Let’s say your company is the clear market leader: your product was the first on the field. Nobody else comes close in terms of quality and customer service. Maybe you even hold a patent. In that case, you can relax. There’s no immediate need to focus on research and development or new innovations, right? Wrong. There are three critical reasons that all firms need to constantly innovate.
1. Pioneering advantage
The first entrant into the marketplace maintains a competitive edge, and you want to be the market leader: not only in terms of being out there first, which puts you in a position to enjoy a monopoly-like status, but also to position yourself to be able to capitalize on that early win.
2. Product life cycle
History shows that sales of products will grow initially after introduction, but they’ll decline over time. To maintain market share, you’re going to have to introduce new products that customers want. As you’re considering how to innovate, you’ll want to use marketing research methods that help you identify consumers’ wants and needs.
3. Market share will erode as competitors move in
This is true particularly in the case of patent holders whose patents expire, such as pharmaceutical companies whose market share for their patented drug erodes when generics come on the market and begin to compete. Analyzing customer preferences and using that data to drive innovations will position you to maintain market share.