What Can We Learn from Digital Marketplaces?
Have you ever needed a handyman or a freelancer? You’ve probably come across companies like Taskrabbit, Fiverr or Upwork. Taskrabbit is rooted in more traditional skills such as local handymen or plumbers. Fiverr and Upwork, on the other hand, help you find people, around the world, who can do anything on a computer for you. That could range from editing photos or videos to making websites or building custom apps.
The concept behind these marketplaces is not a new idea, but the internet has allowed them to scale to new heights. Before the internet, we had the newspaper classified section for housing, cars, used stuff, part time and full time jobs. These listings were local. Now we have eBay for “stuff,” Indeed for careers, sites like Redfin and Opendoor for homes, and Airbnb and VRBO for vacation rentals.
The skills marketplaces, which are relatively newer, have a key underlying theme. People. There are skills required to perform projects or tasks that people are best suited for. The company building the digital two sided marketplace wants to capture as much consumer demand as possible and attract all the people who can fulfill that demand to their platform. Digital skills are in global demand, and there is global supply of them.
The value of these marketplaces is that they can bring supply and demand together at unprecedented scale. They have an incredible ability to connect buyers and sellers that otherwise would have had a hard time finding each other.
Are you running a business or a marketplace?
There are many traditional businesses like HVAC maintenance or healthcare services that are operating like a two-sided marketplace. In these, and other businesses the people matter. Humans are required to perform these jobs because of the speciality of their skill set and possibly their proximity to the jobsite. Growth for these companies is often limited by their ability to attract, develop, and retain talent. These companies may have offices, own tools and supplies, offer benefits, and all the other business overhead.
Marketplace businesses eschew much of that overhead and focus on optimizing network growth. They optimize these processes through software with the goal of continuously growing both ends of the marketplace. These businesses focus more on optimizing demand generation because they believe that contributes to talent joining their network. In order to retain the talent they focus on getting the talent to generate revenue as quickly as possible up front and then consistently going forward.
Before Upwork, a freelance video editor would have to spend money and time to market their skills. That’s less time for video editing, their actual revenue generating work. In a matter of minutes a video editor can join Fiverr, Upwork, and others to find work. These marketplaces give valuable time back to the video editor while providing a centralized place to drive demand towards. The marketplace makes money by charging a small fee to the tradesperson, and in some cases there may be a small fee to the person looking for the service.
A traditional business and a marketplace business generate revenue at the same point in time, however, the means are different. The software defined marketplace drives efficiency by constantly updating customer profiles and optimizing the customer journey to encourage booking a transaction. On the other side, tradespeople can see that there are customers on this platform – they see value from the platform providing qualified customers and facilitating payments. The platform doesn’t cost them much, makes it easier for them to manage their schedule, and get paid quickly.
Simply put, the two sided marketplaces use software to create a low friction, business flywheel. The more customers the marketplace sells to, the more service providers they attract, the more revenue generated, the more marketing spend to attract more customers, and on it goes.
Scaling key processes with software
These marketplaces are finding customers by focusing on their digital presence, including their digital marketing. Marketplaces have minimal support staff to offer support or even oversight for customer or service provider issues. The marketplaces are laser focused on getting each transaction completed as smoothly and quickly as possible. They are able to thrive with such a lean operation thanks to their use of modern software. Our businesses can do the same.
We have talked about Enhancing Your Digital Presence already. Even if you have the software tools in place, you need to have the people and processes to run the system. Marketing, specifically lead or demand generating marketing, needs to be a full time job function. Additionally, make use of cross platform tools like StackAdapt or Adelphic to run target digital ads across many platforms. Also keep customers engaged and updated with email marketing campaigns using tools like HubSpot or MailChimp.
These marketing tools can be used to help with more than customer acquisition. Targeted ads and email campaigns to job seekers work. Sponsored job postings are another good option. Top it all off with a strong hiring process so that job applicants feel attended to and cared for. How you treat candidates will show them how you treat customers.
Historically adding staff has meant a lot of administrative and other operational overhead. While marketplaces don’t directly employ the service providers, they do have some of the same overhead. All businesses need some employee onboarding, training, quality control, and a way to pay their service providers.
There is plenty of software for all of that, and then some. Solutions like Zenefits or BambooHR combine important back office business functions. These HR tools help you craft employee onboarding, training, performance management, and even payroll solutions. Effective implementation and use of these tools will put operations on par with the most tech forward marketplace. Now that the “table stakes” out of the way you can work on extra benefits like creating a culture of continuous learning.
The last piece of this is the transaction itself. The best two sided marketplaces make it really simple for a consumer to create their order, enter payment information, and track progress or communicate with the person performing the job. Depending on the industry, there are a variety of job and contract management software solutions available to you. In a previous blog we discussed key criteria for picking that software. To paraphrase, focus on finding software that:
Is relevant to your industry
Focuses on the customer experience
Provides access to data, analytics, and reporting
Preferably has API’s but at the very least integrates with the other software you’re using
The future is bright
Using the best software to streamline these various processes is the start. Next it’s time to integrate those systems to create your software defined business dashboard and engine. The idea is for managers and operators to have near real time visibility into supply, demand, and revenue. This level of visibility is a new opportunity for the business to manage the delicate balance between supply and demand. The business can grow more efficiently and effectively.
It’s very easy to overfocus on one side of the market which could have consequences. After all there is a marked time delay from starting a marketing campaign and getting the first customer. You’ll be identifying and monitoring new KPIs and metrics in order to manage the business and create sustainable growth.