Marketplaces as a Customer-Acquisition Strategy

One strategy for acquiring customers I’ve heard early founders mention is to use marketplaces. Think Upwork, Etsy, Amazon, eBay . . . There’s lots of demand waiting on these platforms if you can provide what users are looking for. This strategy has merit and can be useful, but there are things to consider:

  • Customer relationship – The relationship is often between the customer and the marketplace. The customer is loyal to the marketplace, not the merchant or vendor who provides the good or service. Some marketplaces even restrict merchants from doing offline transactions with customers they acquired on the marketplace.
  • Learning – In the early days, it’s important to get feedback from customers and fine-tune your product to achieve product–market fit. Not owning the customer relationship can make that difficult.
  • Why – Marketplaces don’t usually share data about what’s driving behaviors on their platforms. Vendors seeing what’s happening but they don’t understand why it’s happening. Not a big deal if things are going well. Terrifying if things are going badly. It’s hard to fix something if you have no idea what’s broken. And growth planning is extremely difficult because you don’t know what drives your growth.
  • Expansion – When you talk with your customers, sometimes you learn about opportunities to add value. It’s the land-and-expand approach. Get your foot in the door and grow the relationship over time. This is difficult to do with customers acquired via marketplaces. Not impossible, but difficult. Instead of growing by selling more to existing customers, you have to constantly acquire and service new customers.
  • Experience – Marketplaces often control the experience for customers. The experience is built for the masses, so it may not be an optimal customer experience.

Marketplaces are great for tapping into demand and supporting a thought-out go-to-market strategy. They aren’t a replacement for a go-to-market strategy and they aren’t ideal for all company stages. Founders (especially early ones) should be mindful of the importance of owning the customer relationship and factor it into their decision about whether to acquire customers via marketplaces.