From last to first: Why it pays to be a late market entrant

Pewin Cabs managing director Justus Kirigua speaks during the launch of a mobile card payment solution in February, which will enable riders to pay for low value transactions with ease and convenience. PHOTO | SALATON NJAU 

By  Queen Munguti

Kenyan taxi company, Pewin Cabs last week launched an improved application called DandiaApp, replacing an earlier PewinCabs app, in a bid to expand its product offering in a late mover strategy targeting the e-hailing taxi market.

For many, such a late move will be viewed as doomed to failure, but the reality is that late movers into new markets only have an eight per cent failure rate compared to a 47 per cent failure rate by first movers.

“Popular wisdom states that there is always a first mover advantage: The first company to get to a market with a new product will enjoy greater name recognition, a higher market share and enduring leadership over everyone else who later enters the same market,” said Peter N. Golder and Gerard J. Tellis in their 1993 research paper, How Latecomers Grow to Dominate Markets.

“In reality, however, the facts actually point to a different conclusion, most product categories tend to be dominated by the companies that best harness vision, persistence, commitment, innovation and leverage, rather than exclusively seeking a first-mover advantage.”

In the case of Pewin Cabs, it has moved strategically to gain advantage in the e-hailing market by learning from the mistakes of its competitors.

“We did extensive research and realised that fare predictability was a concern for customers. We also received queries from customers who wish to travel as a group, which the regular saloon cars cannot accommodate,” said Justus Kirigua, the managing director of the company.

This learning from the early market entrants reduces a late movers’ cost of production because it makes fewer mistakes than the pioneers, according to a review by the Kellogg School of Management on research by Venkatesh Shankar and Gregory Carpenter.

“One key factor is that creating a product is costly, both in terms of the money invested and the mistakes made on the path to success. While the pioneer pays a steep price in creating the product category, the later entrant can learn from the experience of the pioneer, enjoying lower costs and making fewer mistakes as a result,” it said.

In this, it is expected that a late mover will launch a superior product or service than its rivals thus causing a shift in its market share and an increase in its customer acquisition.

“If you come in late, you have to have a good reason for the consumer to switch. One reason could be that you are half the price, and some of the late transfers to a newcomer are simply down to that issue,” said Tim Ambler, senior fellow at the Adam Smith Institute in an interview with business news website Campaignlive.

For Pewin Cabs, in terms of pricing, it is offering customers a fixed rate, eliminating the worry of surges.

“The pricing you are charged sitting in traffic will not apply on our cabs. People need predictability in their pricing. One will get pricing before the trip begins,” said Mr Kirigua.

The fruit of better features delivered later is evident in almost all technology business sectors, not least of all for Facebook, which was a late entrant in the social media scene.

Before Facebook, MySpace was the social media giant, earning at its peak in 2008 around $800m in revenue. The entry of Facebook saw the regime slowly start to change and in 2009, it was confirmed that it had overtaken MySpace as the most popular social media site based on number of visits.

According to statistics by US web metrics firm, ComScore, Facebook had 70.278 million unique visitors in the US in May 2009 compared to MySpace’s 70.237m and with that began its dominance.

Following that announcement, MySpace responded by cutting 30 per cent of its staff and closing offices in different locations in a bid to reclaim its lost glory. But it’s subsequent loss of position has been credited to its failure to innovate. 

“The real problem was that the world had been trained by MySpace that social networking was interesting, but the actual product had been perfected by Facebook,” said Mike Jones, the former head of MySpace in an interview with Business Insider.

“Facebook’s killer feature was that it replicated the real world by forcing people to use their real names, whereas MySpace users used pseudonymous handles, this led to its growth, and the demise of MySpace.”

Typically, late innovative entrants such as Facebook tend to redefine a business category, reshaping its ideal and enjoying the same benefits as pioneers, according to the Kellogg School of Management review.

For Pewin Cabs, the industry will be keen to see if its own innovation is a strategy that pays off.

-African Laughter