This is the first article in our series on the rocket model for platform businesses, excerpted and adapted from the best-selling Platform Strategy book.
Attracting co-contributors to your platform
The Attract stage encompasses the characteristics, features and processes by which a platform is able to draw producers and users. Since platform businesses are subject to network effects, attracting a critical mass of platform participants, on both sides of the platform, is key to its long-term success.
The attraction – and subsequent management – of a community of users and producers on a platform (buyers and sellers, in the case of a marketplace like eBay, or hosts and guests for Airbnb) is quite different from the acquisition of clients in a traditional business. Platform participants contribute directly to the value delivered by the platform: consumers provide valuable feedback and ratings, while producers provide goods and/or services, like their flat, car, content, etc. through the platform. Because of this unique ecosystem, some of the thinking that traditional firms apply to the recruitment, management, and motivation of their own employees can be applied to the attraction and management of platform participants. Identifying high-potential users and producers, training them, incentivising and retaining them, or even ‘terminating’ them – terms typically used more for employees than clients – are key parts of the Attract stage. When value is co-created within an ecosystem, it is very important to think carefully about the governance principles that will drive the right incentive and behaviours that can benefit all.
Types of key platform participants
Before attracting anybody to a platform, it is critically important to understand who the key platform participants will be and what kind of value proposition will be offered to them.
We can put platform stakeholders into distinct groups:
Platform owner – the organisation responsible for the development and management of the platform and its ecosystem. For example, eBay Inc. (commercial marketplace), Kiva (not-for-profit organisation), Kickstarter (public-benefit corporation), or Reddit (private community).
Sides – the customers or entities being connected by the platform. For two-sided platforms, they are typically segmented into two groups: one on the supply side (often called producers) and the other on the demand side (often called users or consumers). They are jointly called ‘platform participants’. In some cases, the same participants can switch sides (e.g. collectors buying and selling stamps).
Producers (supply side) – individuals, communities, businesses or entities delivering value created on and/or through the platform. For example, eBay sellers, Kiva borrowers, Kickstarter creators, Reddit content contributors.
Users (demand side) – individuals, communities, businesses or entities that access, consume and utilise the value provided by producers. For example, eBay buyers, Kiva lenders, Kickstarter backers, Reddit readers.
Partners – individuals, communities, businesses or entities that collaborate directly or indirectly with platform owners and add value to the platform participants. For example, the Airbnb management companies Guesty in the US or Houst in the UK, who manage listings, bookings, etc. on behalf of the hosts. These providers of complementary services add value to the platform ecosystem.
Other stakeholders – organisations that have a specific interest in the development of platforms and their impact on public welfare, competition, etc. Examples include governments and regulators. They are often less relevant in the early days, but their importance increases over time, so it is useful to identify them early if possible. If your platform is very disruptive to established market participants, it will be particularly important to engage with these stakeholders early to educate them, explain your activity and ensure a balanced debate.
After identifying the core groups of participants, it is helpful to go through the value they each bring to the platform – as well as the value that the platform brings to them – to ensure that the overall architecture is consistent with the type of self-reinforcing community model that powers most platforms. While ultimately what will attract users and producers on the platform are opportunities to transact with one another, the design of the value proposition for each side is a critical driver of attraction.
Major stakeholders and key value propositions
The functions performed at the Attract stage evolve over the life cycle of a platform and need to be reviewed on a regular basis. At launch, the Attract function is primarily focused on acquiring and hooking new customers, but as the platform matures, retention starts to play a bigger part.
During the pre-launch phase of a platform’s life cycle, we advise posing the following questions:
- Who are the key participants?
- What is the value proposition for each side of the platform?
- What tools/services should the platform provide to Users, Producers?
Note that these relatively basic questions will also allow you to validate your critical business assumption that a platform business model really is the best way to address the opportunity in question.
To illustrate: On a platform like Airbnb, the key participants are travellers and homeowners, who become, respectively, guests and hosts (Users and Producers). The value proposition for guests is that they can find affordable or unique accommodation when they travel. Meanwhile, hosts can easily and securely rent their property to travellers. And in order to facilitate these transactions and enhance the value proposition for each side, Airbnb offers tools like search filters, reviews, standard cancelation policies, and secure communication channels.
The Attract function remains vital as the platform moves through its life cycle from pre-launch to ‘ignition’. To get off the ground, the platform needs to attract the target participants identified during the pre-launch phase. While customer acquisition strategies change with each wave of Internet marketing techniques, developing a value proposition for each side of the platform that resonates with targeted audiences remains a major driver of attracting and retaining customers. Only by clearly identifying the major stakeholders and crafting strong value propositions can platform owners move forward with further attraction and retention strategies.
- Attract is the first stage of the ‘rocket’ model, which lays out the functional activities of platform businesses.
- Platform participants contribute directly to the value generated on and through the platform; therefore, their attraction and retention is vital for the success of the platform.
- Platforms have several key stakeholder groups. In addition to the platform owner, the Producer (supply side) and User (demand side) groups are the most important. There may also be partners, business collaborators, or other stakeholders, such as governments or regulators.
- The Attract stage has three main points of focus during the pre-launch phase of the platform’s life cycle: identifying key participants, developing value propositions for all sides, and defining the tools/ service it should provide in order to deliver on these value propositions.
- The Attract function also involves more detailed attraction and retention strategies as the platform’s life cycle continues.
Next in our series, we introduce the Match stage, which describes how platforms can – and must – ensure that participants are guided towards other participants who will most likely meet their transaction criteria.
To learn more, order your copy of Platform Strategy: How to unlock the power of communities and networks to grow your business.
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