They’ve already changed the game for many consumer industries, but COVID-19 accelerated their transformation with ever more online shoppers now browsing and buying exclusively in online marketplaces.
Whether it’s retail giant Amazon, travel firm Airbnb or educational platform Udemy – all provide a fantastic example of why companies can no longer ignore the opportunities the digital marketplace represents if they want to stay competitive.
New research by Inriver found 44% of all online product searches now start in digital marketplaces – more than twice as many as in search engines and almost five times more than those that start at a brand’s own website.
Yet many firms still struggled to succeed in these arenas, failing to adopt to their unique environment and compete with hundreds of similar offerings.
The good news is that some of the traditional retail rules are still applying to digital marketplaces.
Product differentiation still provides one of the most important ways to create a competitive advantage, for example.
But the bad news is that it becomes seemingly impossible to offer something truly unique in such a crowded, competitive playing field.
With marketplaces expected to become even more powerful in the future, now is the time for business leaders to develop a strategy to stand out from the crowd, and successfully differentiate their offering.
Clearly define target customers
More than ever, business leaders need to be laser-focused on who their product or service is targeting.
Large online marketplaces attract consumers with highly diverse needs and preferences.
Rather than trying to appeal to everyone equally, leaders need to narrow down on their target customer segment.
For instance, a boutique hotel offering rooms on Airbnb could target business travelers, families or independent travelers seeking a unique experience. The clearer a business is about its target customers, the more easily it can offer unique value to these customers.
The massive transaction volume on leading sites means that even a seemingly small customer segment can represent a lucrative market opportunity.
And marketplaces’ search filters and smart matching algorithms mean their target customers will still be able to find the brand.
Provide a compelling narrative about your value
Most ecommerce platforms allow business leaders to describe their product or service in their own words, but many companies don’t make the most of this opportunity, which is one of the most important tools to help consumers understand the offer’s value.
For instance, my collaborators and I recently analyzed the narratives of nearly 160,000 Airbnb listings and found that a compelling narrative increases demand for a listing by up to 41%.
The study showed that online marketplaces like Airbnb tend to attract customer segments that explicitly seek out novel products and experiences. Business leaders can specifically target these customers through narratives that emphasise in which ways their offering is novel and unique.
Or if it’s in a particularly popular area, the host can describe how travelers anticipate the exciting experience of exploring the neighborhood or the convenience of walking back home after a night out.
When telling a story, business leaders must be sure to clearly tailor it to their target customers and try to communicate how their offering meets their needs.
Even a relatively undifferentiated offering becomes more appealing if it can provide a plausible narrative about how it is superior to the alternatives.
Business leaders should seek feedback from potential target customers to understand whether their content really resonates with them.
Communicate narrative throughout the entire profile
A business mustn’t limit itself to the description to tell its story; All elements of a product page are an opportunity to communicate value.
They say a picture is worth 1,000 words and photos are a particularly important tool to easily communicate how consumers benefit from using a product or service.
For instance, a photo showing an Airbnb accommodation’s living room being used as a mobile office can easily communicate how the property caters to the needs of business travellers.
Investing time to brainstorm which photos will most effectively convey the best aspects of a business’ offering and working with an agency or photographer to ensure that photos are as compelling as they can be, will make an immense difference.
Seek feedback to prevent misleading claims
To grab consumers’ attention, business leaders may be tempted to make exaggerated claims about a product or service, or leave out a feature that could substantially decrease the appeal of an offering to some customers.
But setting unrealistic or misleading expectations ultimately increases the risk of disappointing customers, which can lead to negative reviews.
Taking time to talk to a diverse selection of potential customers and people unfamiliar with a product or service, to understand if and how a marketplace profile may mislead them, is vital.
By listening to a range of voices, business leaders can learn how consumers with different backgrounds may interpret their claims.
Karl Taeuscher is a senior lecturer in strategy and entrepreneurship at Alliance Manchester Business School.