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Collaborative marketplaces beat ‘no buyers, no sellers’ conundrum

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Anyone setting up a new collaborative marketplace faces a classic chicken-and-egg conundrum: attracting customers means offering a wide and varied range of service providers – but those are hard to come by when you don’t yet have an established customer base to offer them.

So, who should you try to convince first – the supplier, or the customer? 

There’s no single, universal answer to this question – but looking at different types of cases, and understanding the user groups involved, we can shed some light on how to break out of this ‘catch-22’ situation.

In the course of our investigation, we’ll look at the example of The Haircut, a recently-created solution that uses the Cocorico platform to let people find independent hairdressers who can visit them at home. 

 

Launching a platform without users is a really bad idea

 

Obviously enough, nobody will agree to become any platform’s ‘user zero’ – by definition, a platform with almost no sellers will attract almost no buyers. Customers want something now, not the vague possibility of something in the future.  

The same is true of providers – they won’t commit to a new platform unless they can be convinced it offers tangible benefits. Being the only vendor in a market probably doesn’t mean you’re about to capture a lucrative monopoly – it means you’ve pitched your tent in an empty field. 

In the case of The Haircut, clients looking for a home hairdresser are spontaneous, only registering at the very moment they wish to use the service. Good hairdressers are usually not short of work, and have had bad past experiences with ineffective online platforms. All this means they take a lot of convincing to get involved in new online platforms.  

 

Build the offer, then acquire the demand: the natural solution

 

The first key insight into the approach of most successful collaborative marketplaces is this:  you need to establish an extensive database of providers before you go in search of customers, then contact and pre-register these providers before your service goes live. 

Offering preferential treatment to providers who come on board early is a great way to get things moving – whether that’s a reduced fee, extra promotion, or additional services...  

This way, as soon as the platform is launched, customers can choose from a wide range of services and will have a good chance of finding what they’re after. The identity of the platform can be built up around the rich offering it represents. 

But before taking this approach, it’s important to look carefully at the type of service providers you’re dealing with. If they’re professionals using the platform for their main business, they’ll likely want a fast return on the time and money invested. If the online marketplace doesn’t produce a steady flow of orders, they might abandon it. 

These professional users are the most valuable, but also the most impatient: they’re already established in their field, unlike your marketplace – which means it needs them more than they need it. 

Individual, non-professional providers come with their own challenges, too. They might be less demanding than professionals, but they’re also less committed – and might lose interest in the time between signing up and the platform going live, and turn out not to be available when the customer needs them.

All this puts your platform’s brand at risk on two fronts: visitors will be disappointed if what’s offered can’t really be obtained, while providers will resent taking the time to get involved if customers don’t materialise.  

In the case of The Haircut, the initial dissatisfaction came on the supply side: more than a hundred home hairdressers were signed up ahead of launch, but in the time it took for customers to appear, those already most in demand were naturally the quickest to get tired of waiting – with the unfortunate result of the loss of the best providers.  

 

Identify target customers, then look for their needs: the reactive solution

 

Though in many cases unsuitable and rarely the intuitive choice, the strategy of gathering a customer database before attracting providers can make sense in some situations – typically, when a group of consumers exists that simply can’t find what it is looking for anywhere. These customers may have no choice but to be a bit more patient than the average punter!

Generally speaking, we’ll be talking about professional customers here – those who have been nursing unmet needs for long time. The chance that the marketplace has to replace an unsatisfactory situation with one where needs are being met offers the creator of the new platform the chance to really win the loyalty of the customer.

For The Haircut, the customers fitting this description came in the form of hotels and hospitals. While individual looking for a trim already had plenty of other options, for businesses that needed to be sure of finding one or more hairdressers at short notice, this new platform offered something they hadn’t been able to find previously. 

 

Grow your customer and provider databases simultaneously: the ideal solution

 

This is undoubtedly the most complicated solution to implement, because it is necessary to convince providers and customers of something which is not yet functioning – using only your ideas. Future users are asked to make a commitment before anything is in place to satisfy their needs. The most important thing here is  creating a balance between supply and demand.

Though it might look superficially similar, this scenario is the exact opposite of the ‘launch without users’ approach. Instead of inviting customers to come and walk around an empty field, you begin by arranging ‘custom pairings’ from among the first suppliers and customers you identify. This is, of course, labor intensive – but it engenders great loyalty, and lets you keep both sides happy while you become established. 

In their first weeks of operation, The Haircut did 75% of its business away from its online platform. This recognised that home hairdressers were not interested in the platform in and of itself – they simply wanted clients. But as a community of motivated and engaged professionals grew together with its new-found client base, the platform offered by The Haircut seamlessly became the natural way for them to continue doing business.  

 

 

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