Product/Market Fit: 3 of 4

What about finding product/market fit for a marketplace?

People sometimes think they are on the way to product/market fit because they’ve identified a complex system that can be better optimized. Taking a step back - this is identifying a systemic problem - not necessarily a solution that people want to use and pay for.

For example, there has been a trend of optimizing small parts of fundamentally broken systems such as the US healthcare system or in creating niche communities and e-commerce platforms for specific interests such as cryptocurrency, gaming, or simply “Gen Z.”  

The first question is - is this a helpful trend? The second question - for whom?

In many cases, the honest answer is - yes, obviously for one side of the marketplace and then - maybe, or even no for the other. If you only have a solution for half a marketplace, it’s much better to know this before you build the entire thing out. That way you can either test your way to a marketplace that adds value on both sides or pivot to being a single product that is non-reliant on a two-sided marketplace.

When building a two-sided market you have a little more work to get to product/market fit.

The complication with optimizing supply and demand is that there are at least two customers in marketplaces who require a value exchange to participate.  Observing an inefficiency does not mean success in engaging two parties to adopt a new way - unless you make it valuable for BOTH of them.

Remember: There has to be a concrete value exchange for any product to be successful. Marketplaces are two-sided products or even two separate (but joined) products.

For example, let's take a niche e-commerce platform. In this case BOTH the suppliers - let’s say curators of unique vintage clothing and the intended demand - let’s say Gen Z collectors, would need to find value in adopting this marketplace product.

If only one side, such as the vintage curators, finds value in attracting Gen Z collectors but these collectors are quickly disillusioned with non-unique inventory or a poor user experience, then the system breaks down and nothing gets optimized for anyone. Here one side of the marketplace didn’t find value in the offering, therefore the entire marketplace concept collapses.

To build a marketplace product you have to define who you are building for and what problem they are trying to solve on BOTH sides of the marketplace. You can repeat the exact same motion as for a single product, you just have to do it twice through the different lenses of supply and demand

Starting with each side of the marketplace, clearly articulate what you're trying to solve and for whom. You know you have more than one specific type of person who you are building to support so break each side into its own solution brainstorming area.

For each side of the marketplace (audience / need pairing) go deep brainstorming all of your solution ideas first for one side and then the other.

After you have finished brainstorming solution ideas for each side of the marketplace, you'll want to step away and clear your head (go get lunch or a coffee; even let the initial brainstorm sit overnight). This is often a good moment to appoint one person on your team to take the supply side and one person to take the demand side to get in the mindset to really act as the “voice of the customer.”

Going back and forth across two sides can get confusing and even cause you to start to rationalize why the marketplace will or won’t work. Don’t stress - focus on getting all your ideas out there on each side - the tests will validate or invalidate them with real people!

When you’re able to come back with a clear mind each supply / demand owner groups similar ideas together on each side of the marketplace. This creates solution options for attracting both supply and demand. Finally refine the language for each so a person outside of your company can read each solution option and understand it easily.

Now you are ready to test the solution options with real people running two separate tests (one for each side of the marketplace).

To recap - for suppliers i.e. vintage curators AND for anticipated demand i.e. Gen Z collectors - you have framed a specific problem for a specific type of person and you have come up with multiple solution ideas that this person could want to use to solve their problem.  

With Foundations: Tests, these ideas are structured to cleanly encapsulate the three must-haves for finding the “tip of the spear” for product/market fit:

  • A one-to-one relationship between the target audience and the problem
  • Multiple solutions for this problem for this target audience

Here is what an example solution idea looks like for a real person on one side of the marketplace.

And here is a view of a solution idea for the other side of the marketplace.

Foundations enables each person - who represents a real potential user on one side of the marketplace - to see a single solution and to give you quantitative and qualitative feedback on this solution. For marketplace ideas we need to know if real people have a genuine interest on BOTH sides and why (or why not).

You can run a test for a few days with real people and quickly get a signal for whether your ideas resonate with the people you thought they would.

Just as with testing a single product idea, your results from marketplace testing will weed out bad ideas so you can focus on going deeper only with the good ones - giving you confidence that you are moving in the right direction. The earlier you know if real people have a genuine interest in your idea and why - finding the”tip of the spear'' - the better.

By the same token, suppose you only get a positive signal on one side of the marketplace. In that case, you might need to go back to the drawing board  and understand the motivations of the user type who did not respond favorably to your ideas (for example, Gen Z collectors) before proceeding with a marketplace buildout.  Alternatively you might decide to pivot to building a single product for the user who found value in your solution ideas (for example, vintage curators).

In either case, Foundations can help.

Start using Foundations for free now.