What is second-mover advantage? Entering a market late


The stress of not being a market pioneer

It's a regular question that I hear 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.

In the WordPress space, this is when I mention 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. People told the Ninja Forms folks that there was no room to step into the space. And that was a few years ago.

But if you look at their growth in the last 18 months—just the last 18 months—you'll see they've gone from 200k installs to over 700k active installations. For the people who don't do math in their heads, that's 350% growth. In 18 months! Years after people had heard of and were using a competitor's product.

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.

The 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!

A Blue Ocean Strategy Framework

There's a book I enjoyed—mostly because of the stories in there—called Blue Ocean Strategy. It covers a lot of material on stepping into an uncontested space rather than jumping into the fray where all the competition exists.


One of the things I love in the book is a framework of four questions that I use often:

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.

This is the journey I'm on right now!

In case you didn't know, I'm about 5 weeks into a new role as the VP of Products at Liquid Web—a $100 million dollar hosting company that is stepping into the Managed WordPress space after ten or more companies have already created and educated a market. We're not a fast follower. We're a late market entrant.

I write this post as much for myself as I do for you. To remind myself of what I know is true and what I've shared with all the folks I've coached over the years. The framework above, and the questions it asks are the ones I ask myself regularly, in my new role.

So trust me when I tell you, if you're reading this thinking about your situation, I'm in the same boat with you.

And if you want to check out our solution (and watch our progression as we answer these questions), you can get a discount by using my coupon code: LEMAFRIENDS when you purchase our Managed WordPress solution—it's 33% off, for 6 months.

About 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.

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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