marketing, mobile-appsToday I got to know a startup named Postmates. While I don’t know much about Postmates (I don’t live in US) but as far as I know they seem to just build up the platform or infrastructure and let third-party local restaurants deliver their foods to consumers, through Postmates’ mobile app.
However, I wonder that for these kind of startups, how they inform their service and entice the local restaurants owners to call to their network. In other words, how can they contact them and then win over them to join their service.
Certainly, it would take too much of time and effort to just approach each owner one by one, and if they do in such an inefficient way, it is easy enough for other entrepreneurs to set up the same service in each city, or a big company just starts its own platform and conquer all the market.
So my question is:
For these kind of startups, how do they inform their service and entice those owners?
Is their method appropriate or is there a better way potentially?
For me it seems better for these types of startups to first approach relatively big sellers and then go to middle-size, and finally small-size. In fact Postmates tried to create a connection with Starbucks and McDonalds.
This is a great example of a two-sided market. The company has two sets of customers: one is using the app to consume the service and the other is using the app to provide the service. Uber users the same model.
These are challenging marketplaces to compete and they tend to have a winner-take-most dynamic. Looking at Uber, if you get a lot of drivers, then it provides a much better experience for passengers. Likewise, if you have a lot of passenger demand, it's a much better experience for the driver because they get higher utilization.
These services tend to start out locally and then, once the model is proven, raise significant resources to expand nationally and internationally. I'm not sure that there's any shortcut that you can take.
So how do you entice owners/providers? Sometimes having a major backer (VC, strategic investor, large amounts of cash) plus a compelling vision. You can also make it easy for people to participate. Do they need to implement any special systems? If you've followed Uber, they started out making it really easy to be a driver and continue to raise the bar. You now need to pay a fee, you need to take training, you need to drive a minimum number of hours a week to get a good commission rate. If they started out that way, it would have been an instant failure.
I'm not sure that I see a better way other than doing the hard work of simultaneously cultivating demand on both sides of the market and scaling up locally extremely quickly. These are not ventures for bootstrappers. There is enormous cost in terms of marketing and sales for startups that want to win in a two-sided market. For example, you also typically need to develop two fantastic apps instead of one.
However, the benefits are huge if you can win. Once you've built the market, it's extraordinarily hard to win. Watch the struggles Lyft is having with an outstanding product and huge budgets. They're still destined for failure.
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