Starting an online marketplace — a platform that connects multiple buyers and sellers — has many advantages for entrepreneurs. They have low overhead costs and allow for scalability and global reach, among other plusses.
But none of that can happen if you don’t know how to operate and market your marketplace to customers and businesses alike. To get the best practices for finding success with marketplaces, we asked Michael Wolf, who has had his fair share of wins.
Wolf helped put ClassPass, Supernatural, Lululemon and FreshDirect on the map, and two years ago stepped into the CEO role at ResortPass, a service that gives people day access to hotel and resort amenities without having to stay overnight. In a statement announcing their partnership with ResortPass, Hilton calls it the perfect way for people to access the No. 1 reason people want to travel: resting and recharging.
ResortPass has grown 5X under his leadership. Here is his best advice for marketplace entrepreneurs.
The key to pitching your marketplace to businesses
I always say that you need to inspire them about what is possible (for us, it’s been the rise of the day guest and the resulting new revenue stream), and then show them you have the perfect solution to do that. Hotels are focused on ancillary revenue but many haven’t successfully brought the day guest into their properties yet because they haven’t embraced or don’t understand the revenue opportunity there.
When we ask hotels what their goals are, they say it’s to find new revenue streams. When we tell them that we can engage a local customer who will return frequently for a daycation, and beyond that who will send out-of-town friends and family to the hotel, they immediately understand the potential. For your business, find what your ‘local’ is — the customer who should be enjoying your product but currently isn’t without a more accessible version of your product they could try.
This approach needn’t be unique to hospitality. Entrepreneurs in other industries can innovate by thinking about the same question that drove us: “What is an ancillary type of revenue today that can become a standard part of revenue for their industry over time?”
Related: 70% of Small Business Owners Say Online Marketplaces Help Them Boost Sales — and Now It Can Be True For You.
The common misconception about running a marketplace
We hear “two-sided marketplace” all the time but it’s actually three sides — your company is the third side. It only truly works if the buyer wins, the seller wins, and your company wins. I say it’s like a triangle. Ultimately it has to be an equilateral triangle where users, partners, and the company see equal value. It won’t necessarily always be static — at various parts of the journey you might choose to give users or partners more value, especially as you scale the business — but balancing these constituents ultimately over time is critical to ensuring ongoing success.
The importance of “front-channeling”
A key part of operating a transparent and efficient organization is ensuring you don’t get to the end of a process — whether it’s a marketing campaign idea or a potential new hire — with reservations, concerns, or game-changing feedback. Instead of relying on a “back-channel” to gain confidence towards the end of the process, starting with the “front-channel” can create a better outcome. Front-channeling with both colleagues and external trusted resources allows you to get key data points and more complete information to make the best decisions right from the start.
Related: From Idea to Execution — The Top 4 Must-Dos for Startup Success
The most important focus for a startup leader
Hands down, hiring is the most important focus area. I recommend spending an outsized percentage of your time – up to 80% – on hiring, especially for a growing business. When you attract the right talent, I truly believe everything will flow from there. When you’re hiring, one of the most important things to index for is instincts: assess if they have strong instincts and also trust your own when evaluating them.
As an entrepreneur, genuine excitement is a huge asset and is critical to building a great team. I share my enthusiasm about our business every chance I get, in every setting, and candidates often comment on how contagious that excitement can be.
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