4 Lessons Learned from Building and Scaling B2B Marketplaces
At Point Nine, marketplaces have always been a core part of our investment strategy. In the early days, this tended to be consumer-facing marketplaces, however, over the last few years, we’ve seen an explosion in the number of B2B marketplaces and have been doubling down on them ever since.
Last week, we organized the first B2B Marketplace Conference, which brought together over 100 of the best B2B marketplace founders from around Europe to discuss the challenges of building and scaling B2B marketplaces. We were joined by 10 incredible speakers who covered a wide range of topics from customer experience, acquisition and retention, hacking liquidity and leveraging data more effectively.
Here are a couple of key takeaways from the event:
(1) Trust and relationships are vital 🤝
For B2B marketplaces, average order values tend to be much higher than B2C, sales cycles are significantly longer and, in most cases, buyers have established relationships with existing suppliers. Getting them to shift away from these relationships is a real challenge and requires building out trust and credibility, particularly when selling into old-school, less digitally mature industries. One way of doing this is to position oneself as an industry insider, by attending relevant events, promoting oneself in relevant industry publications and creating opportunities for face-to-face interaction. Another one is to create a platform which is highly transparent, where buyers know exactly who the suppliers are and can easily benchmark one against the other. Exceptional customer service is also key.
(2) Acquisition is just the first step, retention is the real challenge 🎣
Acquiring customers is tough, but retaining them is even harder. Compared to a SaaS product, marketplaces generally don’t benefit from monthly recurring revenues. They need to constantly re-activate users, convince them to keep reordering on the platform until they eventually become their primary source of supply. Leveraging data to understand exactly when customers are most likely to re-order and re-engaging them accordingly (across multiple channels) is one way to drive repeat purchases. Active account management and ensuring that you have regular touch points with your customers is essential. In some cases, marketplaces can also charge a subscription or monthly fee to create lock-in and encourage users to come back to the platform. Once a marketplace has nailed retention it starts to look much more like a SaaS business characterized by recurring customers and much more predictable monthly revenues.
(2) Build additional products and services into your marketplace 🏗
Another way of increasing retention is by building additional products and services into the marketplace. This could be anything from logistics solutions, trade and invoice financing, KYC/AML, scheduling tools or insights and analytics. These additional tools not only provide increased value for customers but also create a lock-in effect and pave the way for one’s marketplace to become the default source of supply. This is one of the reasons why SaaS-enabled marketplaces are quite common in B2B, you can read more about this in my latest post Come for the Network, Stay for the Tool.
(4) Be bold and try moving upmarket 🐭 ➡️ 🐘
When starting a B2B marketplace, it is critical to understand who your ideal customers are and to build your product accordingly. The intuition for many B2B marketplaces is often to start selling into small customers, prove out their value proposition and then move upmarket. Targeting these customers (or what we would call ‘mice’) usually entails low average order values and less predictable demand. When servicing a complex industry, this may also result in high costs of servicing customers, which might outweigh the customer lifetime values in some cases. In these scenarios, marketplaces should not hesitate to move upmarket and try tackling what we call ‘elephants’. Although, selling into these customers generally requires much longer sales cycles and active account management, the respective average order values, and lifetime values can end up being much higher.
A huge thank you to all the speakers that made this event possible and for everyone that joined us. For those of you that missed it, please find all the speaker slides in the links below. Please stay tuned for some follow-up blogs on some of the sessions and if you are an entrepreneur building your company in this area, don’t hesitate to reach out 😄
- Customer Experience and Operational Excellence in B2B (Carmen Beissner, CCO at Lemoncat)
- How to Drive Engagement in your Marketplace by Building in Additional Products and Services (Sebastian Kreft, Co-founder & MD at Metalshub)
- How to Manage and get Decisions from Big Corporates? (Michael Stephan, Founder & COO at Raisin)
- Building a Data-driven Marketplace (Maciej Wozniczko, Co-Founder & VP of Sales @Packhelp)