19 Tactics to Solve The Chicken-Or-Egg Problem and Grow Your Marketplace

Entrepreneurs are often confused when they are new to the marketplace about deciding priority between the two sides of the marketplaces. So here we provide 19 tactics for solving such doubts for the founders to solve the chicken or egg problem.

Tactic 1: Control the side that seems the hardest ‍

Figure out which side of the marketplace is harder by sales testing and the onboarding process. Usually, when the hard side is taken care of, the other side gets ten times easier to conquer. When the harder side reaches its optimum point, the value of the latter side increases due to network effects.

Outdoorsy is an RV rental marketplace that first figured out their harder side. For them, it was the supply. Once solved, the demand became five times easier for them to bring in.

Tactic 2: Appeal to a niche and repeat it

By gathering data on the highest activity, go after the community groups that care about your marketplace.

eBay got its white-hot market as Beanie beans. Uber started with getting black cars in SF.

Tactic 3: Gain control of the most valuable side

Get the most valuable side of the marketplace in your control or the niche through cash so that they can join your marketplace.

Uber got paid control over the supply side, the drivers in the key cities. Helix got control over the demand side by covering the costs of genetic tests.

Tactic 4: Use automation to make the supply look bigger

Kick start the supply-side by gathering as much data from the web as possible.

Yelp and Goodreads collected data related to local businesses and books, respectively.

Sometimes founders are confused if they can resort to fake activity for tactic 4. Reddit and Paypal did some from their side. However, had they been caught, it might have resulted in opposite effects as planned. So it all depends on the secrecy and how much you can avoid being caught by the media.

Tactic 5: Build up of one side as an email list

The easiest and cheapest way to start a marketplace is through email list build-up, especially if most of your buyers are sellers.

Craigslist and Threadless started the same way.

Tactic 6: Hosting parties, meetups, and gatherings

It might seem to be tough to organize events. However, events help generate communities, demonstrate activities, and receive direct feedback from the audience.

Poshmark hosts posh parties while Yelp hosts parties and invites people to be members of the Yelp Elite.

Tactic 7: Building a SaaS tool

SaaS tools can be sold to one side of the marketplace so that you can lock them with yourself with surety and have enough time to attract the other side.

OpenTable, Honeybook, and StyleSeat built a SaaS tool for restaurants, event planners, and hairdressers, respectively.

Tactic 8: Give software to a third party to bring one side of the market along

Cellphone manufacturers brought consumer demand for Androids because Android built software for them. Similarly, MySpace gave free profiles to bands who convinced fans to join the platform in return.

Tactic 9: Giant user for the initial supply/demand

Candex provides software to Siemens, a big demand-side anchor. The latter gets its supply vendors paid on the Candex marketplace.

Tactic 10: Make one side change behavior

Square won among other mobile payment platforms because it only made the supply-side change their behavior while the demand side remained unaffected.

Tactic 11: Something is suddenly free

‍Taking something that used to cost money and suddenly making it free of cost will attract users to your marketplace.

Users are automatically attracted if a famous costly item suddenly is free.

Robinhood, Napster, and Skype made trading, music, and phone calls/video calls free, respectively.

Tactic 12: Keep a product ready, then open a marketplace

Keep your products and services ready before jumping to open up the marketplace. Amazon firstly acted as a retailer and then opened its marketplace. Similar were the cases in Salesforce, Apple, and SmartRecruiters.

Tactic 13: Connect the two sides

An example of this is Zappos which used to fulfill the order by hand. For Zappos, it was necessary to manufacture excellent transactions. Similar was the case for eToys and Zenefits as well.

Tactic 14: Where buyers are sellers too

Build a one-sided market to avoid the whole chicken-egg question.

Poshmark and Match are some examples that follow such tactics.

Tactic 15: Exclusive access

Try to restrict access and create fear of missing out to build a strong word of mouth and bring in a flood of participation. However, this may not work out much.

Examples: Gmail, Mailbox, and Gilt.

Tactic 16: Setting a geographic constraint

‍When the surface area of operation at launch is limited, a lot of activity is automatically attracted.

Examples: Yelp, Lyft, and Craigslist.

Tactic 17: Setting a time constraint

Time constraint helps to bring about excitement among the masses.

At launch, Tophatter only lets people bid between a particular time limit making the marketplace crowded. Similarly, HQ Trivia uses time constraints to build excitement for newly manufactured products.

Tactic 18: Setting a demand constraint

Give the audience a simple reason to be on your platform. Create a single value proposition well and focus your marketplace there.

Groupon and Fiverr launched constraints over supplies per day and pricing, respectively.

Tactic 19: Pay users with tokens

You may attract new people to your marketplace by creating and paying your users with tokens. The low popularity of a marketplace may often look like a problem. Most people avoid joining such marketplaces. Some attractive and innovative schemes can solve this problem.

For example, OpenBazaar and Wemark are two such marketplaces.