July 15, 2021
So you’ve proven your marketplace adds value to both the supply and demand side of the market. Congratulations!
Now it’s time for the hard part – demand growth.
You have your suppliers lined up. They’re eager to transact with buyers on your platform. They’ve agreed to your revenue sharing terms. You just have to bring them interested buyers.
Demand generation for marketplaces can get really expensive, especially in the early days where you’re still validating your business model and trying to drive transaction flow.
That’s why it’s critical to approach demand generation with the overall goal of testing and validating growth channels rather than immediately dropping your entire marketing budget on a few major tests.
It’s all about finding the right ad copy, the right channels, the right content, and approaching the right audiences with small, targeted tests, and THEN doubling down on what works.
Before you start running ads, creating content, and increasing marketing spend, it’s important to understand what the overall strategy should be for the demand generation phase of your marketplace growth efforts.
You’ve already validated that a market exists for the types of transactions your platform is enabling. You already have suppliers lined up. Now it’s time to test out different sources of demand flow.
With this process, you’ll often feel like you’re pulling different levers, seeing what happens, and then either turning them off or leaving them on.
Some ad platforms and growth channels will be great for your marketplace. Others won’t send you a single customer. Part of what you’ll be doing in the early days of demand generation is channel validation – figuring out where your audience is and how to best serve them.
This is why it’s so important to test first, then scale your marketing efforts.
If you end up spending half your marketing budget on LinkedIn only to find that Facebook was where your highest quality leads were coming from, you’ve only damaged your growth potential.
Small tests – a small spend of $50-$150 on week-long ads across different platforms – can give you a good deal of indication whether or not a specific growth channel is worth your investment. While small tests like these won’t give you 95%+ statistically significant confidence in a channel, they’ll definitely point you in the right direction.
Source: A/B Significance Test
In the real world of digital marketing, that’s really all you need.
On the unpaid growth side, building a robust referral system from the ground up can be a huge waste of resources if you find that no one is using it. Starting small with a template-built referral system from a service like Kickoff Labs will let you test and validate referrals before you decide to go all-in on a full referral program.
The point is this:
Too many businesses, marketplaces or otherwise, decide to go all-in on certain strategies that they intuitively believe will work without any actual data to back up their decision. The point of testing different channels in this way is to make sure your marketing budget is being spent in the areas where you see the highest possible ROI.
Now that that’s out of the way, let’s look at the big question.
Which tests should you run?
When doing demand generation for a marketplace, you’re trying to balance two different needs – those of your suppliers and those of your buyers. For that, you need a steady flow of inbound traffic that’s quickly repeatable and scalable.
Tactics like building a referral system are designed for a long-term payoff. Advertising is what will get you to a place where you can best take advantage of more heavy-duty growth tactics.
When running ad tests for a marketplace, there are 3 major things to remember:
The earliest advertising tests you run should be aiming to do audience discovery – who your marketplace is serving, where they are most active, what kind of copy best attracts them, and what kind of imagery gets them to click on your ads.
Discovery is crucial to ensuring that you run optimized ad campaigns and spending your ad budget in the right channels. For that, you’ll need tactics around crafting ad copy, selecting product imagery, and running ads in different platforms.
Here are a few to get you started:
Question Ad Copy: Try rephrasing your ad copy as a leading question to give your customers something to respond to. The answer should indicate why your marketplace can be valuable to them.
Urgency Ad Copy: Using urgency in your ad copy can improve the likelihood of someone clicking and taking action. There are many ways to do this, but make sure it’s a credible reason for urgency. For example is your marketplace’s beta promotion period ending soon?
Product Shot Ad: High-quality photography or screenshots in an ad for your product can be an effective way to drive sales. Showing the product up close and in high detail in advertising helps interested consumers to properly visualize the product and how it might look in their use. Often, this visual cue is what’s needed to garner interest in a product and land a sale.
Lifestyle Image Ad: Try selling the image of the lifestyle your product promotes rather than just the product itself. Using product lifestyle imagery shows an audience the type of life they can lead by buying the product. Help your audience better imagine what the product would be like in their hands and in their lives, helping them relate to the product and want to buy it.
Narrow Audience: If an audience is not converting, perhaps it is too broad. Layer more narrow targeting parameters on an existing audience to better aim for the right demographic. 1 million is generally a good audience size.
New Ad Platform: Different advertising platforms take different approaches to the way they reach audiences. Targeting the same audience with the same creative across multiple platforms can be a good way to determine relative volume and efficiency. You’ll be able to see how your audience on each network responds to your creative and adjust your ad spending and copy.
For more such tactics, you can check out the Ladder Playbook, where we’re making public all of the growth strategies that are part of our tactic database.
A huge advantage of marketplace businesses is that they are usually serving a rather niche interest that can easily be taken advantage of for advertising purposes. Especially in the early days when you might be targeting a small niche in a specific geography with specific products, your audience is very clearly defined on an interest basis.
Interest-based targeting, then, on networks like Facebook, Twitter, LinkedIn, Pinterest, Instagram, etc…, will be a huge potential win for your ad spend.
Since all of these networks let you target audiences based on their own stated interests, you’ll be able to get your ads directly into the social feeds of your exact ideal audience profiles.
So for example, if you’re a Boulder, CO-based marketplace between sellers of camping gear and camping enthusiasts, you’ll be able to target people on Facebook who like different camping sites in the Boulder area and follow different camping gear companies.
Here are a few interest targeting approaches to get you started:
Category Interest Audience: Targeting audiences based on their likes and interests related to your product category. For example, a luxury bag retailer targeting people who like ‘fashion’, a hotel aggregation site targeting people who like ‘travel’ or a drip email software company targeting people interested in ‘CRM’. Note that this is a separate tactic from targeting people interested in your product (‘black bags’, ‘rome hotels’, ‘drip emails’) or targeting specific competitors (‘gucci bags’, ‘rome hilton’, ‘hubspot crm’).
Complement Interest Audience: Target audiences whose social media interests complement your product category. Consider what other items and item categories your audience shows interest in and make ads that target those keywords. For example, target luxury products if what you sell is also a luxury product – i.e. people interested in Porsche are likely to be interested in expensive watches.
Customer Lookalike Audience: Try targeting an audience that looks like your current customers with your advertising. Target them based on your current customers’ demographics, shared interests, geography, etc… You already know what kinds of customers your business draws and targeting people similar to them is a great way to expand your reach and increase ad performance.
We have plenty more interest audiences over at the Ladder Playbook!
The last thing you want to happen for your suppliers is a ton of traffic that’s extremely low quality. Generating leads for your suppliers is great, but if those leads aren’t qualified and if they end up being really low quality prospects, then not only are you not increasing revenue, but you’re also damaging the reputation of your marketplace.
Think of it this way:
You spent a ton of time ensuring the quality of your suppliers.
Why not spend the exact same effort to ensure the quality of your buyers?
You’re serving both sides of the marketplace with your platform, so you have to ensure both sides are happy with one another.
At the end of the day, if you drive a few high-quality leads to suppliers – ones that convert, become good customers, leave quality reviews, etc… – then your suppliers will be more likely to trust that your marketplace is worthwhile. If instead you drive a bunch of traffic that turns out to be useless to them, they’ll quickly move on and find a different source of potential revenue.
The above tests and tactics will eventually lead you to the right audience for your suppliers. As you begin to see transactions happen on your platform, make sure you ask for feedback from both sides of the market.
Your suppliers will let you know if you’re targeting the right audiences for them to land more sales.
Your buyers will let you know whether you’re serving their needs and whether your suppliers are of a high enough quality.
The feedback you get from both sides, along with the data you gather from ad performance and transactions, will enable you to double down on exactly the audiences you want to keep targeting, clean up your marketplace to remove bad actors, and scale up your marketing spend to increase traffic and transactions.
When your ads are purring and you’re driving transactions on your platform, it’s time to start focusing on long-term growth. The aim, once you figure out advertising, should be to begin creating a repeatable, scalable growth mechanism around your marketplace.
For that, you should be thinking about two major approaches: referrals and content.
For your marketplace to grow, you’ll need to both find more suppliers and attract more buyers. A referral program can be a growth driver for both of these purposes.
For demand generation, you can create a referral program where people refer their friends in return for discounts or free stuff.
For supplier growth, you can allow suppliers to refer other suppliers to your platform in return for better revenue sharing terms.
Finally, you can also get your happy buyers to refer suppliers and to your platform. Allowing them to send an email saying “[Customer] would love to see you on our marketplace!” is a great way to introduce suppliers you have yet to reach to your business.
Here are some referral program tactics you can implement:
Referrals From Existing Users: Prompt your existing users to refer friends to your product or service. A great way to do this is to provide an incentive of a free trial, a discount, or some other reward. This creates a viral loop around your product, driving happy users to share with their friends, increasing new user registrations, and encouraging those users to participate in the referral system.
Referral Link In Invoice: Providing a referral promotion link for users who need to pay their next bill can incentivize them to share your product and cut the cost of their next bill. It’s an easy way to build a viral loop around your product while gaining access to the qualified leads of your current customer base. Simply add a link to your referral program with a bit of information about the potential benefits to the user at the bottom of the invoice for their latest payment.
Customer Referral Program: Set up a referral program to get your customers to refer their friends. This referral program can offer a discount or account credit for each friend that signs up, or can give a larger discount such as a free month of service for each milestone of new registrations. The program will give you get access to friends of your current happy customers.
Your second major source of repeatable, scalable growth can be content. You can create a lot of great content around the experiences that you’re selling on your marketplace. Image-heavy, gorgeous Instagram posts; sharing customer stories; instructional posts for best practices around the items you’re selling.
Content will be a long-burn, slow growth channel that you should be ramping up over time. It’ll give you great returns on SEO, allow you to show up in searches for your most important keywords, and most importantly position your marketplace as an engaged leader in your space.
Here are some content tactics to try:
Longform Content: Longform content is our highest-performing content at Ladder. Our biggest blog posts (10,000 words or more) tend to do extremely well on all important SEO metrics – sessions, pageviews, time on page, sharing, returning users, etc… That’s because this type of content is both immediately actionable & useful, and is long enough that people bookmark it for later visits.
Data Blog Post: Content around interesting data you have on your users or industry is a great way to get attention and PR for your business. You collect a lot of insights about your customers that can shine a revealing light on different parts of your industry and your own business’ performance. Sharing that data with the world as content is sure to grab attention with journalists and in your industry.
Skyscraper Technique: Skyscraper is a classic technique that can help you create content that ranks higher than your competitors. Here’s how it works: You read a ton of great blog posts every day. Find one that’s link-worthy, write your own unique version and make it better, and then do outreach for backlinks. Think of it as a skyscraper size race – make your own content a dozen stories higher than the competing product.
The end goal to your earliest days working on demand generation for your marketplace is to find the formula for repeatable, scalable growth channels.
That will require a lot of small tests at the start – week-long, small spend ads to ramp up growth – that will lead into your biggest wins: audiences that you can rely on for regular growth and programs like referrals and content that will let you scale faster.
The biggest thing to remember is to always ship new tests, always aim to validate your channels, and avoid spending your entire budget on the wrong signals.
If you can manage that while keeping your suppliers and buyers happy, you’ll build a demand generation process that will help you reliably scale your marketplace.
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