If you’re considering tapping into the booming marketplace business, start with a few questions to clarify your plans. One is, “How do you grow an online marketplace?”
Marketplace growth comes with several challenges. First, it takes longer than other e-commerce businesses. You’ll have to work hard for three years just to see your marketplace take off. Second, some marketplace-specific issues can impede growth, such as leakage.
At DigitalSuits, we’re not just an e-commerce web development company – we also help startups grow into successful marketplaces. Today, we’d like to share our experience with you. Read on to find ten time-tested online marketplace growth tactics.
1. Build a solid foundation for growth
Before you can start testing the growth tactics listed below, you should have the following defined for your business:
- Your offering. These are the product or service types you will be filling your marketplace with. Make sure you understand their peculiarities and limitations. Define whether you’ll start as a hyperlocal marketplace first, too.
- Your unique selling proposition (USP). This is the one thing your product – i.e., the marketplace itself – does better than your competitors. Avoid being too generic in your USP. Also, differentiate it for providers and customers.
- Your business model. Know your monetization and pricing strategies – i.e., how your marketplace will generate revenue. Make sure your take rate won’t put off your users.
- Your target audience. Research your ideal providers and customers to understand what it’ll take to get them to participate in your marketplace. Also, pay attention to their preferred communication channels and messaging.
You can read more about the preparation to make before planning out the market growth in our blog post on startups’ stages of development.
2. Introduce marketplace curation
Curating products and services on your marketplace can come in many forms:
- Identity verification for providers
- A trusted provider status
- A review-and-rating-based reputation system
- Penalties for low-quality products or a low rating
- User reporting features for suspicious listings
- Materials to help your providers learn to become better: tutorials, guidelines, checklists
Curation will help you establish a quality baseline your customers will expect from your platform. This, in turn, will foster trust and engagement. Be mindful, however: curation will mean friction for providers, so keep the process as smooth as possible.
3. Make the most out of your marketing toolkit
The marketing strategy is the cornerstone of your growing online marketplace. It should be comprehensive while catering to your target audience’s specific preferences and needs.
Here are the three marketing tools your marketing strategy should include.
Search engine optimization
This is how you get traffic from search engines. To optimize your marketplace for search intent, you should:
- Use the keywords your target audience will likely type into the search bar.
- Optimize your website speed for better search engine rankings and user experience.
- Help your providers optimize their listings for search engines by adding SEO features and guides to your marketplace.
Put it simply, create the content your target audience is likely to search for and share. It typically involves creating blog posts, but it’s not the only type of content you can leverage. You can also create tutorials and engaging videos, launch a newsletter, or develop social media channels to tap into your target audience.
Repeat customers are the backbone of any business, and marketplaces are no exception. A loyalty program is one way to increase the rate of repeat customers on your platform. 83% of consumers say participating in one impacts their decision to buy again from a brand.
There are four types of loyalty programs you can consider setting up:
- Point-based: customers accumulate points through purchases and other actions and can redeem them for discounts, freebies, premium services, etc.
- Tiered: customers can earn levels based on their engagement and get varying perks based on their level.
- Paid: customers get benefits in exchange for paying a one-time or recurring fee.
- Value-based: customers choose which cause you’ll donate a share of their transaction to.
4. Onboard and protect your supply
Your marketplace will look empty without the supply – a red flag for potential customers. So, to ensure the growth of your platform, onboard your providers and work hard to retain them.
Here’s what it means in practice to prove you have buyer potential:
- Offer incentives for signing up, creating listings, or becoming the best sellers on the platform.
- Identify sources of friction for providers and mitigate them.
- Consider making your initial providers co-founders or shareholders.
You can also use the following tactics to keep your providers from using any other marketplaces:
- Offer lower fees or other incentives for unique inventory.
- Help them build a non-transferrable reputation on your platform (e.g., through reviews and ratings).
- Introduce a tailored provider support program (e.g., Uber’s vehicle rental program for drivers).
5. Invest your resources in creating a powerful brand
Your brand is the way your existing and prospective customers perceive your marketplace. It’s defined by many faucets: visual design, the functionality of your website, your slogan, tone of voice, the quality of listings, etc.
If you haven’t given your brand much thought yet, here are five steps toward creating a powerful one for a marketplace:
- Define the user insight: who do you want your brand to resonate with?
- Explore your competitors: who are they and what are their brands?
- Describe your marketplace in one sentence.
- Pinpoint the rational and emotional benefits of your marketplace as a product.
- Craft a brand positioning statement.
Your whole operation should reflect your brand positioning statement. That includes the look of your website, your copy, your marketing campaigns, your customer funnel, and even your policies as a company.
6. Understand what works great in your marketplace
This is where tracking key marketplace metrics comes in. Use this data to pinpoint the “hot zones” or, in other words, what works great on your platform. It can be a promotional tactic, a particular outreach message, or certain features. Then, double down on it in your growing online marketplace.
Here are ten key metrics you should track:
- Monthly active users
- Bounce rate
- Customer and provider liquidity
- Transactions per customer and provider
- Provider-to-customer ratio
- Repeat purchase rate
- Gross merchandise volume
- Customer acquisition cost
- Customer lifetime value
- Customer conversion rates at every part of the funnel
These metrics represent quantitative indicators – figures you can collect or calculate using existing data. However, don’t overlook qualitative data, either. For instance, your users' feedback through support tickets, feedback forms, or even social media posts.
7. Engage your existing customer base
Each of your existing customers has its network – a network you can access indirectly. Here are three ways you can do it:
- Referral programs. Offer your existing customers a bonus for bringing someone on board. This bonus can come from a promo code, discount, or cashback.
- Brand ambassadors. Encourage your existing customers to spread the word about your marketplace on their social media pages. (For 61% of online shoppers, user-generated content is always a factor in making purchase decisions.) You can do it by running a contest or offering a reward for sharing (e.g., a promo code).
- Affiliate links. Launch an affiliate program to motivate influencers among your existing customers to promote your marketplace. Their incentive is earning a cut from every transaction made through the links they publish.
8. Create a community experience
If your users feel like a part of a community when engaging on your platform, you’ve secured a powerful competitive advantage. (Both Airbnb and Etsy leveraged this tactic to grow their marketplaces.)
The community experience drives up engagement, which drives up the repeat purchase ratio.
Here are eight steps toward building a community around your platform:
- Determine which side you’ll target: providers or customers. (Providers tend to be more valuable for a marketplace. So, focusing on them in community building makes more sense.)
- Understand what your business stands for – and who your mission will resonate with.
- Tap into a community that already exists around this mission.
- Get to know early members of your community to understand what they need and how to talk to them.
- Provide ways for members to interact with one another and facilitate contact.
- Tell your community members’ stories on social media.
- Weed out the bad actors in the community and moderate its content.
- Organize local events for community members.