Many marketers believe one of the worst competitive positions to be in is being a late entry with a new product or service. That is, competitors have gotten a head start entering a market giving these early entrants what some competitors think is an insurmountable competitive advantage.
In actuality, the advantage given to early movers can be overcome even by firms that do not enter until well after a market develops. This may be especially true if the market is characterized by one or more of the following:
- The market consists of products that offer relatively similar advantages with no one product having features that are superior to others.
- Growth in the market is relatively slow but is expected to pick up speed as more customers begin to recognize the benefits of the product.
- Customers who have already purchased do not have a strong overall satisfaction level with existing products.
- A sizable percentage of product distributors have not added the product to their inventory or are not opposed to expanding their offerings by adding more selections.
In most cases, the key for late entrants is to accept their position and recognize that becoming the market leader is probably not in the cards (though not impossible). More likely, the late entrant will do well to be a strong second-tier or niche player. While not commanding the market position of the early entrants, second-tier positioning can still be quite profitable, at least while the market is growing.
For products that are late to market, several strategies could enable a successful run. Here are a few:
Low Price Advantage
The most obvious strategy for late entrants is to gain market share by entering at a price that is lower than that established by existing competitors. If customer loyalty is not particularly strong then a product offering similar benefits but with a lower price will be in a good position to capture a healthy percentage of the market – at least in the short-run. If a company plans to compete on price they should brace themselves for retaliatory reaction by competitors, who will not take kindly to seeing sales migrate to a new, lower price competitor. The early entrants are bound to respond by offering additional incentives to the market. If the marketer has the strength to sustain a price battle, this strategy could help establish a foothold. But the risk is high.
Create or Suggest Added Value
Since battling on low price is often a risky strategy, a late-to-market product may find greater long-term success by offering other benefits beyond those available in the basic product. For instance, the company could develop features that provide extra value, such as easy-to-access service centers, attractive product packaging, product training, and extended warranty plans. Alternatively, instead of creating value through the addition of new features, the marketer could promote features that already exist but may not be fully exploited. Examples may include promoting the new product’s compatibility with other products sold by the company or directing attention to advantages in the manufacturing process (e.g., locally produced, state-of-art manufacturing process, dedicate work force, etc.).
Exploit Ease-of-Use Advantages
The classic Product Life Cycle concept suggests new products appeal to different user groups at different times with a small market of early purchasers (called innovators and early adopter) willing to experiment by purchasing the product well before much larger markets (called early and late majority) make the commitment. Buyers in the early stage often seek benefits that are more personal in nature (e.g., status within their peer group), while customers in latter stages of adoption are often drawn to products offering significant usage benefits beyond those of existing products, such as how it can save them time or money. However, this group is often opposed to a steep learning curve in order gain these usage benefits. For this group, showing how easy the product is to use in order to start experiencing these benefits may trump other advantages offered by competitors’ products.
Another strategy for market latecomers is to promote incentives not offered by other firms in an attempt to gain buyers’ interest and confidence. As we discussed, competing directly on price is often a short-term solution since competitors are likely to respond in-kind. Yet the marketer could consider offering financial incentives that may not directly reduce price but still lowers the overall “cost of acquisition.” For example, offering trade-ins for older products, money off coupons for future purchases or free add-on products and services will make the buyer examine the cost of the whole package in relation to what competitors are offering. Other incentives can also be considered especially those aimed at the customer who lacks confidence in purchasing the product. These incentives could include money-back guarantees, free installation and easy-to-follow instructions.
Outsmart and Outsell Competition
Finally, instead of spending significant funds in efforts to differentiate a product from those already on the market, why not just try being more creative AND work harder than the competition. Investigate opportunities that have not been exploited by competitors, such as selling via new sales channels. Or brainstorm to develop new promotion methods that are likely to capture media and buyer attention.