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Startups: Is it better to be first or second to the market?

By Lee Mesika
 pixabay / 594
*Updated 2022
We live in a time where innovation has become an expected part of our daily lives. Modern technology has given us the ability to create groundbreaking technologies (not to mention lifesaving vaccinations) in very short time spans. Creating a startup has become the all-American dream; and we are constantly hearing or reading about various success stories, especially the rise of unicorn companies. In this constantly expanding market, where everyone strives for success, should we aspire to be a pioneer of a new innovation or is it better to be the first follower? Is it necessary to come up with an idea, or can you be more successful by acting fast on an emerging trend?
Here are three reasons why you should strive to be an innovator and three reasons why being a fast follower is enough.


The Innovator


Building a relationship with customers

A huge advantage that innovators have when coming out with their product is being the sole seller of the product. The time period until their ideas are copied and products are reproduced is key in building a lasting relationship with their customers. By being the only option on the market, consumers have no other options and must turn to the innovator himself or herself when purchasing. Research shows that the most critical time to gain consumer loyalty is when they make their first purchase or begin service. As it costs about 6-7 times more to acquire new customers than it does to keep current ones, it’s better to “strike while the iron is hot” and make sure you get those first customers on board.


Brand association

When we think of dolls, the first brand to come to mind is most likely Barbie. Now think of mobile phones, did you think of Apple first? And what about soft drinks and fast food? Chances are high that Coca-Cola and McDonald’s first came to mind. Brand association is a big thing. There is a strong correlation between brand awareness and association and purchase decisions. By being the first brand to sell a product, if done right, you can make your brand name almost synonymous with the type of product (Kleenex or Band-Aid anyone?). The media is also more likely to cover a “first of” than a “slightly better” version.


“The early bird catches the worm”

What do Amazon, eBay and Coca-Cola have in common? These three companies had this motto in mind. They acted fast solely on the belief in their product. By being a first mover, you get a head start on your potential competition and are in a prime position to test the product with real users. This process, where testing and adapting are done in front of real users, as opposed to a development lab, is at the heart of the popular “lean startup” dogma.

The First Follower


“The second mouse catches the cheese”

There were search engines before Google. There were navigation apps before Waze. There were even social media sites before Facebook. In a study conducted of 500 companies, the first mover (first to sell a product) had a failure rate of 47% as opposed to the 8% failure rate the first follower faced. Why is this so?

The previously mentioned companies weren’t necessarily better than their predecessors. They used the data that was already available to them from the first movers and improved themselves. They had better business models, better management and better timing. They were more focused and learned from the mistakes previously made by others in the field. Also, by entering the market later, they could see that there existed market demand for their product.


Public Acceptance

With all change comes skepticism. Innovation can even cause a scare until the public is ready to accept a new idea/product. The market can be split into five groups, with the late adaptors and the laggards (estimated at being about 50% of the public) being the last ones to tag along to a new innovation.

By not being an innovator, you allow the public time to adapt to a new product. This way, even though you are entering a market that is not necessarily fresh and new, you are entering at a time when there is already consumer interest, public awareness and acceptance.


Competition is good

Adding another player to the market creates competition between firms. This is positive, as competition is good for business and consumers. Buyers will get better prices for products (not to mention better quality of products) while companies will be able to learn from each other to perfect their respective product(s) and focus on what they do best. True, by being a fast follower, you will have to always bring your “A game”; this is the only way to succeed. However, this will also result in higher customer satisfaction, which may lead to larger revenues down the line. 


The Bottom Line: By being an innovator, you give your company more time to “take off” and build lasting relationships with your customers. Not to mention, there’s more opportunity to grow brand awareness, which can influence consumer buying behavior. On the other hand, being a fast follower can be very rewarding. You allow yourself to join an already flowing market and can learn from where your competition went wrong. Would you rather be an innovator or a fast follower?

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