In my first post in this series I introduced a number of marketplace strategies for product managers to consider when launching and growing marketplaces. In my last post I expanded on two of those ideas: vertical dominance and horizontal expanse. In this post I will expand on the next two: unique supply and unique demand.
Unique Supply and Demand?
Markets that offer commoditized products or services can be challenging. Often their primary means of competition is on price, which becomes a race to zero as they and their competitors enter a cycle of price-cutting and/or increased marketing expenses that ends only when there is little to no margin remaining.
Alternatively, markets that offer unique products or services, or unique customer demand, can provide fantastic business opportunities.
Unique supply requires the market to exercise control over the supply of a specific product or service. Control can be achieved through intellectual property rights and regulations, exclusive relationships, brand value, or other means.
A good example of unique supply is the VIX® index. This product is unique in several ways that all interact to make it an excellent example of unique supply. The VIX® was invented and trademarked by Cboe, a CFTC-licensed futures exchange. According to CFTC regulations, Cboe is not required to allow competing futures exchanges to offer its proprietary contracts for trading. So VIX® is a unique brand used for unique products offered exclusively on a single market. Like other exchange-traded products, VIX® derivatives benefit from network effects; as more people trade them, their utility increases. All of these facets enable Cboe to offer unique supply in products that can’t be found anywhere else, compounded by the fact that the more people use them the better they become.
Businesses that have access to a unique customer or segment can build up a large or important customer base, or otherwise partner with someone who has, and can introduce new goods and services to readily available demand.
A good example of a market with unique demand is AngelList, which has amassed a network of accredited investors. This customer segment is further enhanced by the participation of “celebrity investors” who can form syndicates and act as the lead. For startups, this unique investor demand may make AngelList an attractive place to seek capital.
What PMs Should Do
Whether and how PMs can execute a unique supply or demand marketplace strategy tends to depend on other functional groups and assets within their organization: e.g. sales and marketing to gather unique customers, legal and R&D to help develop and secure intellectual property, or even other product managers that work on products (such as futures contracts) listed on the market. Internal collaboration and communication are critical to understanding what unique assets and relationships a company has, or could have, to develop unique supply or demand.
The appropriate strategy is also dependent upon the stage of the market. A PM who has access to intellectual property or relationships that have the potential to develop into unique supply or demand, but no market, may be faced with the decision about whether to build a brand new market or seek to partner with an existing market. This decision should take into account whether similar or adjacent products could be added to continue growing the new marketplace, and whether a stand-alone marketplace makes sense relative to the size of the addressable market.
A PM with an existing market can consider whether investing in new IP or relationships could be a viable strategy. This decision should take into account the time, investment, and risk involved, as well as how quickly new IP or relationships can be bootstrapped into commercially viable unique supply or demand.
About the speaker
Serial entrepreneur, adviser and investor with experience building successful, disruptive technology startups. Industry speaker and panelist. Domain expertise in regulated financial markets, market structure, trading technology, electronic marketplaces and exchanges, blockchain and distributed ledger technology, cryptocurrencies and crypto assets. International experience in North America, Latin America, Europe and Asia spanning product, strategy, operations, and business development. 12 market/exchange launches in multiple jurisdictions (N America, Europe, Asia) and asset classes (equities, futures, precious metals, cryptocurrencies).