Who Is Your Customer?
In a double sided marketplace, of which we have many in our portfolio, it is always tricky to figure out who your customer is. Many marketplaces punt on this question and answer with “both”.
I think it’s hard to run a business with two different customers. It can be done but it is hard.
Yesterday, Kickstarter published some year end stats in a beautiful presentation. I would encourage all of you to take a quick spin through them. It will take you between 10 seconds and a few minutes depending if you watch the videos.
Even though Kickstarter served over 3mm project backers last year, they have never been confused who their customer is. Their mission is is “to help bring creative projects to life” (from their about page).
So Kickstarter focuses on the creative project and the project creator. And by doing that, they end up serving millions of people a year who come to Kickstarter to back a project, or two (between 25% and 30% backed more than one project in 2013), or a hundred (almost 1000 people did that in 2013).
So if you can figure out who your customer is and if you focus on them and their needs and serve them well, you can build a large two sided marketplace that can grow and sustain itself. Kickstarter is a great example of how to do that.
Comments (Archived):
Yeah, hard to serve two masters. That’s tripped me up a couple of times.
So in an ad network model (publishers on one side, advertisers on the other) who would you say is the network’s customer?
Follow the money. The advertisers.
I feel like you should say, “Grasshopper” at the end of that 😉
Hahaha
Who are the customers of Google search?
Follow the money.
Yes, at first glance that’s the obvious answer – but I’m not so sure it’s right.
I am. Just about everything they do is centered around a better advertising environment. They are building a better search engine for consumers to the benefit of their clients (the advertisers).
Totally agree. Google values users, but they are not the customer.
Advertisers are the customer.If you want to hurt GOOG, find a way to take away advertisers.
Terrific question.If your model is performance based (PPC) then isn’t the true focus always on the end user?I think that’s the tip of the value chain in this case.
Google search isn’t a marketplace. It’s a search engine.There are no sellers, no buyers, and no transaction. Instead, there’s content and consumers of that content via a free exchange. Marketplace mechanics do not apply.
The monetization of search is AdWords.AdWords is a marketplace.
Absolutely. AdWords is a marketplace where Google supplies ad space, and businesses buy it.And while AdWords are displayed in search, it’s a completely separate product from the search engine in and of itself.
Actually, I’ll edit that.In AdWords, like in any other media channel, the space itself is the marketplace. The suppliers are the folks with ads (what they pay is the cost of being a supplier), and the “buyers” are the folks who click on them.
Nope–not to Google. It’s all one and the same product, just layers of value and monetization.
Hmmm…not buying that. AdWords is otherwise known as “Paid Search” and it is rendered as a result of a users query.
I’m not saying AdWords isn’t related to search, but Google is a big company with a lot of intertwined offerings.If you take the AdWords offering and pull it apart from the rest and ask yourself, “How does AdWords, specifically and uniquely, make money?” the answer is by offering a space where advertisers can hawk their ads to viewers who click on them.That space is *on* the search engine but it isn’t *the* search engine. The search engine can exist and still perform its function whether there’s an AdWords or not. The reasons why people use the search engine have nothing to do with the ads on it, in the same way folks don’t buy magazines for the ads. The ad exchange is a marketplace that is connected to but, business model wise, separate from the media channel.Do we buy that argument? 😉
I disagree with this. While figures may have changed a bit over time, 5 out of 6 users couldn’t differentiate between paid and organic results for many years after Google launched AdWords — they just clicked on whatever result was most relevant to their search and oftentimes it was a paid ad. That obviously doesn’t mean people explicitly use Google for the ads, but the ads undoubtedly enhance the site’s overall experience.This is precisely the reason why AdWords is the best native ad offering that’s even been (or will be) developed. It aligns the interests of users, advertisers, and the publisher itself in a way that no other site can.
Nope. :-)I’ll have to introduce you to some of the women I know that buy Vogue and Cosmo just for the ads.
Yes.But if you and I owned google.com and GOOG owned Adwords, we would be happier.
Google is the largest advertising agency in the world. 🙂
So true.Agency and platform are one.
When it’s pegged as a B2B or a B2C who the customer is is more straightforward.It can be confusing for founders when they see that FB is monetizing by providing analytics and services to brands (B2B) but they are also a consumer play. So then it’s a B2C2B hybrid which serves both sides.Or in the case of Microsoft they were predominantly perceived as B2B with their OS and now they’re moving B2C with their devices.
All marketplaces are not the same.Kickstarter serves the project creator well but they are not in the business of aggregating a market for them. People without strong networks have a tough time (with exceptions) of getting their projects funded.Etsy is all about the consumer to me. They fill the funnel for the merchant and that, more than the infrastructure, appears to me to be the value.Many new marketplaces will have a tough go and fail because they are focusing on merchant need not customer want. It’s easy to get merchants to sign up to play in a marketplace. Everyone wants new business. They will leave, the market will stumble unless they figure out how to bring the market to them. That’s the tough work.
You’re so right. It’s interesting because the Silicon Valley myth is that great product trumps everything. Build an amazing product and the hockey stick commences.The truth is: there are a lot of crappy products doing just fine because they have a great distribution channel.Deliver a great product into great distribution and that’s when you might have something amazing.
Yup–you know this one personally.Someone said recently, that 90% of startups that fail, fail because they can’t find their market, and most established companies fall as they sit by and loose it.Not a mention of product in there.
Love that quote. So true.
agreed. and you can break that paradigm by thinking that users are the customers’ customers. if you take care of both, you win.
All marketplaces want dense networks of consumers that suppliers (e.g. merchants) can tap into. Tough to hack the consumer side of the marketplace without a supply of something to consume, though.The most commonly effective way of bootstrapping a marketplace (*that I’ve seen) is building a set of tools/services that support suppliers — Etsy merchants, Kickstarter projects, Eventbrite organizers, etc — and then leveraging the traffic they drive and the communities they tap into to begin building that consumer network (i.e. the consumer side of the marketplace).You have to hack one side of a marketplace first, and this is the most repeatable way I’ve seen it done.
Certainly without merchants which are the product you have only half the coin.Depending on the merchants’ networks and brands is really an iffy way to kickstart any marketplace especially one made up of artisanal micro brands.
I am annoyed to be in the Pacific time zone and on vacay this week. Especially, when my ALL TIME MVP STARTUP QUESTION is the post topic on AVC.Arnold, you nailed it.10 years ago this year, I was involved in a startup that haunts me to this day. I will spare the details. Suffice it to say, that a PPT deck that described the opportunity is reflected in 90% of all retail locations I enter (private business or government).In an apocryphal meeting at that startup, the operations lead asked the assembled group this question – who is our customer? The group was the founder/CEO/former Apple Salesperson of the Year for the Planet (true award), founder/system designer/mad genius inventor/ wanted to be called CTO but was not at all really, CFO (founder of the 2nd or 1st largest SUN VAR on the planet in the 1990’s, depending on the year), SW team lead, HW lead, marketing lead (me) & the sales lead.That’s 7 people and he got 5 DIFFERENT answers.The Sales lead & the CFO got it right and were the first two people to answer as we went around the board room table (I agreed with the CFO’s answer when I heard it; the Sales lead phrased it differently) – everyone else got it WRONG.The CFO’s answer – your customer is the person who sends you the money.
Great comment.As Fred knows better than all of us, marketplaces are hard.’I was personally involved with 3 over the last two years. One folded (painful), two moved from an assumed two sided marketplace structure to b2b, removing the consumer tools and focusing on value add to the existent merchant biz.One has found its stride and is building market share, the other will.My track record is above average, though all luck here.
“if you can figure out who your customer is and if you focus on them and their needs and serve them well, you can build a large two sided marketplace that can grow and sustain itself. “This and doing a million other things right. What about the countless two-sided marketplaces that focused on customers and failed? Survivorship bias?
There’s always a million things. But there is always a core customer behavior that matters.And of course, you can do everything right and still fail. Happens every day.
The wikipedia article on two-sided markets should be required reading for entrepreneurs. I’ve seen people throw around the term “network effect” all the time when they actually mean two-sided market and the strategies are really quite different. http://en.wikipedia.org/wik…
Is KS’s customer the highly engaged audience (they are the payers after all) or the smaller group of creatives?Maybe it’s “Know your value (proposition)” vs “Know your customer” ?example: FB first customers were IVY league students who valued exclusiveness. Marks value proposition was to make the world a better place via sharing and openness.
No question it’s the project creator. They do not build audiences for the projects, the creator’s networks do.
Creators
I agree (but for the sake of discussion), KS vetting process is partly motivated by the engaged backers who want a consistent (minimum) creative project value?
they are the payers after allNope. The creators decide to play on the KS platform, so they pay.
Last time I checked, Mark’s original customer was Ivy League guys not wanting to end up on a date with women they found beneath their standards.There was no money in that, so he found a new customer – finance people who were looking for growth.The openness messaging dies as soon as he had enough $ in the bank – advertisers did not care about it and users freaking hated it.Have to give him for marks for adapting.
Love their deck. First it talks to the backers. If you haven’t participated they ask, “Why not you?” in an interesting way. 3M people, 480M bucks, so $160 a person. That’s not “too much” in their target backer’s eyes I suppose. Then they showed what the money does with some very cool projects that inspire people.Two sided marketplaces are the most difficult to execute. The beauty is they have network effects, they become really sticky and generally sustain.Who the customer is in the beginning might not be the customer in the end and which end you choose to focus on can make or break you. I have seen many of them fail. the big commodity exchanges used to be in the business to manage risk. Now all they do is focus on high frequency traders. Big money, big volume but in the long run I think they are making a mistake. In my opinion they abandoned a core value.Exchange models are more operationally intricate than they look. Customer acquisition costs can doom you as well. One reason is chasing the big money isn’t always the best thing to do to get it started.In Kickstarter’s case, it looks like at the onset, they knew their core value. “they bring creativity to life”. They tapped into pent up demand by artists to get different projects made. Those artists were able to find backers and run them through the platform. Then they started branching out into other things. Now, Kickstarter can do anything. Sweet story.
But they won’t. They are maniacally focused on their core value
By “anything” I meant “anything creatives want to pursue”. Started in movies and artsy stuff, but now products, science and anything.
Couldn’t agree more on the need to focus and over-serve.For Kickstarter, it seems their goal a bit more qualified — to bring *quality* creative projects to life? Given their rigorous vetting process and established rules of the game, they also have the end backer in mind by creating a filter that helps to ensure supply meets demand.Though it’s crucial to over serve your core customer, it remains incredibly important (and often difficult) to build the right marketplace incentives and boundaries to ensure the supply/demand of your core customer will meet the needs of the other side.Like Kickstarter, airbnb does this quite well – they serve the guest with great affordable options, but it all relies on the trust created by their incentives and profiles.
Trust is the key word here.Marketplaces require trust as they scale to improve confidence for both consumers and creators.In my opinion, this is what kickstarter brings to the table with their (sometimes too) rigorous vetting process. It’s a manual version of airbnb’s reviews or ebay’s star rating. It says – “we thing this person is at least marginally trustworthy to deliver a great creative project.”There is also another important trust metric at play for creators and consumers on kickstarter: $$$. It’s very clear and obvious at any point what other people have provided. In many cases, this provides the social proof needed for consumers, and also shows other creatives that the marketplace has value.I do think that the vetting process has one more very important function for kick starter, though. It helps then decide which projects to say no to. If you look at the other ‘crowd funding’ sites out there (kickstarter was neither the first nor the last), many are torn between hundreds of categories. This means they have to cater to every type of creator (and by extension every type of cobsumer).Kickstarter on the other hand, can focus heavily on the growing creative class and provide a consistent process and experience that is sure to resonate with that (fast growing and popular) group.I think we (Shapeways) can learn from both pieces here. We do a lot of work to attract an cater to all three sides of our marketplace: creators, consumers, and manufacturers. It’s clear that manufacturers are behind the curtain and are brought on to serve the other two sides, but are creators or consumers our true customer? 🙂
I think Kickstarter’s manual vetting process is amazingly great. Not only does it make the supply of higher quality, but it trains suppliers to be better. It makes them think, “geeze, if i want my project o succeed, I better go do X, Y and Z first.”What’s funny is that this aspect is kinda anti-USV, and definitely anti a lot of what Fred has written about here on AVC — Kickstarter is still a network, but its pretty authoritative. (Let’s see if Fred admits that, though. :-)Still, I think some authority is important. Especially in the beginning. Once you’re bigger, you can let on content creators more liberally and use good UX design to serve up the good stuff quickly and bury the bad stuff.
Kickstarter, even Etsy, are very simple models compared to Shapeways.You have a much more complex model, message and brand.Really hard to put one poise that speaks to all three of your constituents at one time. I like your model a lot. My bet is over time as you get bigger, the message will get simpler.
Agreed. I’ve been here 2 years now and the messaging is get simpler, especially now that we don’t have to start the conversation with “what is 3D printing?” given the growing market awareness. To Fred’s point, though, it’s often easier to punt the question than to wrestle through. For us, the complexity comes from the fact that we are both manufacturer and retailer, creating complexity in how you establish trust, expectations and incentives, and even who you enable to connect and communicate. We can definitely learn a lot from other marketplaces, but it’s a brave new world.
Let’s take it to the water cooler Brad. 😉 If you look back to the mission statement we were just chatting about, the focus is there. We just have to act on it.And as you said, build trust and display signals for social proof! Can you hear me typing my feature request?
Awesome comment. It is difficult to build up both sides at once but if you create the right incentives and capture your core customer like airbnb did the focus + over-serving will give you the best chance at success. My question is when should you start to shift focus from core customer to other side when building out a double-sided marketplace? Airbnb might be the rare example of a marketplace that was able to focus successfully on both sides very early. I believe when Airbnb started up the focus was primarily on accommodating guests who couldn’t find an affordable place to stay but Brian & Joe also started the company to generate extra income because they couldn’t afford their rent. As the company has grown the focus has shifted to the hosts. These days they’re working to educate and make the experience seamless for hosts while expanding internationally.
It’s a good question. Not sure whether you should switch. If you take Etsy as an example — from what I’ve seen, they’ve always been trying to meet the needs of end consumers, but they’ve had to make major investments in seller education and tools in order to create great experiences for consumers.
True, there is no easy answer and I’m sure it’s different for each company depending on circumstances.
All marketplaces are (at least) double sided. Someone has to create supply, and someone else has to demand it. And in all marketplaces, the creator of the supply is the first priority of the marketplace. Always.Break it down to something as simple as a farmer’s market. If the food is good, people will buy it. If it’s not, they won’t. If the farmer’s market courts customers before having any good food, or any food at all, there will be no demand. Thus, supply comes first.But how do you convince suppliers to list their goods before you have buyers?The marketplace needs to have something of value to the sellers before there are buyers, since there won’t be any. The most classic and easy way to do this is to create a marketplace for suppliers who are already out there, begging for a place to list their product, but have no place to go (Kickstarter). A harder way is to take suppliers who have a place to sell, but that place isn’t tailored to them specifically and you move them to a marketplace that is (AirBnB vs. Craigslist).It can also mean giving suppliers more emotional benefits, like a mission that they believe in and want to be apart of (www.wanderandtrade.com), or the prestige of being in an elite group (500px), or simply a pretty place to list their supply that they can be proud of (both of the aforementioned), or a whole host of other angles that’ll tug at the heartstrings of suppliers.If you’re building a marketplace, the key is to just start pitching sellers. Eventually, you’ll figure it out what they want. Then you have to give it to them.In a marketplace, a good supply begets demand. That means putting your focus on sellers to create the supply. Figuring this out has helped me immensely.___In other news, I should start turning my lengthier AVC comments into blog posts.
Well said but “good supply begets demand” sounds like “build it (well) and they will come”.True sometimes but more often not.
I definitely don’t want to promote “built it they will come” thinking. You have to, well, promote. And that’s something Wander&Trade did little-to-nothing of.Still, visitors / customers grew organically, and our conversion rate is ridiculously high. That came via a focus on suppliers, but also via a shit ton of experience leading eComm products. :-)Either way, now we know that when we promote, it won’t be into a leaky bucket. Had we focused on customer acquisition first, with crap supply, we could have had 10x the traffic with 10x fewer sales. That would have been bad news.
Certainly. Great product is essential. Market strategy is more than half the game and where most fall.
“build it (well) and they will come”.Although I would love to say I know the official originals of where that saying came from the thing that comes to mind to me is when Walt built Disneyworld in California and later Walt Disney World in Florida.Tremendous projects which were clearly examples of “build it and they will come”.The thing is that when something is as large as a Disney it (especially back then) it is going to garner a shit load of free press stories.This is the same thing (and I’m sure you remember this) that got many internet companies off the ground back in the mid 90’s. They got a shit load of free publicity and stories written about them. (That’s why they can have sucky names because if you hit people enough with a sucky name they will remember it).Of course Disney also had the advantage of a world where people used travel agents. In that world you could open a random resort somewhere and give free trips to introduce it to travel agents and they would spread the word to their clients. [1] So that might be an example of “build it and they will come” because if there is enough money involved in a project there are many things that can be done that don’t work on a smaller scale. And so on.[1] As with most things I say, my observation, not something I read somewhere.
Disney already had a powerful brand (via his studios) to work from…and he built it in FL mostly because of size constraints in other locations he was searching for ( http://en.wikipedia.org/wik… )So it was only *slightly* build it and they will come…BTW – I think the modern root of the saying is from “The Field of Dreams” where the main character had a vision come to him and told him “if you build it, they will come”…the vision was talking about a baseball field in the middle of a corn field ( http://en.wikipedia.org/wik… )
Disney already had a powerful brandWell ok so what happens when Nike decides to build an amusement park then? You still have to get people to make the connection between the fact that they know Nike and that Nike has an amusement park.Ok well, you say Nike isn’t a kids brand.So let’s take Sesame Place (located in Langhorne, PA suburbs of Philadelphia). How do people know that there is a Sesame Place outside Philadelphia? Perhaps having that name makes it more likely to be picked from a list of amusement parks (instead of “Falicon Park”) but that is not enough. Nobody is traveling from California to go to Sesame Place (although they do travel perhaps from Washington DC or Boston I think). It’s not big enough to have the critical mass to be on the worlds radar even with a well known kids brand. [1]Likewise Universal Studios has parks but they are no where near the quality and level of Disney Parks.Agree with the Costner movie (which I specifically didn’t mention) but I somehow think the idea for that line in the movie must have come from something before that that gave the inspiration (and my “guess” is Disney).[1] All ties in with money when you think about it. Money floats all boats in a well execute business where you are grabbing the low hanging fruit of opportunity.
I just mean that Disney built the park with the known intent that he would push (market) people towards the park.BTW – super brand fans *do* travel to these kind of parks from all over the world…but part of it depends on the size of the park. (my wife and I are planning the family vacation this next summer for CA partially because our youngest wants to go to the Lego hotel/park there)…and we’ve had more than one set of friends from around the country ask us about Sesame Place (we *highly* recommend it to families with young kids)….also historically…I *think* there are a few versions of the ‘build it and they will come’ in some bibles…even the ark story is a bit of that really (and is about to be released a major motion picture)…
friends from around the country ask us about Sesame PlaceIf “dad” goes behind the walls he can easily walk into the area that has food for employees and avoid any food lines. (And save money). At least that is what I did when I was there years ago. They don’t ask any questions.Separately I used to live about 5 minutes from there (in Yardley) and went to high school in that area (Newtown). Great place for families to eat is “La Stalla” in Newtown PA.
+1We live about 1.5 hours north of that general area (go to Easton and then head east in NJ towards NYC)…you’re still in the general PA area though aren’t you? I keep thinking I should head out there to grab coffee with you at some point – email me at info at falicon dot com if you get a chance and maybe we can work out a time?
As someone who has negotiated contracts and marketed with Disney, they are the complete opposite of this.They build and then they market the leverage of their brand with vociferous intent, and massive resources.They wait and assume nothing. They never think the product is in itself enough, cause it just ain’t.
.No bugs on Disney. After all, its empire is run by a mouse named Mickey.JLM.
;)Disney is the most controlling maniacal brand in the world to work with.The Hollywood saying is–Close your deal with Disney, celebrate then go out of business.We at RLD survived and prospered for a bit but it was a calculated gamble.
They build and then they market the leverage of their brand with vociferous intent, and massive resources.Well first I have the highest respect for Disney having visited when Orlando first opened as a kid and marveling (to this day) at how well thought out and planned everything was. As a kid I noticed the cleanliness, the name tags of the “cast members” as well as many details. Like even the trash cans and the people sweeping the streets. Others like the rides. I liked the operations.That said I don’t think that when Disney opened in California in the 1950’s that the brand marketing was anywhere near as advanced as later when they opened their other parks and had the experience under their belts. (I do know about all the planning that went into the physical details but my guess is that the marketing machine was not the well oiled machine of today (or when you dealt with them)).I mean anymore than network news of today is like network news of the 50’s and 60’s. Where they sat at desks, smoking with wood paneling behind them. I think the desks on the sets were ordinary steelcase iirc.
Certainly they are more powerful now but my point, not well articulated, is that they did not build it and wait, they built it then worked and worked and more to make it real.Hollywood gets brand marketing.
Disney;s success – and I was just at Disneyland yesterday – is that they pioneered the Customer PoV as a business culture.Somewhere there is a saying – the mouse figures it out, roughly – that indicates how much time and effort they put into seeing the customer experience.They torched us on one day passes and my kids LOVED EVERY MINUTE. It was also easy to park. And when we asked a Cast Member where we could replace a lost map, they pulled one out of their tool belt.Ridiculous.
I go to D-land multiple times a year because I have a son who is a fanatic. Walt Disney is his hero. I marvel every time. Pure marketing/ branding/ customer service genius. It inspires me as a business person. Delights me as a customer. Enjoy your visit to Southern California!
Thanks! We have.Its back to the snow tomorrow.
.Build it well, market it well and they will come.JLM.
Add luck…and I agree.You can build it great, market it brilliantly and be too early or too late, or just plain wrong.
.Truth. Timing, in life, is everything.The earlier I come to work, the luckier I get.JLM.
“I should start turning my lengthier AVC comments into blog posts.”I’m not going to say that I don’t see value in doing that but I think since you are running a business that is getting off the ground you have to spend 95% on that taking time off only to rest so you can continue to spend 95% on that.Writing is fun and anything fun will impact the time you spend on the things that you should be doing.I know it can easily be rationalized but I would make sure that if you are doing a blog that you really have a clear idea that it is going to help your business more than spending the time on other things (like contacting American Express or another one might be Vista Print..)
The #1 thing that’s a roadblock right now for W&T is resources. So, begrudgingly (and with the help of @JLM:disqus) I’m transitioning into fundraising mode, and plan on taking a page out of Charlie O’Donnell’s gospel of self promotion, so I’m giving thought to blogging.But I’m also concurrently recruiting talent, making strategic alliances, and testing customer acquisition tactics — including seeing how avenues like Amex can help.
Welcome to the club…I’m rooting for you for sure!Blogging can be a time suck/distraction for sure, but I think you can also make it an important and useful tool for your process…I just wrote a bit about it today in fact ( http://falicon.com/post/727… )
The farmer’s market example breaks down a bit though because there are a lot of other factors that come into play beyond quality and quantity of food…location is massively important for a farmers market (proper location helps ensure higher demand)…as is price.Put a farmers market where there are no people…quality food doesn’t matter. Put a farmers market in a crowded poor neighborhood and quality of food doesn’t matter as much either.Good supply is directly tied to understanding demand…and both are just table stakes for playing (and no guarantee for winning anything).
without a market nothing matters.
You’re right, there are a lot of factors. I’m speaking to the singular question of, if you’re starting a marketplace and you’re wondering which side to pander to, it’s the supply side.Ideally, you’ll know who your supplier target is, which means knowing the buyer, too.If you want to build an upscale farmer’s market for uptown ladies who lunch, then you need upscale suppliers with upscale foods, and a fair amount of choice because folks will want to browse and nibble before buying. If you’re in a poor neighborhood, the game is different.But even if you don’t know much about your target, if you pull together a group of suppliers that resonate, the people will come.If you put a farmer’s market in an upscale area that has products that pander to a less monied clientele, if the supply is right, the folks with less money will hop on the train and go to that market. And if you take a specialty foods market with excellent goods and put it out in the sticks, the upper class people will take a drive to get their fresh goods. Both happen all the time.
In some very few cases this is true, in most cases absolutely not.”But even if you don’t know much about your target, if you pull together a group of suppliers that resonate, the people will come.”This is pure best product wins strategy.When McNally opened Odeon back in the day, TriBeCa was a ghost town. But he knew exactly who the market was and exactly how to market it. He knew the market and knew how to get them there.
Mostly agree about pandering to the supply side to start…and the easiest way to pander to them is to show that you really understand, and can drive, the demand for their supply.”But even if you don’t know much about your target, if you pull together a group of suppliers that resonate, the people will come.” <- this I really disagree with though.If you have something *really* remarkable, and you have enough time, you *might* be able to pull this off…but 99.9% of the time you’re still going to have to figure out, and help generate, where demand should/could be coming from…and then you’re going to have to go to that demand and pull or push them into your supply.Gary Vaynerchuk is the perfect, local and recent, example of this…his family wine shop was good but people weren’t going out of their way for their supply…so he figured out what the demand really was and then built an amazing experience and brand around that (along with his own personal brand) – http://en.wikipedia.org/wik…
Pandering is a really loaded word.Sure I get it but that isn’t what we do with partners.
I was just using @Brandon_Burns:disqus word…I’m not smart enough to have a word like that come out of my brain first… 🙂
Hah!
Its almost as if you have a vested interest in a marketplace of some sort.
Marketplaces are hard… I had always thought the simple answer is that you serve the person that pays you, and to a large extent that is true… but in Kickstarter’s (or Google’s) case, not as much. The bottom line is that you have to provide valuable features and “stickiness” for both sides, but there always has to be an eye on how to make the financial transaction easy to understand and complete. And maybe a little bit of magic 😉
What about foursquare (though not marketplace). Is it the 5% of actives, who take the time to provide data? the 95% of users who consume the data? Or is it the retailer?
When in doubt, pick the one writing you checks. If their title isn’t “VC” it’s safe to say you’ve found your customer.
That presentation is brilliant. Knowing their customers is all about their understanding that most people who give $ to Kickstarter want to be part of something that is bigger than themselves, contribute to creativity even if they aren’t in their day to day lives and to change the world a little bit. Simple and brilliant.
Fred, I agree that finding your ideal customer is tough challenge and people don’t spend enough time doing it, despite the fact that it’s one of the foundations of marketing. But, as with other challenges in the discipline, there’s a process that will help you structure your thoughts around who may be your most valuable audience. While it does not eliminate the need to test and to iterate, it does increases the chances of finding the right group. I wrote about the process in detail with several startup examples (including Kickstarter) here: http://www.cezary.co/post/6…. The key takeaway is that entrepreneurs should evaluate customer groups across several key factors (including market size, demographics, general mindset, category-specific mindset, replacement tools and behavior frequency) and then pick 2-3 of the most compelling ones to test to see what works.Once you hit your customer sweet spot, you should dedicate the majority of your efforts to that one group. But with two-sided markets, there are two customer groups, which adds complexity to the challenge. That said, it’s not impossible to do, and I typically find that one of the two audiences is a slightly higher priority. For example, with Skillshare I’d argue that attracting teachers was more important in the early stages of the business, because there was a clear value proposition to this audience for the platform (make money through something you already know) and each onboarded teacher would contribute to student acquisition through their own personal networks. Of course, this may change over time (for example, the online model the company shifted to would place a stronger emphasis on students given it’s ability to scale), but it allows the company to keep focus with limited marketing resources.You can use this same approach when scaling the business to multiple types of customers and segments. For Kickstarter, there was a clear prioritization of product categories when the company first launched (eg. accesories for tech gadgets) which allowed it to keep focus on a smaller audience rather than trying to attract every single type of creative person that exists.Another big challenge to keep in mind is communication to a two-sided markets. Most people think that you can say whatever fits best to a particular customer segment to appeal to their specific needs, but that will never build a strong brand because the message becomes too fragemented. However, you can’t take a one-size-fits-all approach to communications, either, because people are different. The solution is to create a message architecture, with a broad, overarching message for the company that captures the essence of its overall value proposition, and individual messages that fit into this theme while being tailored to each customer group. Andy Weismann had this question a while back, so I wrote a blog post about it as well: http://www.cezary.co/post/3….Here’s how a simple message architecture would look like for Skillshare:Key message: Skillshare empowers you to define your own education.Message 1 (students): Skillshare lets you learn about things you love.Message 2 (teachers): Skillshare transforms your passions into shared knowledge. Theme: defining education in your own terms
Let’s keep it simple, and follow the money path.Whoever pays the bills IS the Customer. Follow the revenue stream, and that will lead you to the customer. In Kickstarter’s case, it’s the creative entrepreneur.The rest is marketing and merchandising their customer’s products.
Agreed, but as I pointed out, it does make sense to focus on the other customer group if they help you acquire the people who pay the bills.
True. that other group is the customers’ customer.
Is there another example of a marketplace, like Kickstarter, that takes no responsibility for making the market for its merchants?
why does kickstarter take no responsibility? i’m not understanding that part. they are a magnet for new users looking to fund creators, no?
I’ve done 4 now–they provide you with great tools, they do not provide a market,
maybe your product isn’t matching with the existing user demographics? I do know of funders that discover new funding opportunities continuously. So, maybe it’s works in progress?
Yes, any classified service.
Fred, I agree that finding your ideal customer is tough challenge and people don’t spend enough time doing it, despite the fact that it’s one of the foundations of marketing. But, as with other challenges in the discipline, there’s a process that will help you structure your thoughts around who may be your most valuable audience. While it does not eliminate the need to test and to iterate, it does increases the chances of finding the right group. I wrote about the process in detail with several startup examples (including Kickstarter) here: http://www.cezary.co/post/6…. The key takeaway is that entrepreneurs should evaluate customer groups across several key factors (including market size, demographics, general mindset, category-specific mindset, replacement tools and behavior frequency) and then pick 2-3 of the most compelling ones to test to see what works.Once you hit your customer sweet spot, you should dedicate the majority of your efforts to that one group. But with two-sided markets, there are two customer groups, which adds complexity to the challenge. That said, it’s not impossible to do, and I typically find that one of the two audiences is a slightly higher priority. For example, with Skillshare I’d argue that attracting teachers was more important in the early stages of the business, because there was a clear value proposition to this audience for the platform (make money through something you already know) and each onboarded teacher would contribute to student acquisition through their own personal networks. Of course, this may change over time (for example, the online model the company shifted to would place a stronger emphasis on students given it’s ability to scale), but it allows the company to keep focus with limited marketing resources.You can use this same approach when scaling the business to multiple types of customers and segments. For Kickstarter, there was a clear prioritization of product categories when the company first launched (eg. accesories for tech gadgets) which allowed it to keep focus on a smaller audience rather than trying to attract every single type of creative person that exists.Another big challenge to keep in mind is communication to a two-sided markets. Most people think that you can say whatever fits best to a particular customer segment to appeal to their specific needs, but that will never build a strong brand because the message becomes too fragemented. However, you can’t take a one-size-fits-all approach to communications, either, because people are different. The solution is to create a message architecture, with a broad, overarching message for the company that captures the essence of its overall value proposition, and individual messages that fit into this theme while being tailored to each customer group. Andy Weismann had this question a while back, so I wrote a blog post about it as well: http://www.cezary.co/post/3….Here’s how a simple message architecture would look like for Skillshare:Key message: Skillshare empowers you to define your own education.Message 1 (students): Skillshare lets you learn about things you love.Message 2 (teachers): Skillshare transforms your passions into shared knowledge. Theme: defining education in your own terms
Brand is so important. Yet so few tech folks understand it.You’re on the money with, “The solution is to create a message architecture, with a broad, overarching message for the company that captures the essence of its overall value proposition, and individual messages that fit into this theme while being tailored to each customer group.”When Kickstarter says its mission is to “Help bring creative projects to life,” it’s saying one broad thing that has two different, specific meanings. To creators, it says “You’ll get funded!” but to funders it says, “You’ll be apart of something cool!” It’s a master stroke.For Wander&Trade, we’re still crystalizing things, but our core belief is this: No matter what you need, a small business, somewhere, makes it. To our small business vendors we’re saying, “We’re 100% in your corner.” To consumers, it says, “We’ve found a small business somewhere in the world making what you need.”The vendor message is what got them to partner with us before we even had customers. And while we’re not even close to fulfilling the consumer side of that promise, they buy the message and, more importantly, they’re buying product, despite not having a full suite of merchandise (yet).A good brand story that’s on-target will give you the time and room you need to grow, even if you can’t fulfill the promise 100% yet. That’s called good branding, and it’s essential to understand.
Noticing that you pulled the goods from your site?No matter what you need, a small business, somewhere, makes it.Have you approached You should approach American Express to see what you can do to somehow tie in with that “small business saturday” promotion.
Yes, I had to pull the goods and “close for renovations.” The reasons are many, but basically amount to the fact that the business is doing a whole lot better than what the team / financial situation can support.I’m having coffee this weekend with my ex-boss who now runs Amex’s small business initiatives account. We’re on their radar. 🙂
[Reposting this, as Disqus lost my previous reply!!!]I totally agree with the importance of brand. It’s one of the core principles of marketing and one which too many startups ignore, or think about in a very shallow way (eg “our brand is our logo”). I’ve found that the best way to talk about brand is through its five components:- what you believe- what you say- what you do (your actions, not product)- how you appear- what you make (the product – but not that I put this last)Kickstarter is a company that lives and breathes its brand each day (even though they like to say they don’t do any marketing ;-)). If I had to do the branding exercise for them, it would look like this:what they believe:everyone should have the opportunity to build something that reflects their passionswhat they say:we help creativity come to life (the concept is also strongly reflected in the name, which reflects the idea of “kickstarting”)what they do:deliberately stay out of the public eye, work out of an awesome space outside manhattan, promote creativity among their employees, hand-pick the companies on the site, apologize when they’re wrong (http://www.kickstarter.com/…, – these are just a few examples, but I’m sure there are many morehow they appear:friendly (eg bubbly letters on logotype), inviting, unassuming, empoweringwhat they make: a platform that connects people with creative ideas with those who share their values (for now, a website + apps, but this could easily turn into something more)Of course, this topic is close to my heart so I’ve written a post that outlines how entrepreneurs can build a foundation for their brand, and illustrates how successful startups have done it: http://www.cezary.co/post/3…
“But with two-sided markets, there are two customer groups, which adds complexity to the challenge. That said, it’s not impossible to do, and I typically find that one of the two audiences is a slightly higher priority.” What are some examples of companies that have built up both audiences at once? This is extremely difficult and I think in the beginning you have to focus on one audience then build as the network grows.
Some of the examples I shared on the blog post are Uber, SideTour, NewsCred and Flipboard. But all of the other big, successful two-sided markets in technology had to go through the process as well. I would guess that they did a great job of prioritizing their efforts and shifting attention from one audience to another depending on the context and company stage (I know this is the case for Uber, which did a lot of juggling to attract consumers and drivers and would often switch gears depending on how each segment grew). I don’t thing you can ever treat both segments completely equally, at least not with limited staff and resources.
Agreed and your posts were great btw. Especially agree with your thoughts on creating a compelling message and theme tailored to each customer.
Thanks John!
Great topic. You need a site “Conversationstarter” Fred. You are the master bartender.I agree it’s vital to serve one customer fantastically. Doing that it will then serve other constituents.Kickstarter serves the project creator by curating great presentations of vetted projects. The creators bring their own audience, and lots of that audience sticks around and gets involved in additional projects.Everything falls from the “serve project creators with big followings” tree.
What you are talking about is usv.com modified so that every time someone posts a link they have to write their twist or why they feel the subject is of interest.Brandon Burns did that here:http://www.usv.com/posts/as…
Interesting post for today. Last night, something got me thinking about marketplaces just before heading out to walk the dog, and I remembered a quote from your post ( almost exactly a year ago ) introducing Voomly, a product I really like, BTW.The service is not (yet) a marketplace.http://www.avc.com/a_vc/201…I am helping a young entrepreneur decide if he wants to go down that path, and I wondered if some businesses intentionally avoid building a marketplace. Perhaps to avoid the potential pollution.
.This post supports and demonstrates the importance of having a clear and comprehensive business model canvas which serves to accurately and defnitively identify the relationships among stakeholders with an eye toward from whence the revenue comes as well as those relationships and skills which are strategic in nature.Much of the discussion today could be concluded with a quick glance at the business model canvas and the realization that some questions — who is your customer — have a answer that is: “Well, it depends.”Looking at a well drafted business model canvas — http://www.businessmodelgen… — even a very simplistic one such as shown here, will provide a great insight into how the moving parts touch each other and relate to each other.Following the money is a knee jerk reaction which is also a damn good one. All knee jerk reactions are not suspect, sometimes they are revealed truth.The revelation that a marketplace has both a buy and sell side set of customers and revenues is basic and fundamental. Obvious really.Almost any business can intelligently answer this question by looking at its business model canvas.What??? You don’t HAVE a freakin’ business model canvas?JLM.
I have had one and it has not helped.Its a nice to have, not a need to have.You can focus on a core set of customers and go a long way.
.Like any tool, it is the hands of the craftsman which determines its effectiveness and efficacy.Sometimes those calloused and seasoned hands need no tools.JLM.
That may not have been the case for me!Its a useful tool for sure.
How do you apply that logic to the VC business? If you can only have 1 customer is it LP’s or entrepreneurs? VC is an entrepreneur service business, but it also does require LP funding.
What a gorgeous presentation! Slide #12 (“A human powered helicopter took flights”) is just absolutely mesmerizing – i can keep looking at that for a while 🙂
@fredwilson:disqus OT comment – love the #USVconversation box on the right. Great size, great topics!
It’s not enough to focus on the Customer. You also need to think about the Customer’s Customer, whether they are at the other end of your marketplace or via their own value chain.That is the paradigm to think about. Then, it transcends the 2-sided marketplace debate. The deeper you offer value along the value chain, the better.Etsy: Merchants are Etsy’s customers. Users are the Merchant’s customers.Amazon: Suppliers are Amazon’s customers. We are their customers, via Amazon.Kickstarter: Creators are their customers. We are the customers of the creators.
While that’s definitely true, that seems to be at odds with Fred’s point; namely, that you have to pick one as a primary focal point.I guess the question that pops to mind for Fred is what don’t you (or you do differently) by virtue of having picked one side of the two-sided marketplace as your primary?
Brilliant post.
Fred walks the talk on this one (as usual). It’s probably way, way, back in the archives but I remember a passage about how he knows the entrepreneurs are truly his audience/customers here on the blog and at USV. Less so the money.I’ve been a middle manager for years and find it to be a very sociable place. But we’re trained nowadays to think 360 degrees and serve those below, around, and above us in the hierarchy. What if instead my mission were only, “to mentor the next generation of marketers?” I would be guaranteed a great staff of helpers for life, right?!
Many new market segments will have a challenging go and don’t succeed because they are concentrating on vendor need not client want. It’s simple to get suppliers to subscribe to perform in a industry. Everyone wants new company. They will keep, the industry will fall unless they determine how to carry the industry to them. That’s the challenging perform.Spybubble gratuit
At the end of the day, it comes down to nailing down what your business model is all about because in the final analysis, as William Mougayar succinctly stated,“Whoever pays the bills IS the Customer”. For me this highlights why building a strong brand is key to figuring out who is your primary customer. When done correctly, it is a mental shortcut for a purchase decision by your primary customer while also highlighting any secondary market/customers that support the purchase decision of the primary customer. It also highlights another reason why branding should be a core competency for startups. Echoing similar comments earlier, rarely does building a better mousetrap ensure customer success and I would add branding it well more than marketing, with that dash of luck thrown in, is the hallmark of success.
Etsy sellers bring a lot of buyers. In the early days that was the primary acquisition channel and it is still a very meaningful one
What does this nuance affect, from an operational point of view?I like to think in a more linear way: there’s a customer, and that customer has a customer. How you touch each or both varies for each situation, but at the end, you are provide value, and you have to market it, and deliver on it.
True, that may apply to Etsy, but wouldn’t you agree that that’s not the case with many other marketplaces. Most marketplaces cannot rely on personal networks of the producers to bring in the consumers. eBay, Airbnb, oDesk, TaskRabbit, iStockPhoto and Zillow are just a few that come to mind. Most marketplaces will require focus on both sides, particularly when one side cannot bring in the other.
When Etsy started did they focus entirely on buyers and how has that changed through the years? I talk to a lot of entrepreneurs that trying to build a two-sided marketplace w/o focusing on one side in the beginning. Do you think one of the two sides should always take priority or is it possible to focus on both at once?
I term it a B2B2C business.I serve a customer who serves consumers.
But it doesn’t have to be just b2b2c. it could be b2b2b or c2c2c or c2c2b. your customer’s customer could be anyone really.
Agreed – was just using the provided examples.