When a new product hits the market, you’d expect it to be expensive. After all, R&D costs money, right? But then, within weeks or months, the price crashes-sometimes by more than half. If you’ve ever bought a smart TV, a database license, or even a fitness tracker, you’ve seen this happen. It’s not a sale. It’s not a mistake. It’s the first generic entry-and it’s changing how every product is priced.
What Exactly Is a First Generic Entry?
A first generic entry happens when a competitor releases a version of a product that does the same thing as the original, but cheaper. It’s not a clone. It’s not a knockoff. It’s a legitimate alternative that works just well enough to make customers switch. Think of it like this: Apple launched the iPod in 2001 for $399. It was sleek, simple, and the only game in town. But by 2005, companies like SanDisk and Creative were selling similar MP3 players for under $100. Apple didn’t lose. But it had to drop its price. That’s the first generic entry effect. In software, it’s even more dramatic. Oracle’s database software used to cost tens of thousands per license. Then PostgreSQL came along-an open-source alternative that matched 85% of Oracle’s features. Within two years, companies were switching and cutting their software bills by 70% or more. The same thing happened with Microsoft SQL Server and MySQL. The original vendor didn’t go out of business. But they had to change how they priced things.Why Do Prices Drop So Fast?
It’s not about the cost to make the product. It’s about the cost to believe it’s worth the price. The original product-let’s call it Product A-has monopoly power. No competition. No alternatives. So the company can charge what the market will bear. That’s called price setting by scarcity. But as soon as Product B shows up-same function, half the price-the game changes. Customers don’t care about brand loyalty anymore. They care about value. And value is no longer defined by who made it. It’s defined by what it does and how much it costs. Here’s the math: If Product A costs $10,000 and Product B costs $3,000 and does 90% of the same job, most businesses will choose B. Why? Because IT budgets are tight. CIOs are under pressure to cut costs. And if Product B works well enough, the risk is worth it. The first generic entrant doesn’t need to be perfect. They just need to be good enough. That’s the key. In software, 80-90% functionality is enough to trigger mass adoption. In electronics, matching core features like screen quality, battery life, or processing speed is enough. You don’t need the logo. You don’t need the warranty. You just need the outcome.How Do Generic Entrants Afford to Be So Cheap?
They don’t build from scratch. They stand on the shoulders of giants. Take PostgreSQL, for example. It’s open-source. That means the code is free. No licensing fees. No royalties. The company behind the first generic entry doesn’t pay for the core technology-they improve it, package it, and sell support. That’s the business model now: sell service, not software. In hardware, it’s even simpler. Many generic electronics use the same chips, screens, and batteries as the big brands. They just skip the marketing, the retail partnerships, and the fancy packaging. A $50 Bluetooth speaker doesn’t have a $200 R&D budget. It uses a $12 chip and a $5 battery. The rest is profit. And then there’s labor. Many first generic entrants are based in regions where skilled engineers cost 60-70% less than in the U.S. or Western Europe. That’s not exploitation-it’s efficiency. And it’s why companies like MongoDB and Redis can offer enterprise-grade tools at a fraction of the price.
What Happens to the Original Company?
They don’t disappear. They adapt. When the first generic entry hits, the original vendor has three choices: fight, flee, or transform. Fighting means suing, lobbying, or spreading fear about quality. That rarely works anymore. Customers are too informed. Reviews are too public. TrustRadius and G2 show that 63% of users switch because they got the same performance at half the cost. Fleeing means giving up. That’s what happened to a lot of early smartphone makers in 2008-2010. They couldn’t compete with Android’s low-cost alternatives. Transforming is what the smart ones do. Microsoft didn’t fight MySQL. They made Azure SQL cheaper. Oracle didn’t stop PostgreSQL. They started offering their own cloud version at 40% off. Adobe dropped its $600 perpetual license and went subscription-only-because they had to. The new rule? Price isn’t about cost. It’s about perception. If customers think your product is overpriced, they’ll find a cheaper version-even if it’s not perfect.Real Examples: The Numbers Don’t Lie
Let’s look at actual data:- In pharmaceuticals, the first generic version of a drug cuts prices by an average of 76% within six months (Congressional Budget Office).
- In enterprise software, first generic alternatives launch at 40-60% below the incumbent’s price (PwC, 2019).
- When Sony’s Bravia TV launched at $1,799 in 2015, competitors brought similar models in at $999 within a year. By year two, the price dropped to $899.
- Companies switching from Oracle to PostgreSQL reported 78% lower licensing costs-with no drop in performance (Reddit, r/sysadmin, 2022).
- Fortune 500 companies now have formal processes to evaluate generic alternatives within 3 months of launch-up from 32% in 2018 (Gartner, 2023).
Is There a Catch?
Yes. But it’s not what you think. The biggest complaint from early adopters? Integration. Setting up a new database, switching CRM systems, or migrating data takes time. On average, it takes 3-6 months to fully transition. And training your team adds another 40-60 hours per IT admin. Support isn’t always as fast. The original vendor might have 24/7 phone support. The generic version? Often email-based, with a 4-8 hour response time. But that’s changing. Many open-source companies now offer paid support tiers that rival the big names. And some generic products are just “one-time savings.” You save money now, but later you need to upgrade to a better version-or pay for extra features. That’s why the smartest entrants use a “land-and-expand” model: free or cheap at first, then add-ons that make sense as you grow.What Should You Do?
If you’re a buyer: Don’t wait for the sale. Watch for the first generic entry. It’s coming. Check forums like Reddit, G2, and Capterra. Look for reviews that say “switched from [brand] and saved X%.” If the product has 4.5+ stars and mentions cost savings, it’s worth testing. If you’re a business selling software or hardware: Your pricing model is outdated if it’s still based on licenses and upfront fees. Start thinking in terms of usage, subscriptions, and value-add services. Offer a free tier. Let people try before they buy. Lower your entry price. Or you’ll be the one watching your market share disappear.The Future Is Faster
Ten years ago, it took 18 months for a generic alternative to appear after a product launched. Now? Six months. Sometimes less. Why? Cloud computing. Open-source tools. Global talent. Faster development. And customers who won’t wait. ARK Invest predicts that by 2027, open-source alternatives will capture 35% of the enterprise software market. That’s not a threat. It’s a signal. The days of charging premium prices for “brand trust” are over. The new currency is value-and speed. The next time you see a product’s price drop hard at launch, don’t think it’s a flash sale. Think: first generic entry. That’s the real story behind the numbers.Why do generic products cost so much less than branded ones?
Generic products don’t spend money on marketing, retail partnerships, or fancy packaging. They use existing technology-like open-source code or commodity hardware-and focus only on delivering the core function. That cuts their costs by 30-60%. Their profit comes from volume, not premium pricing.
Is a generic product really as good as the original?
In most cases, yes. First generic entrants typically match 80-90% of the original’s functionality. You might miss a few bells and whistles, but if you only need the basics-like running a database, playing music, or connecting a speaker-you won’t notice the difference. User reviews consistently show that 63% of people switch because performance stayed the same but cost dropped.
Do generic products come with good support?
It varies. Early on, support is often slower and email-based. But many now offer paid support tiers that rival big brands. For example, MongoDB and PostgreSQL have enterprise support plans with SLAs (service level agreements) that guarantee response times under 4 hours. Community forums also fill the gap-often with faster answers than official support.
How long does it take to switch to a generic alternative?
For software, most companies need 3-6 months to fully migrate data and train staff. Hardware swaps are faster-often under a week. The biggest hurdle isn’t the product itself. It’s data migration and integration with existing tools. Many businesses hire consultants for this step, but the long-term savings still outweigh the upfront cost.
Will the original company go out of business?
Rarely. Instead, they adapt. Microsoft, Oracle, and Adobe all lowered prices, switched to subscription models, or added cloud services to stay competitive. The market doesn’t eliminate leaders-it forces them to evolve. The winners are those who listen to customers and stop treating pricing like a monopoly.
Should I wait to buy a new product until a generic version comes out?
If you can wait 6-12 months, yes. That’s usually how long it takes for the first credible generic alternative to appear. You’ll save 40-70% and still get 90% of the functionality. If you need the latest features or guaranteed support right away, buy the original. But if you’re flexible, waiting is one of the smartest financial moves you can make.
