Your Two-Sided Marketplace Startup Has Customers, Now What?

Getting customers is one thing, keeping them is another

image by pch.vector

Digital marketplaces have been a popular startup trend for a while, and there doesn’t appear to be an end in sight.

I still get a couple questions a week from founders of two-sided marketplaces (2SMs), the digital middleware between customer and vendor that takes a cut of every product or service transaction conducted within its digital walls. In return, said marketplace purports to make each transaction frictionless and cost-beneficial to both the customer and the vendor.

2SMs seem like a no-brainer of a business model that can be applied to any field or industry. Put psychiatrists or plumbers or dog-sitters on one side, and time-strapped customers on the other. Let them find each other and transact, then sit back and watch the money roll in a few bucks at a time.

None of that is true, however. A two-sided marketplace is difficult to get started. Then it’s even more complicated to attract the critical mass of customers and vendors needed to make transacting timely.

Then, once you have that launch mass, it’s even harder to grow.

I’ve written a lot about the mechanics of building 2SMs, but this post is about that elusive growth phase. A lot of 2SM startups tend to stall out soon after they get a handful of customers and vendors transacting. There is promise in their platform, there is potential, but promise and potential don’t generate revenue.

I’ve been building 2SMs for a long time now. One thing I’ve learned is that revenue growth in 2SMs all comes down to customer demand, so let’s answer two important questions:

1. How do you get more customers to transact quickly, confidently, and repeatedly?
2. How do you onboard and keep enough vendors to not only meet that customer demand, but consistently handle more demand?

Offer the customer something unique they can’t get anywhere else

Most 2SMs fail because they’re nothing more than a directory of products or services — a classic “middleman” instead of middleware. But a middleman can easily be cut…