What is an Online Service Marketplace?
A lot of industries have problems that can be solved by a service marketplace. The on-demand talent economy and gig-economy are providing people with more high-quality and convenient service options than ever before while also empowering mobile workers to find streams of income from various sources.
A service marketplace is an online platform that facilitates the buying and selling of services between a buyer and service provider.
If you’re reading this blog post, it’s probably because you’re thinking about or have decided that you want to be a part of the burgeoning trend of starting a service marketplace business. Welcome!
While, building a service marketplace business doesn’t have to be as difficult as you may think, there are several things you should consider before starting that will help you launch your marketplace successfully.
Here’s how to build a service marketplace business and the factors you should consider before launching your marketplace:
1. Choose a vertical for your online marketplace
To start, you need to decide what services your marketplace is going to provide. Some of the most successful marketplaces focus on one thing and do it extremely well.
For example, Outdoorsy as a marketplace focuses its business on RV and trailer rentals. The Outdoorsy platform has booked 840,000 travel days among 620,000 users, generating $325 million in revenue as of April 2019. They are expert at facilitating the service relationship for this specific vertical, and it could be argued that this has made them more successful. Choosing a niche will help you stay focused on serving a particular market to the highest quality.
Sometimes after a company succeeds in one vertical, they are ripe to expand into other categories. This is what happened to marketplaces like Amazon, which originally only sold books, but now sells a wide-range of products.
Start a service marketplace in one location, validate the idea, and then build it to eventually expand out to different geographical areas.
Going vertical can also be effective in terms of location. Starting a marketplace in one location, validating the idea, and then building it to eventually expand out to different geographical areas is also an effective strategy to manage growth. This is a common strategy utilized by marketplaces.
2. Build supply for your online marketplace
Finding ways to build supply for your service marketplace business begins with determining where the people in that particular service space “hang out”. Whether it’s in person or online, you need to put yourself in their headspace and do some research to understand where you can find these remote or mobile workers.
Once you find them, you can spread the good word by sharing your service marketplace opportunity and finding ways to incentivize them to join it as a service provider.
Individual workers who don’t already sell online will be easier to convince to join your marketplace, because they want the extra income stream and an added bonus for you is that they will bring along their existing customer base.
Here are just a few examples of places to search when building your list of providers for your service marketplace.
A) Search for trade organizations
Another idea is searching trade organizations that relate to the audience you would like to direct your service marketplace business to. For example, the Mechanical Contractors Association of Canada trade organization would be a great place to find mobile workers if you want to start a service marketplace that provides services related to the plumbing, heating, ventilation, and air conditioning.
B) Engage on social media
Social media is an online world where so many people spend their time nowadays. It could be a Facebook group dedicated to people who are looking for more freelance web developer opportunities, your marketplace could help connect web developers with people who need their services.
Another idea is exploring hashtags on Instagram to see if there are popular accounts also related to that space. Other online forums like Reddit can also be a goldmine in finding people who are in niche service spaces.
C) Search adverts or marketplaces like Craigslist
You can begin by searching adverts and other marketplaces like Craigslist to find service providers. Adverts help service providers promote their services and can be a great way for you to source the right providers for your marketplace.You can find adverts in newspapers, trade magazines, television, social media, and beyond.
Another place to search is Craigslist which has a services section of their marketplace where people list services related to various industries. These service providers are listing their services individually. The benefit is that these mobile workers are already familiar with the business model and know the ins and outs. If you position your marketplace as a better option and more specialized, they will most likely consider listing their services on your marketplace.
D) Leverage your network
Your network is your net worth. Always start with your own network. You’ve already built a certain amount of trust with your own network and this trust is stronger than with a complete stranger. Share your opportunity with those in your network, and see if the people who provide that particular service are interested in listing their services on your marketplace.
After you find your service providers, read our post on ways you can convince them to join your marketplace.
3. Build demand for your online marketplace
So, you have an idea for a service marketplace that you think people need. But, how do you create more demand around this type of marketplace to get people excited?
Here are just a few examples of ways to build demand around your service marketplace:
A) Content marketing
Creating content in the form of blog posts, e-books, etc. is an inbound marketing strategy that helps to educate people who may be looking for information related to that particular service. Not only does it improve your search engine ranking through the use of keywords, but if you get people to subscribe to your email opt-in list and continue to provide them with valuable content through email marketing strategies you can move them down the sales funnel and into a paying customer.
The key is to continue to add value through your content. Eventually you will have built thought leadership around your industry and be the go-to source for information related to that industry.
B) Email marketing
By building an email list of potential customers, you can keep sending them valuable content-like offers, share new service offerings, or direct them to recently published articles on your blog. Most people check their email at least once per day, keeping the lines of communication open are key to activating existing customers because it keeps your marketplace top of mind. Read our blog post on how to make your emails standout from the crowd.
Many marketplaces also identify as communities. The type of community we are talking about is one where people in them share something in common. These users engage with others on the marketplace who share these commonalities. This is a form of marketing because it keeps users on the website to interact with other users, even if they don’t necessarily intend on buying anything.
By positioning a marketplace as a community and not just another business, it makes potential customers feel like they are a part of something bigger.
This is a psychological phenomenon that helps people to feel like they are in the in-group, we draw our psychological identity and strength from belonging, we also like when other people are there to support us. By positioning a marketplace as a community and not just another business, it makes potential customers feel like they are a part of something bigger.
D) Paid advertising
The benefit of paid advertising is it helps to build traffic and boost conversions quickly as long as you are targeting a specific audience and have specific goals in mind. Also, in the early stages, this form of marketing can be used to validate you marketplace idea, by running ads to see how many people click through before going all in on an idea.
For early stages, this is not always the ideal way to market your marketplace because the costs may be unknown. At this point, you don’t know how expensive customer acquisition costs are going to be. Also, since Google ads and Facebook ads are purchased in an auction style, this means it is competitive resulting in increased costs.
4. Building versus buying an easy to use service marketplace platform
One you have determined that yes, people want your service and yes, there are many service providers interested in listing on your marketplace, then you need to decide if you’re going to:
While, there are pros and cons to each, and deciding this will be important because it will affect how quickly you’re able to get your service marketplace up and running.
Important to note, is that these days there are many inexpensive options for easy to use platforms and software solutions for service marketplace businesses. MarketBox for example has a plug and play option which will get your marketplace launched quickly as well as an enterprise version if you want more customizations. There are also field service management features which make the process seamless for service providers to conduct their business with customers. Automate online sales, scheduling, and route optimization.
In contrast, building your own platform from scratch is expensive and time consuming. You will need to hire a team of developers to code and create the marketplace. These developers will either need to be a team you hire internally or a team you hire externally. Then you will need to decide what features you will include in your platform.
Do you know what features to build and how they should be designed for an optimized user experience?
For example, will you include extensive field service management features? Do you know what features to build and how they should be designed for an optimized user experience? Many times, a business thinks they know what features their customers want, only to launch them and have the customers get confused and stop using the site out of frustration.
5. Determine your unique value proposition for your online marketplace
Even after finding individuals during the building supply phase, you must then find ways to incentivize them to sign up to your marketplace because listing their services on your marketplace requires work on their end.
This is heavily tied to your unique value proposition. What is the value you are going to add to the space you are trying to service? What can you offer these potential service providers that other service marketplaces cannot?
Researching your competition is the first step in finding ways to beat out the competition and be the top choice for service providers. Learning what you may be able to do better for them, in particular to the service they provide could be key to convincing them to list on your marketplace.
It’s also important to determine your unique value proposition for the customers that will use your marketplace as well. If there is no value being added from using your marketplace specifically, then your customers will leave the platform, go to another platform or try to take the sale offline.
6. Be patient when building your online marketplace
Probably one of the most difficult things to do when starting a new business: be patient. Marketplaces are unlike other online businesses in the sense that they take more time to grow, they aren’t built overnight. Usually e-commerce websites take about 6-9 months to show signs of growth. According to Boris Wertz and Angela Tran Kingyens Guide to Marketplaces, on average it can take marketplaces about three years to gain traction.
Keep monitoring signs of growth like repeat customers and continue to listen to the feedback your customers are giving you to truly understand their pain points. Continue developing your marketplace based on this feedback.
Ready to get started?
Using the strategies mentioned will help you create a strong foundation for your service marketplace business.
Starting with a vertical will help to focus your business and eventually after validating the idea you can expand to other categories and locations. Next up, building supply and demand are important factors to stacking your marketplace with high-quality service providers and then getting the attention of potential customers.
Deciding how your service marketplace is going to compete with other marketplaces is also crucial. Determining your unique value proposition is the key to knowing how you’re going to set yourself apart and attract mobile workers.
Lastly, being patient and understanding that service marketplace businesses are unlike other online businesses is important. They take more time to grow, so don’t be discouraged if you don’t see immediate success.