Diving into Marketplace Dynamics

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Diving into Marketplace Dynamics

There’s been a bunch of buzz in the IT world recently about marketplaces. Have you considered joining one? Starting one? Entirely unsure what to do with them?

Despite all the talk about marketplaces, I’m not sure we actually know how they work, particularly in the MSP and IT space. Pulling together vendors, distributors, solution providers, and customers into one marketplace is a four-way deal, so I wanted to talk to someone who’s familiar with the complexities of centralizing multiple parties.

Bryan Clayton is the founder of GreenPal, a marketplace for buying and selling lawn care services. The app is 300,000 users strong and seems to have mastered the balance between three different parties: the service provider, the consumer, and GreenPal itself.

Want to know what makes a marketplace work? Here’s what Clayton shared on a recent bonus episode of the Business of Tech:

The Early Days

Clayton’s story caught my eye because he didn’t come to the tech industry naturally. He actually started in the landscaping industry as a high schooler, ultimately growing his lawn-mowing business to 150 people over the course of 10-15 years. After the business was acquired, he decided to give tech entrepreneurship a try to bring his idea of an Uber for lawn care services to life.

He didn’t have any coding experience, so he and the other co-founders spent a ton of time and money on hiring a development agency. They launched it after about a year of building, but the customers just didn’t come. So, Clayton and his original co-founder decided to learn about software through YouTube and bootcamps.

Once they had an app they could tweak and change on their own, they finally managed to pull off some recruiting. After earning their first 200 users in Nashville, they slowly started to roll out to other cities.

Initial Challenges

I was fascinated by the transition from operating based on gut feeling to data-driven growth, so I asked Clayton how this unfolded.

He explained that during those early days, they were completely operating based on their own assumptions – which was fair, considering his own background in lawn care. However, things really started to take off when they prioritized accumulating customer feedback.

At first, the data sets were very, very small. They only had a handful of users, but it was enough to figure out that a lot of their early assumptions were flat-out wrong. Over time, they went from listening to five or six people explain what they didn’t like to A/B testing across 1,000 users.

In his own words:

“In the early days, it was very qualitative, and I think where a lot of founders screw up is they skip that phase. They want to go straight to the scaled-up data phase. The fact of the matter is, you need to get belly to belly with your early customers and let those small bits of data guide your decision-making.”

The Dynamics of the Marketplace

Marketplaces are unique in that they have to be a middle ground between multiple sides while still making money. I asked Clayton about how to build while balancing these demands, and he confirmed it’s essentially like playing 4D chess.

In SaaS, he explained, everything is pretty linear – there’s a funnel, and they drive people to it. But with marketplaces…

“You’re really more like a farmer, where you’re just cultivating different parts of the field and trying to figure out what’s working, what’s taking hold, and what’s not. So that’s one reason why they take a really long time to get going, but that’s what makes them durable. If you get that supply and demand lock in that little network, it makes them defensible against other people trying to copy what you’re doing. So what makes it hard makes it valuable.”

Clayton reached that point through relentless experimentation. He and his team are always looking for new ways to listen to customers and implement feedback. At any given time, they’re running 10-20 different tests.

“It’s not always about just raising conversion. It’s really about trying to figure out what’s going on inside of that thought sequence of your user, of your customer.”

Turns out, this approach leads to a decent amount of surprises. Early on, Clayton and his team assumed that customers only care about finding the cheapest rate for lawn mowing – so much so that low prices were one of his initial value propositions. However, after talking to customers, they discovered that the actual priority was reliability and speed.

So, they began promoting contractors based on speed and reliability, not conversion and price. They rewarded reliable behavior on the platform and set up workflows to help vendors find the optimal number.

“On the one hand, you want to think, ‘Okay, the market forces will just take care of themselves, and buyers and sellers will determine the pricing, so just let it take care of itself.’ But on the other hand, you, as the arbiter of the marketplace, can influence and guide decision-making.”

In Clayton’s view, his goal as the marketplace provider is to close the gap between the company’s logic, the customer’s logic, and his logic as the founder, and testing helps them get there.

Clayton’s Advice

I asked Clayton what he would say if he could go back in time and give advice to his earlier self, and he had two messages.

First, raise money instead of bootstrapping. It speeds everything up.

Second, you have two customers, the buyer and the seller, and you have to have a value proposition for each one. And, most importantly, both offerings have to be enticing:

“Your marketplace has to be 10 times better than the status quo for buyers and sellers, or else it’ll never take off.”

To see Clayton’s marketplace in action, check out GreenPal on the app store or www.GreenPal.com.

What are your thoughts on the recent marketplace buzz? As always, I’m available for stories and insight at [email protected].

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