To acquire and retain millions of users, product managers continuously strive to build great product experiences that drive growth. These experiences should be highly personalized, as if the product was built for you, and is a delight to use. What are practical examples for acquiring these new users and driving higher engagement with existing users? Uber Product Leader Sreenath Kizhakkedath shares a framework to build experience and deliver growth in two-sided marketplaces.
Join us for new conversations with leading product executives every week. Roll through the highlights of this week’s event below, then head on over to our Events page to see which product leaders will be joining us next week.
Join us at our weekly Speaker Series events to engage with product leaders in your own community and gain insights on how to accelerate digital transformation.
On how to start a two-sided marketplace
There are a few ways to get started on a two-sided marketplace. It is important to focus on your problem and niche down, as well as build a community to attract. You also should provide value to one side.
“There is a big question: How do we start a two-sided marketplace? For one, it’s hard. It’s a chicken and egg problem. You need to invest on both sides of the market. But what we have seen from the industry is that there was recently a survey done and the right approximately 30% to 35% of the top 100 marketplaces, they focused on one side of the equation first. Usually, people say supplies. So the company’s focus on supply. Airbnb, for example, focused heavily on getting posts onto the marketplace. For Uber, there is a heavy focus on getting more drivers and then customers would come. Usually, people start, or companies who have started this, start going after a particular niche in a particular market, very constrained environment, such as a small place in Chicago with a particular subset of customers. That’s how you start. Then you have to build a community to continue to attract. It’s a classic chicken and egg problem because hosts will not come in or the supply side will not come in unless you have customers.
There are a few ways you can manage that. … [Uber] focused initially on people who provide limo service, a lot of drivers with a car. During the service, there was a lot of time where they were idle. So Uber’s approach was like, Hey, here’s a smartphone. There is an app you went over and at the time you are idle, a circle of time, you might get a ride. That makes perfect sense for those who are at home. They’re like yeah, that makes a lot of sense. Let me just open up any new customer coming in for my unsold inventory, which is fine, it’s just more profit. … Groupon is another one. Groupon started with selling gift cards, and merchants were being helped locally. They’re getting more customers, the merchants are super happy, so they’re willing to give away their gift cards at a lower price. Those gift cards are sold to customers. So they got the merchant side squared away first.”
On important elements of a two-sided marketplace
In his presentation, Sreenath shared 7 elements of a two-sided marketplace: customer experience, software-powered, retention/use case expansion, transactional, trust, pricing management, and leveraging of data and signals. For these areas, KPIs and metrics play an important role.
“Important elements of the marketplace are around a few things. Provide an amazing customer experience, it needs to be sorted out. The retention and use case expansion is super important. You want to continue engagement. We talked about unit economics and how that works. You want to be highly transactional and make it very easy to make the first purchase. You want an element of trust. There is a good element of pricing management so that it’s a marketplace that managers price really well. You will leverage a lot of data and signal training blocks of these components and a strong database.
All of these companies live and breathe with metrics. Across each of these elements like activation, acquisition, activation, retention, there are many metrics being looked at for various reasons. For example, for acquisition, you’re looking at the cost of customer acquisition; activation, you are looking at conversion through the funnel. For retention, you are looking at how often are you coming back and using? So, time difference between each usage, how many times are you using it? What is the value in dollar value? For scale, you’re looking at month-over-month growth, competitive positioning in a market, the lifetime value of the customer now, or business metrics like revenue, margins, unit economics, things like that.”
On becoming a good PM in the marketplace sector
What characteristics do you need to be a good product manager in the marketplace? How do you become a good product manager? Sreenath shares some insights he has, noting this isn’t a comprehensive list but somewhere to start as you grow in this role.
“This is … just a perception of things that are important. I’m sure there are many things outside of this that are also critical. … A good product manager has skills in writing and articulating, not telling the story around why more is needed. We are talking about human psychology, customer psychology, as well as making it a seamless, frictionless, easy-to-use, delightful experience on the platform.
They understand unit economics. They should have a pretty good overview all around. Why would this make sense compared to why it doesn’t? If you don’t have good unit economics sense, then you are not really building something that is valuable for the customer.
Market timing is another big one. You don’t want to build for today, you want to build for the future and where the market goes. Rapid prototyping, like the classic use case, as well as listening skills from the customer and debating skills with the stakeholders. I think those are some of the core elements.”
About the speaker
About the host
Neha is the Senior Director of Product at Macmillan Learning leading a set of start-up products under the institutional group aimed to address challenges in higher education such as affordability of educational materials, retention and student success. She has been bu.ilding, growing and scaling products in the ed-tech space for the past decade with her experience ranging from course-ware solutions, student facing applications, to analytics and insights tools for decision makers. She loves to travel and lives in South San Francisco to stay close to the airport