For two-sided marketplaces, growing supply is the difference between success and failure.
Lenny Rachitsky, former Growth Lead at Airbnb, estimates that 80% of marketplaces are demand-constrained, meaning they need more supply on the platform to provide the great customer experiences that lead to demand growth. As the general manager of Uber Eats in Atlanta, I faced this challenge every day. Of course there are the traditional methods of supply growth via things like paid online ads and your website, but this article will dive into five creative ways that you can test to grow your supply base and kick off the flywheel for your marketplace.
For two-sided marketplaces that don’t require specialized licensing or skills on the supply side, converting customers to supply can be a powerful tactic. At Uber, we experimented with this in-app, giving riders a clear call-to-action, “make money driving”, and a seamless sign-up flow from there.
Your customers are already comfortable with your brand, so they are a more captive audience than the general public. Logistically speaking you also already have a bit of their information, making the signup process on the supply side much quicker for them. Most importantly, these people will provide amazing experiences for customers since they know the customer experience firsthand.
It’s old school, but personally calling people who moved through the supply funnel and have been onboarded but haven’t taken that first major action on your platform can have a big impact. Especially at the earlier stages when every bit of supply counts, this tactic can be invaluable. Going through the signup process to be a host on Airbnb or a shopper on Instacart is very simple, but once you’re onboarded it can be quite intimidating to make that first listing or go online to get your first request. Activation phone calls to the “bottom of the funnel” can give newly onboarded users the confidence and motivation needed to take the first step on the platform.
As your marketplace matures, you can use analytics to find the “magic moment” that leads to long-term supply retention. In other words, once users on the supply side reach a certain number of transactions within a certain period, they tend to stay on the platform at a much higher rate than those who don't reach that milestone. In the earlier days at Uber for example, this was roughly 20 trips in 2 weeks for drivers in many US markets (though this certainly has changed). Once you find this “magic moment”, you can use that as the targeted KPI of the activation calls, making the calls even more effective.
Referrals are a well-known growth tactic in many businesses, but the devil is in the details. One of the major barriers to growing supply in the earlier stages of a marketplace is low trust in reliable earning opportunities on the platform based on low brand awareness. Word-of-mouth is a great channel for breaking down that barrier, and referrals encourage an increase in organic, word-of-mouth spread of your marketplace.
The key with referrals is setting them up the right way so that they’re cost efficient. The payouts to the referrer and the referee need to be high enough to get them to take the action you want, but not so high that they’re just joining the platform for the money and don’t have any interest in sticking around. To prevent this behavior, you should also use that “magic moment” mentioned above as a criteria for a successful payout. That way you increase the likelihood of the supply staying with you over time.
Hosting in-person events can be a great way to jumpstart your supply growth. These could be simple onboarding events where you give a pitch on joining your platform and then onboard people on site. However, these events are often most effective when you’re offering other relevant content for the audience. For example, hosting an event for restaurant owners where you have interesting speakers who offer advice on running a restaurant successfully can provide real value to the owners, while giving you a chance to convert them live. Obviously these events don’t scale, but to build a marketplace you have to start with unscalable tactics.
Finally, you can create your own supply. This depends on what kind of marketplace you have, but often adding your own supply can be a great way to solve the chicken-and-egg problem of marketplaces.
You could think of this like a private label product at a grocery store. You’re not trying to get rid with the supply that already exists on your platform, nor are you trying to create a barrier to entry for new supply. You’re more interested in bolstering the overall offering on your marketplace so that customers have great experiences. On UberEats, DoorDash, and other food delivery platforms, virtual restaurants serve this purpose by filling in cuisine and price point gaps in various parts of a city.
Every marketplace is different, so finding the right mix of supply growth strategies is not one-size-fits-all. The best marketplace operations teams are constantly running quick tests to see which tactics have an impact. These tests are usually scrappy, run manually outside of the platform via email, SMS, phone, or in-person. However, they’re critical because they can uncover hidden gems that will provide exponential supply growth.
Unfortunately, in reality these experiments take a long time to set up and analyze. The data science team often has to get involved, and it’s hard to get these experiments high up on their already packed list of priorities. The rapid learning and iteration cycle that leads to major supply growth is broken at many marketplaces today.
We’ve experienced this problem firsthand, so we’re building a solution to fix it. Sagelink is a no-code experiment tool for marketplace operations teams, helping them run quick tests to measure the impact of growth tactics without needing a data team. We’ll have more information very soon, but you can click the ‘Join Waitlist’ button above to get early access to our beta.