One of my earlier posts discussed the inherent advantage that some products enjoy while trying to solve the chicken and egg problem that plagues two-sided markets: Do you get the consumers first or the producers and how do you get one without the other. One of the solutions (described here) lets you seed the platform by leveraging producers to bring in consumers. This especially works for B2C customer management platforms where producers actually use the product to manage their customers and the producer-gets-consumers dynamic becomes central to experiencing the value proposition of the product.
A producer-gets-consumer dynamic is great because you need to worry about only one side of the market and the other side takes care of itself. But what if you could run this as a recursive loop:
- Producer gets consumer
- Some consumers become producers
- Loop gets repeated
This is not an “Invite your friends to try our product” model. We’re actually talking about products where this loop would be central to experiencing the value proposition (and hence, quite unavoidable!).
A few Examples
Brilliant execution of the model. Survey Creators get the word out about their survey to users who they would like to have responses from. Every survey contains a reference to SurveyMonkey and some of the responders start a survey of their own. And the loop goes on…
A C2C event invite and invite list management product with a free tier which allows users to send out invites for free when the ticket price is zero. The free model helps with the viral spread. And somewhere down a series of free invites lies a consumer who’s interested in setting up an event with a ticket price (paid user).
MailChimp allows producers to create and manage mailing lists. It helps with acquisition as well as management and all the associated analytics. MailChimp, again, includes a link back to the tool on every email sent out enabling users to try it as a producer.
Ning famously implemented a network of networks where producers could start a new social network and some of the consumers invited to that network would then start one of their own. Like some of the examples above, they had a Freemium model but soon realized that supporting networks that multiply using this dynamic can be quite expensive. They have since moved to a subscription model for producers.
In a vein similar to Ning’s, MeetUp allows producers to create meet up communities and when they get in the consumers, some of them create meet up communities of their own. MeetUp started as a free service and famously made a very successful transition to becoming a paid service for producers.
PayPal, again implemented this strategy very well by virtue of being a C2C product that allowed consumers to become merchants by using PayPal. The C2C aspect is crucial to the success of the recursion here because the tool should allow users to easily move from a consuming mode to a prodding mode.
HotMail’s invite line at the bottom of every mail sent using the service is probably what started this whole trend off. HotMail’s exponential growth was a revelation in the early days of the web and was almost completely attributable to the invite line at the bottom.
The Magic of C2C
This ‘blessed’ category of products is what I would like to club together as the ‘C2C customer management tool’ category. They are characterized by the following:
- Users in producer roles use the tool to invite and manage users in consumer roles.
- Some users in consumer roles could start producing and repeat step 1.
- Since this is C2C, the market is very symmetric and the product’s marketing scales with its usage.
- Companies need to only target users interested in production roles to get the loop started and the user acquisition scales from there.
- These companies often run on a Freemium model allowing viral spread to be enhanced by the free tier and making money off the paid tier.
- Most of these products cater to consumers as well as businesses. They can internally afford to have sales team target high value business accounts while the product’s free tier allows viral spread among consumers even if they first came to know about it from an invite from a business.
- Most importantly, the communication object that is created using all these tools (survey, mail, event invite etc.) has a link to the actual tool encouraging consumers to try it out as a producer.
The key to making this work is having both the producer and consumer roles open to everyone, and in most cases, having a free tier that increases the likelihood of the loop being repeated.
If you’re running a C2C platform (both consumers and producer roles are played by the same user segment), is there a way you can get this going for yourself?