Economics Expert on Product Markets (Part 3)
People turn to the middleman because they are viewed as a trusted nexus in a product market between buyers and sellers. But the question that often comes up is how do middlemen create trust between both sides?
I think that every middleman struggles with balancing the needs of a two-sided market. Buyers want to be where the sellers are, and sellers want to be where the buyers are. In order for the marketplace to thrive, there needs to be a balancing act between serving the interests of buyers and sellers equally.
Many of the largest and most successful marketplaces can become indifferent to one side of their business. Oftentimes, they can try to exploit their power within a product market. Recently, Uber has provided an example of what can happen when there is an imbalance between the buyer experience (riders) and the seller experience (drivers).
Uber delivers a convenient experience for riders. However, the drivers feel that the company is not treating them fairly. Even if the drivers feel powerless to leave Uber, you can assume that the rider experience will be affected by unhappy drivers who may not clean their cars as often or do not talk with riders as frequently.
Now with competition from Lyft, Uber is competing on rider pay scale and pricing for their riders. This shift makes it trickier to balance the needs of your key customers and staying competitive in a product market.
About the speaker
Marina Krakovsky is a business journalist who specializes in social science and economics. Marina has written several books - including “The Middleman Economy: How Brokers, Agents, Dealers, and Everyday Matchmakers Create Value and Profit.”