a product marketing agency, they will charge between $5,000-$10,000 a month. A cash-strapped startup can do this on their own, as you’ll see in this over-the-shoulder view of my process.
Before you learn my positioning process, let’s define our terms and understand the pros-and-cons of being a first-mover.
What’s the Definition of the First-Mover Advantage?
The first-mover advantage is the value you gain by being the first product (“first-mover”) in a market.
What Are the Advantages of Being a First-Mover?
See also: Positioning strategy
If you ship the first product in a new market, you may get rewarded with higher than normal profit margins. This is because:
- By default, you are the product leader. Even if your positioning strategy is terrible, you reap the benefits as the product leader because you’re the only option.
- You receive the pricing benefits of a monopoly-like status. If your product is a strong need, you can charge almost whatever you want. No one can easily undercut you.
- There’s no advertising competition. If no one is competing for your keyword search results or bidding for those ads in Google, your acquisition costs will be lower.
The goal of positioning is to have your business be in a niche which is either:
- Able to become the #1 or #2 in the market.
- Create a new market category, and become #1 in the market.
Because of the power law. The power law states “a relative change in one quantity results in a proportional relative change in another.” In other words, if you’re #1 and #2 in the market, you will capture the majority of the market share.
Here’s an example power-law graph:
If you create a new market category as the #1 in the market, by default you also are a first-mover.
What’s the downside of the first-mover advantage?
What Are the Disadvantages of the First-Mover Advantage? And Why Do You Suggest Most Entrepreneurs Should Not Be First?
In a study comparing businesses in over 50 product categories, first-movers had a failure rate of 47%. Improvers who introduced a product different and better had a failure rate of 8%. (Source)
That’s a 5.8x higher failure rate for first-movers!
What are the specific disadvantages of the first-mover advantage?
- Poor positioning. Entrepreneurs sometimes create markets that do not actually exist. Further, a late-entry product may position themselves to better serve customer needs. Repositioning is a high investment for a market leader and they may not wish to take that necessary risk.
- The technology free-rider effect. Someone who comes later into a market can get the same technology at a lower cost. (Source)
- Shifts in technology. If the market leader fails to innovate fast enough, a competitor can use superior technology to create a better product. (Source)
- Shifts in customer needs and tastes. When a new product first meets the market, they may not get an accurate read on what customers in the market prefer. As a result, a second-to-market product can better position themselves for these preferences.
- First-to-market blindspots. The pioneer who’s first-to-market experiences higher profit as the market leader. But they may fail to make the necessary investment to remain a market leader. (Source)
- Changing resource requirements. As market demand, competitive threats, and the environment changes, the market leader has to keep up. If they don’t adapt successfully, they struggle to survive. (Source)
- Insufficient investment. Those new to the market may not invest enough resources to succeed in the new market. Companies that enter the market later have a better ability to estimate the potential investment needed to lead the market. (Source)
It’s not all doom-and-gloom if you choose to launch a product in a new category. However, it’s wise to be aware of the potential advantages and disadvantages.
If you choose to create a product in a new category, you’ll want to make sure your product category exists and serves a real client need.
Here’s an outline of our positioning process, step-by-step.
How Should I Position My Product for a New Market? A Behind-The-Scenes Look at Our Positioning Process
Note: Decibite is a Growth Ramp client. We’re using them to give you a step-by-step process of how to position your product.
Decibite is a web host that helps non-technical entrepreneurs get faster hosting. They’re competing against giants like:
- Google (Cloud)
- Amazon (AWS)
- Microsoft (Azure)
- EIG (BlueHost, HostGator, HostMonster, etc).
Before I began working with Decibite, they were a cloud hosting company for “everyone.” WordPress hosting. Python hosting. DNS hosting. You name it.
A company that attempts to serve “everyone” becomes the best for no one. So my first step was to talk to customers to learn what they thought differentiated Decibite from the competition.
Step 1. Talk to Customers
Main article: Voice of the customer
To differentiate and position Decibite, I began by talking to their customers. I asked questions like:
- What is your biggest challenge you are currently facing? (This answer becomes “$PROBLEM”).
- How valuable is it for you, in terms of your current urgency and importance, to overcome $PROBLEM?
- What have you previously done to address this problem in the past? (This answer becomes “$SOLUTION”).
- How satisfied are you with $SOLUTION?
- What do you like about $SOLUTION?
- What do you wish were better about $SOLUTION?
- Have you hired anyone to help you with $PROBLEM?
- Have you bought any other $SOLUTIONS to solve $PROBLEM before?
- What is your ideal outcome you would like to experience?
- What other $SOLUTIONS have you used in the past? Please tell us their names. (This answer becomes “$COMPETITOR”, but asking questions for each competitor).
- What did you like most about $COMPETITOR?
- What was your biggest complaint using $COMPETITOR?
- What are the top three reasons you chose Decibite instead of another product?
- How do you feel our product is different than other products out there?
I took notes of every word customers said (you will want this in step 7).
Step 2. Synthesize the Results
See also: Product keywords
After talking to customers, a lot of Decibite’s customers loved three things about the company:
- Customers loved that Decibite was fast.
- Customers loved that Decibite offered a ton of security features to remove the technical headache, but was not sure what all they did. (Note: This told me I needed to describe Decibite’s security by creating feature pages). It turns out Decibite’s competitors’ charge between $392-$4,951/year for these security features. This becomes another potential way to differentiate them from the competition.
- Customers loved that Decibite felt like a partner in business.
Step 3. Survey the Market
Each of those could be a phenomenal opportunity to position Decibite. But I needed to survey the market to make sure these desires were not isolated. So I opened up the tool Pollfish and invested in getting some survey results.
Please note: if you’re positioning your product on a low budget, you will want to talk to more of your customers. Market research is a higher investment. The more customers you talk to, the greater the chance the way you differentiate will fit customer needs (and not make you just look weird).
This market research confirmed a lot of people wanted fast hosting and fast technical support. Some also wanted better security and scalability. But again, I did not want Decibite to attempt to do everything the best. Just one thing.
Step 4. Do Competitive Research
Main article: Competitive intelligence
I list out every competitor by doing Google searches (“$COMPETITOR alternatives”), browsing Reddit, and looking up articles on the competition in Wikipedia.
Because it was a big market, I separated every competitor into different niches. There are three major niches I put the hosting competitors into:
- Generic web hosts (think GoDaddy, BlueHost, and 1&1).
- Cloud hosts (think AWS, Azure, and Google Cloud).
- WordPress hosts (think WP Engine, Kinsta, and Flywheel).
There are smaller markets too. But this covers the majority of the hosting industry.
Step 5. Positioning Decibite
Main article: Positioning strategy
Of the three niches, I picked generic web hosts as the best audience for Decibite to serve. Specifically, we would serve non-technical entrepreneurs with fast hosting.
Why did I think Decibite would best serve non-technical entrepreneurs with fast web hosting?
- People were complaining the loudest about generic hosts. You can find this information out by searching your competitors on Reddit and finding out what people say about them. If people hate what they are using, it’s easier to get someone to switch.
- More entrepreneurs know the value of fast hosting. Faster website speeds mean better SEO (search engine optimization), better CRO (conversion rate optimization), and better UX (user experience).
- Non-technical entrepreneurs had extreme pain. When starting, many entrepreneurs start with shared hosting. What they may not realize is if they’re successful, they face two major problems. 1) Companies can throttle shared hosting, which shuts down their website. 2) They now need to upgrade to VPS, which feels way more technical than they want to deal with.
Step 6. Creating Decibite’s Unique Selling Proposition (USP)
Main article: Unique selling proposition
Since customers want fast hosting, I wanted a specific reason to make the switch. Rather than reinventing the wheel, I took GEICO’s USP and applied it to Decibite.
GEICO’s “15 minutes could save you 15% or more on your car insurance” became “Get 15% or faster web hosting” for Decibite.
Here are some other USP examples you can use:
- M&M's "melts in your mouth, not in your hand."
- Colgate toothpaste "cleans your breath while it cleans your teeth."
- Anacin, a headache medicine for fast relief. (Yup, the same USP Advil borrowed 30 years later).
- Domino’s pizza. “Fresh, hot pizza delivered to your door in 30 minutes or less or it's free.”
- Head and Shoulders. “Clinically proven to reduce dandruff.”
Step 7. Improving the website’s messaging
This step is simple.
Take everything customers told you in step one and put it in some form or fashion on your website. I recommend you start with the USP you created in step 6.
Did a customer say something was missing that you believe is “obvious” about your business? This is a signal you need to communicate this “obvious” element better on your website.
You will also need to create a few web pages or update them with your new differentiation and positioning. I created over 120 pages for Decibite, many of which were comparative landing pages because these pages have a higher chance to convert into sales. You’ll likely need only 7-15 for a bare-bones website that’s “good enough.”
This best copy will come from your customer’s mouth. Every powerful word or phrase from step one became the foundation for Decibite’s website.
What Should I Do Next?
Competition is a sign of market demand. Being first-to-market is not the only way to make a profit. Rather it starts by properly positioning your product.
To know how best to differentiate your business or product, start by talking to your customers. Find out from them why they bought from you rather than the competition.
After doing customer interviews, you will get clarity about what makes your business different from the competition.
For more articles like this, click here to check out our articles on positioning.