How to Launch a Platform When Neither Sellers nor Buyers Have a Reason to Join Until the Other Side Joins First?
When trying to build a two-sided market in which both sides are equally important, how do you attract one without the other? Which one should come first?
If you are launching a payment platform, for example, without sellers accepting your payment solution, buyers won’t adopt it. And if buyers don’t accept it, sellers won’t invest time, effort and money in accepting it.
This is a common challenge faced by many platforms at the start of their journey, including some of the best known platforms. In today’s networked world, part of the reinvention strategy of many traditional businesses is to shift from products to platforms.
In this series, ‘Voyage in the land of platform businesses’, I will take you on a journey to discover the secrets behind platform businesses, what makes a successful launch, the strategies that some of the biggest online companies of our time have used to grow, what is happening in Africa and much more.
I was privileged to participate in a 5-week program on Africa Platform Management, Strategy, & Innovation delivered by some of the best thinkers and practitioners of platform businesses and have the honour to learn directly from Geoff Parker, the co-author of Platform Revolution from which this series is inspired from.
According to Applicoinc: “A platform is a business model that creates value by facilitating exchanges between two or more interdependent groups, usually consumers and producers.”
To solve the chicken and egg conundrum associated to launching that payment solution, a wide range of ingenuity will be at play. Should you advertise? Too expensive and not effective at this early stage. Make deals with banks? Lengthy process that might lead nowhere. So what then?
‘Bribe’ people to join. Hum? Yes. That is the ‘PayPal’s way’. To recruit users, they gave $10 to customers to refer a friend and another $10 to the friend who joined. For this technique to be effective and result in the desired growth, at least three things need to happen:
- Frictionless and simple product
PayPal removed friction by making it simple to adopt. You just need an email and a credit card to sign up. This was an iterated version of their first idea, where you needed to have a Palm Pilot (remember those?)
- Organic viral growth
Design great incentives to stimulate new sign ups, get them to try the service and be hooked. Your job really doesn’t stop at acquiring new users, you need to get users committed to use your product or service and be active.
In PayPal’s case, users had to spend the $10 to experience the service, love it and refer their friends. Once they got addicted to the service, they asked other merchants to accept the new payment system.
The merchants started to see the value of the service and put PayPal logo on their site to indicate they accept it. New buyers saw the logo and were informed about the new system, tried it and got hooked too, causing a virtuous circle and exponential growth. Sellers were also given referral fees to bring in more sellers to accept the payment system.
- Stimulate consumer demand and explode growth
For Paypal, the place to be was on Ebay. Deploying their ingenuity further, the company designed a bot, an automated software that bought goods and insisted on being paid with PayPal. Sellers noticed this growth and signed up too, and put the logo on their sites. Result: in three months, they grew from 100,000 to 1 million users.
Most of the strategies that work well to launch and grow a platform are ‘Pull’ strategies.
- The product or service must be designed to be remarkable from the beginning.
Before I understood this fundamental shift, I struggled to market products and services that were designed for a push strategy and failed to get any traction. Today, you got to tell stories about what you have done (not what you will be doing) that is also why PR doesn’t work the way it used to.
- Stimulate user commitment and active usage, not just signups and acquisition.
I call this ‘commitment marketing’. I recently signed up to Hubspot CRM and didn’t do any activity after a week of joining. Taylor, one of their customer satisfaction officers got in touch, asking if I needed some help. So I asked if they have video tutorials (easier to learn!). Guess what? Taylor sent me the links of a whole library, worth $000s of high quality video documentation. All this for free. Do you think I started to use the system? Of course! They are watching, and if I don’t use the app, they will get in touch again and this time I won’t have any valid excuse.
This is a perfect example of getting your customers active and committed. The more they use the solution, the more valuable they find it and they more they stick to it.
- Structure incentives in a way to stimulate participation as the incentive give the platform itself a pull appeal.
A great example is Buzzfeed, where every post is designed to incentivise the viewer to take action.
When designing contests, reflect on the behaviour you want to encourage. If you want to see high quality contributions, structure the incentives to encourage that. When Google wanted to attract the best ideas for the Android launch, they offer big prizes to developers in 10 categories.
- Marketing needs to be embedded into the platform. In the old paradigm, marketing was disconnected from the product. It was something you did in addition to the product or service. Now, the platform is the marketing, therefore if you don’t design your products and services with inbuilt marketing capacity you are almost certainly assured to fail.
In the platforms world, as we’ve seen, rapid, scalable and sustainable user growth are achieved using pull processes. But push strategies can still work too as we will see next time when a major app used it to generate 1000s of downloads and another launched successfully with a big PR event.
What are the pull marketing strategies that you’ve find to be the most useful? Let me know your thoughts below. Thanks