3 second-mover advantages: benefits of late market entry

The stress of not being a market pioneer

Let's talk second-mover advantages. It comes up regularly when talking with people about new products. Especially in the WordPress ecosystem, people regularly ask the question.

Are all the good product ideas already taken?

The underlying assumption is that once a single product exists, or once a great product exists, that there is no room for anyone else. But it's not true, is it?

Market pioneers—the first mover in a market that creates a new and compelling offer—are awesome and they get a lot of benefit from being early. Think Coca-Cola.

But we all like variety and choice, right? We want more than one kind of car, more than one kind of hotel, more than one kind of coffee. The stress of not being a market pioneer is real, but something we shouldn't stress about. Especially if it's something that can't be helped.

My answer, in case you wondered, is always this:

No, the good product ideas aren't all taken. There's tons of room to innovate.

Ninja Forms leveraged second mover advantage

In the WordPress space, I often talk about Ninja Forms—a company that appeared in the WordPress ecosystem years after there was a flagship product (Gravity Forms).

In 2011 I was telling people that the only plugin to buy—of all the plugins out there, not just form plugins—was Gravity Forms. It was a category creator and winner. People told the Ninja Forms folks that there was no room to step into the space. And that was a few years ago.

But then you'd have to look at their growth in 2015 & 2016 – years after Gravity Forms had taken that corner of the market. In a period of 18 months they went from 200k installs to over 700k active installations. That's 350% growth. In 18 months! Years after people had heard of and were using a competitor's product.

WPForms leveraged second mover advantage

You might think the form business ended there – with Ninja Forms stepping into a market owned by Gravity Forms. But it gets even more interesting.

Years after Ninja Forms was a well-known name, right as Ninja Forms grew 350%, WPForms stepped into the market.

You might think it's a crazy idea. Want to know what's crazy? WPForms now has more than 4 million users.

There's always room for a new and differentiated product.

The definition of second mover advantage

When I talk about a second mover advantage, I'm really talking about entering the market after someone else has defined the playing field. You might enter right after someone else (a fast follower), or you might enter after several players have arrived (late market entry).

Here's the good news: when you don't enter a market as a pioneer— whether you're a fast follower or a late market entry—you can enjoy several advantages that aren't available to the first movers.

The second mover advantage eliminates the high costs and risks of finding product market fit.

  • You spend less on R&D
  • You spend less on market education
  • You deal with less risk of product acceptance
  • You potentially spend less on customer acquisition

The truth is that you don't have to be first to find success.

As Vala Afshar reminds us, Google wasn't the first search engine.

Google isn't the only example of a late market entry that ended up having tons of success.

Three advantages of a late market entry strategy

There are a lot of reasons why entering a market later can be beneficial. Here are three.

Customers can be serviced better.

Whenever everyone is mad at the leader in the space, but isn't switching because the switching costs are too high, or the risks are more than anyone wants to take on, a late market entry has a shot. I heard the founder of Stripe (which I love) talking about what made them initially successful. He talked about tone, emails and documentation. I agreed with all of it. But I would have started with, “We weren't PayPal.”

Product gaps can be seen more easily.

If there are a couple of players in the space that offer similar products, there are likely some things that everyone has taken for granted. Customers have come to learn that this is just the way things are. Until someone innovates. But that innovation often requires seeing the gap – and that's easier when you're not the first mover who created the category. AirBnB‘s refund policy is a no-brainer now, but VRBO didn't have anything like it for years.

Acquiring customers can be cheaper.

Imagine being the first person to sell a telephone. How does that pitch go? When you're trying to sell a new product that requires you to educate a market in order to do so, you'll have a high cost of sale. When you arrive to the market after someone has already done it, it's a lot cheaper. One of my startups was a pioneer that simply ran out of money educating a market, and it allowed others to step in, thank us, and take the market we'd trained. That was a painful and costly lesson!

How to leverage these second mover advantages

There's a book I enjoy, mostly because of the stories, that has a framework of questions that I appreciate, called Blue Ocean Strategy. Don't worry that it suggests you have to do this in an uncontested space. I find that the questions are worth asking even when, and especially when, you're stepping into a market where competition exists.

blue-ocean-framework

What will you eliminate?

Are there factors that have become commonplace in your space that you can eliminate completely? Just because everyone else is offering it, must you? What if you take it away from your product complete? It could lower your costs—which could increase your margin.

What will you introduce?

Are there completely new features that you could introduce that no one is doing right now—for whatever reason? Sometimes you'll discover that entering the market late allows you to create something that others haven't been able to because of their existing infrastructure or approach.

What will you reduce?

Are there factors that you can reduce—whether they're friction points or costly attributes of your product – that you can adjust? A lot of folks punt to pricing but I don't recommend that. Becoming a low-priced leader is hard work.

What will you improve?

Are there factors that are frustrating people that you can improve? What factors demand an improvement? As you step into a market late, your approach may allow you to improve things far cheaper or faster than existing players who are living with existing constraints.

Building a new SaaS or Plugin? Choose your category carefully.

One of the products I've recently discovered is called Bento. It's an incredible product that lets me do personalization, even with anonymous readers.

But what is it? Is it a CRM? Is it Marketing Automation? Is it Personalization?

One of the toughest challenges when you create products is knowing which category to put yourself in, because the moment you do – you take on the expectations for that space (good or bad).

But this is also where you can enjoy second mover advantages – because if you say you're like Hubspot, and deliver a ton of value that's on par, but charge less than $100 / month – you're creating some significant contrast.

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Chris Lema
Chris Lema has been working with WordPress since 2005. Over the years he's been a blogger, a speaker at WordCamps, a coach for WordPress product companies, and the founder of the conference for WordPress business owners, called CaboPress. Today he's the VP of Products at Liquid Web, where he manages the world's first managed platform for WooCommerce stores.

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