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One Response to “What Are The Advantages Of Coming Up With A New Product?”

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  Tom says:

  March 1, 2010 at 12:29 pm

  o. Maximum profit as you have a monopoly until other competitors enter.
  o. Ability to manipulate entry barriers – patents, market saturation, leading brand – making it harder and less appealing to potential competitors to enter. You are a price-setter, rather than a price-taker as competitors will have to be. Additionally, economies of scale kick in and the first mover can start turning a profit more quickly after investment in manufacturing equipment (or in services, training and so on). Followers may have slower sales and so it may take a long time (read: too long) to turn a profit on the original investment.
  o. Switching costs – if all buyers within the target market of your product buy your product you can create high switching costs and barriers. So, when the product is replicated by a competitor, the consumer perceives too much cost (and risk) in switching to the new brand. Think VCRs – as I recall, super 8 was the first format out… so people willing to purchase a VCR purchased that. When competitors came out with other formats, the cost of switching meant losing the investment in the Super 8 VCR + all the super 8 tapes you’ve purchased.
  o. Ability to set a defensive position. Followers will have to ‘attack’ you or your product to get a piece of the market. So by getting in first, you can occupy niche markets and geographic regions that you can hold market share easily in after the above points (switching costs etc). A competitor will have to attack these position aggressively to be successful. This is costly, and they don’t have a concreted position to rely on. It is a higher risk.
  There are others but hopefully this helps.

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