Entry to market

 There is a common phrase, “the early bird catches the worm”. In business, the worm relates to market share. In this article, we will discuss three categories of market entry: first to market, latecomers and commodity (generic). There is almost a complete inverse relationship in all aspects of costs vs benefits between being the first to bring something to the market and a commodity offering. What are the advantages/disadvantages of each of these entry points? After learning about each category you will be in a position to determine which strategy to take. Keep in mind, that while this article specifically relates to market entry, it is true about any other aspect of life where there are different entry points.

Development

First to market - The first group to the market needs to be the most creative. They have to have a very deep understanding of the market that they are going into. They often have to do market research, invent new processes and experiment on pricing and support models. 

Latecomers - All groups that come afterwards have the ability to learn from the first group in. They can review what was already done and determine slightly better ways of accomplishing the same thing, or adding additional value on top of the existing base offering. These teams need to be creative, but they are “standing on the shoulders of giants.” The difference is similar to editing a book, as opposed to writing the initial content. The final result will be better, but the editor couldn’t have done it alone.

Commodity - The final group that comes to the market is the commodity company. They copy what already exists and has no real creativity costs. They might be a few months behind the latest innovation, but can offer it at a greatly reduced cost.

Marketing

First to market - The first group in the market needs to actually define the market. They must convince their target audience that they need the service/product. People had been living without this until now, so convincing them that they need something and should be paying for it could be an uphill battle. Sometimes it is obvious, because you can show in an easy to understand way that this will save them money or significant time/effort, but other times what you are offering is a mere convenience or opportunity that potential customers don’t inherently understand the need.

Latecomers - Groups that come to the market afterwards can take advantage of the market that already exists. They need to differentiate themselves, but can build on the target audience of the original service. The main work here is convincing potential customers to use their service as opposed to the competitors, but they don’t need to convince them that the service is a necessity. 

Commodity - The main goal of a commodity company is to gain market share by offering a service that people are already looking for at a lower cost. They merely need to use the existing buzzwords with a price to bring people to their service.

Continuity

First to market - In order for the first to market to keep their edge, they must constantly be innovating and providing new value to their customers. New features or offerings must be released on a quick and regular basis. They control the lexicon and the standards and have the ability to continuously evolve it, to make sure that the latecomers can’t easily catch-up. Creativity can never end and they must always be on the top of their game.

Latecomers - Groups that come to the market afterwards are in a much more relaxed position. They have the time to learn what worked and what didn’t from the market leaders and offer similar, more compelling services. These companies have to determine ways to distinguish themselves, such as offering new features or services that the original company isn’t offering. They can turn into serious competition for the market leadership.

Commodity - Commodity companies should update their services regularly, starting to develop new services when they see success in the market. There is no need for creativity, just a better price in order to gain the market share of customers who don’t need the shiny new features as soon as they come out. 

Summary

Where do you fit in? It is totally dependent on your style and what you are looking for.

Staying the market leader in any industry is a very difficult position to be in. It usually incurs the highest costs, and because of that can offer customers to be the first to try something, giving their customers the competitive advantage. They can charge a premium price because of this and will generally control a larger market share. 

It is much easier to be a latecomer and build your offering around an existing market. You can still be creative and compete in a lot of the same spaces. You don’t control the market, but if you wanted to, there are ways to distinguish your offering and push ahead.  You may start out as the first to market, but comfortably move to the side and stay a major player, when other companies catch up. 

The commodity market is the easiest to enter, but there will also be the greatest number of competitors. In this space, the only real difference is price. While the total market share for commodity offerings is very high, it is also super competitive, because the customers are there only for the low price.