first-mover advantage, noun
from The Marketing Dictionary

A sometimes insurmountable advantage gained by the first significant company to move into a new market.

first-mover advantage, noun
from Copernicus Marketing Consulting

An often-insurmountable disadvantage heaped upon a company
who is first to market with a new product or service.

Obviously at this point in time, the theory behind first-mover advantage (FMA) is best suited for the lecture halls and coffee houses of business schools. But it's so easy to see why we drank the kool-aid:

• "It's absolutely true that nothing can make up for first-mover advantage, and the proof is that Yahoo! remains where it is today and eBay remains where it is, despite the entry of many other companies into those vertical categories,' said Lucas Graves, an Internet specialist at high-tech research company Jupiter Communications." [Someone should tell Mr. Graves that Yahoo! was not a first-mover. The first significant portal was The Global Network Navigator from O'Reilly.]
  
• "You create the paradigm," said Wit Capital's Francine Sommer, managing partner of the Multimedia Angel Partners venture capital fund. "You're setting the tone. You can define the space you're in, which is very important."
  
• Phil Leigh, a vice president at financial services firm, Raymond James, stated that first-mover advantage is worth a 100% to 150% premium over how a stock might be valued by other measures—for example, as a multiple of revenue.

Ironically, we managed to unearth one contrarian from 1999, Mr. Robert Mohn, a portfolio manager of the Acorn USA fund. He stated, "I don't pay an extra dollar a share because someone has first-mover advantage. And first-mover advantage may be no prediction of future success on the Net." Thank you, Mr. Mohn.

Today, it's abundantly clear that FMA isn't something you can take to the bank. The reality is that FMA success stories are difficult to find. Let's face it, when there are profits to be made, other companies will enter the marketplace like sharks to blood. And all too often, when a company is first to market with a new product or service, it's either incomplete or flawed. And with no one to copy from, many FMAs have no idea how to sell their product, who to sell it to or how the customers will use it.

"There's this belief, and it's very, very American, that to create things and be an innovator is a glorious path to success. But it doesn't work out that way," says Professor of Marketing Steven Schnaars, who wrote Managing Imitation Strategies, a playbook for second-movers. As an innovator, "you get bought out, or you go under," Mr. Schnaars says. "A company very rarely goes from small to large as a pioneer."

If you asked who was the first computer game software company many would say Electronic Arts because they're still standing. But EA was about the 41st game software company to get funding. And they're not alone:

• Anyone remember a little gadget called Newton? Apple's Newton was the first commercially marketed personal digital assistant. Initially plagued by poor reviews of its handwriting recognition capabilities, the PDA never recovered from those first impressions. Or more recently, what about Sharp? Despite years of selling personal organizers, the Japanese electronics giant could do nothing to slow the phenomenal growth and acceptance of the PalmPilot.
• The browser battle. Even Netscape's headstart, and strong customer loyalty against Microsoft in the Web browser market didn't help the company. [Spyglass incidentally also began selling Web browsers at roughly the same time Netscape did without gaining a long-term advantage.] Unfortunately for Netscape, their FMA could not withstand the Microsoft juggernaut.
• Statistical Software. The first easy to use statistical software package was not from SAS or SPSS—it was offered by a pair of Harvard Professors, David Armor and Howard Cousch and called DATATEXT. Simple to use and powerful compared to its competitors in the early 70s, it was outmarketed by SAS and SPSS and largely disappeared by the mid-80's.
• The first diet soda was not from Coke or Pepsi. Royal Crown Cola sold the first diet, decaffeinated cola, RC 100 in 1980. The company established a new soft drink segment and struck a responsive chord with millions of consumers.
• The infamous Betamax. Once considered one of the hottest new technologies to hit the consumer sector, it's now a synonym for how not to introduce a new product.
• Free e-mail anyone? The now ubiquitous Hotmail wasn't the first company to offer free email. Juno was first and had a $20 million ad budget which presented a daunting challenge to the upstart competition. Hotmail now has 84,000,000 subscribers to Juno's 14,200,00. [O.K., it doesn't hurt that the company was bought by Microsoft in 1997.]

How did all these "me-tooers" succeed? By taking advantage of major shifts in either technology or consumer needs/expectations as well as lessons learned by the original first-movers, they were able to recast an FM innovator in a new way and in turn substantially differentiate themselves. For instance, overnight document delivery was not a new concept when FedEx introduced its tracking system. But suddenly, customers began to expect reliable overnight delivery. The US Postal Service is still reeling from that one.

It takes more than a spark of innovation to make it through the long haul and that is where most first-movers fail. The skills to manage a company that is growing like wildfire, the ability to control costs amidst constant innovation, the wherewithal to acquire and assimilate other companies or technology when needed, difficult to accomplish when you're also bearing the burden of being a first-mover.

Finally, as we wrap up this month's insight, a bit of advice for all you second-movers out there happily maintaining your topdog position: things have a funny way of coming full circle. IBM was the first company to sell PCs in large numbers and literally created the corporate PC market. We're sure this first-mover never thought itself susceptible to upstarts such as Apple and Compaq or that it would lose its number one position in a PC market it dominated for so long. Ironically, however, several years later Apple and Compaq found themselves in the same vulnerable position when Dell came onto the scene. Alas, sometimes it's a lot easier chasing the crown than wearing it.

While most of us don't jet-off to Hollywood to dine with the stars, successfully negotiate world peace, or hit the game winning home run during the World Series every day, some of us still find life pretty exciting. In fact, those that find life exciting differ distinctly from those who find life dull in terms of many demographic, behavioral, and attitudinal characteristics.

Adults who find life exciting have higher household incomes and are more likely to spend disposable income on charitable donations. They believe they are in good health and that their success in life is mainly due to hard work and perseverance. Though more likely to be reigstered Republicans, adults who believe life is exciting have more liberal views towards social issues including freedom of speech, immigration, and homosexuality. They often listen to music in their spare time and regularly attend religious services.

Those who find life dull, on the other hand, have a more negative outlook on people in general. They believe, if left on their own, people will try to take advantage of others and that the government should be more involved in regulating people's lives. This group holds more conservative views on social issues, yet are more likely to be registered Independents. With less education and a lower household income, this group believes it's better to keep their feelings to themselves and think success in life is mostly due to luck.

Here are a few of the discriminating traits we found between the two groups:

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Ask five marketing managers to define positioning, and you'll probably get five different answers. It's become a nebulous brand-building concept caught somewhere between targeting and advertising.

And though many talk about it, we have seen little evidence of any serious commitment to marketers actively articulating and executing upon one. In fact, we have compiled several years worth of anecdotal evidence indicating a disturbing disconnect between a company's proclaimed positioning and marketing communications strategy. Frequently, a brand's positioning and advertising seem completely unrelated.

To investigate positioning in advertising, we recently conducted an analysis of a week's worth of prime time network television advertising amounting to approximately 340 commercials for a wide variety of brands, products, and services, as well as several public service announcements. We monitored each commercial along three very basic dimensions that make for an effective ad:

1. Clear communication of a brand name
2. Clear characteristic/attribute message delivery
3. Clear communications of a distinctive unique selling proposition or positioning.

Unbelievably, while nearly 75 percent of the ads managed to get their name across, only half of the ads delivered a message mentioning attributes or product features. Alarmingly, a mere 7 percent of the ads actually communicated any sort of positioning. Consider the following two spots that were part of our analysis:

Hyundai Santa Fe
This particular spot announced the introduction of a brand new entrant in what we assumed to be the low end of the vast SUV category (sadly, they didn't tell us in the ad). Unfortunately, the vehicle looks like every other smaller SUV and all the ad offers is a mandatory view of the vehicle negotiating tough terrain with a voiceover that mentions forgettable features offered on other SUVs. With no specifics offered other than a "great warranty," this spot offers nothing compelling to help the consumer make a choice for this SUV.

Office Depot
The "slice of life" execution depicts a man turning his business over to his daughter who goes out to tour the aisles of a business supplies retailer not clearly identified as Office Depot. There is virtually nothing offered in the way of product or service information. And the tagline, "Takin' care of business" offers little in terms of differentiation. This wasted effort contributed in our view to Office Depot's drive towards Chapter 11.

Now take a look at one of the ads which did present a strong position:

100% Columbian Coffee
This is a well-executed parody of a customer testing the coffee in lieu of wine at an elegant restaurant. All the elements of wine tastings are included but translated into a supreme coffee-tasting experience. In the end, the waiter presents the can for visual inspection with a voiceover that says, "Be sure it's 100 percent Columbian coffee, the richest coffee in the world." The implicit and highly effective position of course is that there is no substitute for Columbian coffee.

Why should marketers care that a minimal number of ads during an entire week's worth of network commercials clearly communicated a differentiating message? Well, for one it appears that companies are wasting millions of dollars on advertising. Fantastic they got their names across, but if you haven't provided a compelling reason to buy the product or service, not to mention buy it over the competition, what's the point?

Secondly, positionless brands in overcrowded categories are in danger of becoming price-driven commodities. In a study we did earlier this year, The Commodization of Brands and Its Implications for Marketers, we found that consumers overwhelmingly perceived brands in categories as diverse as financial services and office supply stores are becoming more similar over time rather than different. As they slip toward commodities, leading brands have little else other than price to induce purchase—not a good situation for marketers already facing squeezed margins.

In a world obsessed with image, the art of positioning has become lost. Even within the pages of recent best-selling books on marketing and branding, this fundamental is noticeably absent. A Senior VP of Marketing at a major package goods company recently told us, "Positioning? Brands don't need a positioning any more." Yes they do sir, yes they do.

For more insightful marketing discoveries, visit http://www.copernicusmarketing.com/discover/index.htm

Have a hot discovery for our next release? Contact us at info@copernicusmarketing.com

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Taking a cue from The Cluetrain Manifesto, in our hype-infested society, Mr. Silverman has written a book detailing how honest and positive word of mouth can multiply sales explosively. And the surprising truth is that word of mouth can be implemented as strategically as any other form of marketing—and at significantly lower cost! Central to this book is the innovative Decision Matrix, which helps readers identify who their potential buyers are and what messages those prospects need to hear from friends, coworkers, and trusted advisors. Complete with strategic advice and tactical recommendations, this book is a welcome addition to our bookshelf.

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There's nothing like relaxing with a good book during the summer, and publishers have a wide fare of branding and marketing books for the avid summer reader this year. We'll offer our recommended summer reading list along with the Copernican version of Cliff Notes (for those of you who may not be able to make it through the 20+ books on branding and customer relationship management on the market today) in next month's issue.

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