We're sharing a guest blog post from Ravi Mehta covering the Marketplace Capture Framework, which can be used by early stage marketplaces to capture and keep demand. This was previously shared as a post in the community here.
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Note that this is the first time sharing a comprehensive post covering the Market Capture Framework on past group chat (recording here).
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As a product leader who has worked with numerous marketplace startups, I'm often asked about the key factors that drive success in the early stages. While there are many elements to consider, one critical insight stands out: Demand is the lifeblood of any marketplace. Much like how the mortar binds bricks together to create a strong foundation, demand is the connective tissue that enables a marketplace to thrive.
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So, how can early-stage marketplaces capture and retain customer demand? I've developed a simple yet effective framework to help founders and teams think through this challenge. I call it the Market Capture Framework.

The Market Capture Framework is based on the idea that customers will choose your marketplace over alternatives (other marketplaces and transacting directly with suppliers) when you offer distinct advantages in one or more of the following areas:

1. Price Advantage: Offer the most competitive prices in the market. Amazon is a prime example of a marketplace that has leveraged its scale to provide unbeatable prices.
2. Exclusive Supply: Provide unique inventory that can't be found on other platforms. Etsy and Turo have excelled by curating one-of-a-kind handcrafted goods and privately-owned vehicles, respectively.  
3. Discoverability Advantage: Make it effortless for customers to find exactly what they need and difficult to comparison shop elsewhere. Airbnb and Faire have mastered the art of discovery through personalized recommendations and niche focus.
4. Trust Advantage: Establish your marketplace as the safest, most reliable option for transactions. Uber and Lyft built trust through driver vetting while StockX authenticates high-value collectibles.
5. Fulfillment Advantage: Deliver a superior end-to-end purchase & delivery experience. Upwork streamlines hiring and paying freelancers while Steam makes buying and playing games seamless - going as far as creating Steam Deck, a portable gaming device that is one of the best places to experience games available on Steam's marketplace.
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To illustrate how this framework can be applied, let's look at Sesame, a Series B direct-to-patient healthcare marketplace I'm currently working with. Sesame enables patients to book appointments directly with vetted doctors for upfront cash prices, sans insurance.

Sesame has thoughtfully structured its marketplace to excel across multiple dimensions:

1. Price Advantage (High): With doctor visits starting at $29, Sesame boasts prices up to 50% lower than competitors. 
2. Exclusive Supply (Medium): While not entirely exclusive, Sesame's doctors are carefully curated for quality and customer-centricity.
3. Discoverability Advantage (High): Patients can easily find available doctors by specialty, price, time and location - a rare level of transparency in healthcare.
4. Trust Advantage (Medium): As a newer brand, Sesame is building trust through maniacal focus on customer satisfaction and streamlined experiences.  
5. Fulfillment Advantage (Very High): From booking to prescriptions, Sesame handles it all, bypassing the typical hassles of dealing with insurance and disjointed providers.
   

As you build your marketplace, evaluate how you stack up in each of these five areas. Where do you have natural strengths you can lean into? Which aspects need more focus to gain an edge? Use the framework to make an honest assessment and shape your priorities.

The path from initial traction to market leadership is rarely a straight line, as I saw firsthand during my tenure at Tripadvisor. 

Founded in 2000, Tripadvisor built its business on an insight that was perfectly timed for Web 1.0 -- the reviews & opinions of travelers could help people make better travel decisions. It turns out, user-generated reviews were not only a consumer win, they formed the perfect foundation for an SEO flywheel driven by a constant stream of fresh, relevant indexable content.

In 2012, Tripadvisor was getting about 300 million visitors per month -- mostly from SEO. But, there was a big problem. Traffic would flow through Tripadvisor rather than to Tripadvisor. At the time, Tripadvisor monetized via "check prices" ads. Online travel agents and hotel brands would bid for relevant traffic. They paid a cost-per-click for travelers interested in particular hotels.

This meant that travelers would quickly flow from Google to Tripadvisor to a booking site where they would price shop and eventually complete their booking. As a marketplace, Tripadvisor was facilitating demand but not capturing the value from that demand. 

Tripadvisor had a "leaky bucket" problem.

Tripadvisor shifted to become more of a transactional marketplace by adding the ability to price shop hotels on Tripadvisor ("meta" pricing similar to Kayak), adding the ability to book hotels on Tripadvisor (Instant Book), and adding the ability to book attractions (Viator) and restaurants (La Fourchette) on Tripadvisor.

Tripadvisor launched Instant Book for hotels by partnering with established online travel agents like Booking.com and Expedia Affiliate Network to provide much of its supply. The transition wasn't without challenges. Let's look at why:

1. Best price (Low): Tripadvisor could only achieve price parity in most cases. Other marketplaces had the same or better prices. 
2. Exclusive supply (Very low): Hotel supply primarily the same across online travel marketplaces.
3. Discoverability advantage (Medium): Tripadvisor could help people discover the most relevant hotel based on reviews from other travelers, but that supply could easily be cross-shopped (for the best price) on other platforms.
4. Trust advantage (Medium): Tripadvisor is a trusted brand, but travel is an anxiety inducing use case. People want to feel assured that their reservation will be there when they show up, and Booking.com, Expedia, and the large hotel chains (Marriott, etc.) had a trust advantage over Tripadvisor for hotel booking. 
5. Fulfillment advantage (Low): Tripadvisor had limited ability to differentiate in the purchase or stay experience, especially compared to booking directly with the brand like Marriott which uses things like loyalty points to differentiate.

On the other hand, Tripadvisor's attraction booking business, jumpstarted by the acquisition of Viator, has flourished - fueled by exclusive supply from long-tail providers, price efficiency, robust discovery tools and the trust/safety of booking with a known brand.

1. Best price (Medium): Tripadvisor can offer good prices on a wide selection of attractions -- often much cheaper than booking while in market at a concierge or tour desk.
2. Exclusive supply (Medium): Many attraction suppliers focus their efforts on Tripadvisor primarily or exclusively due to the amount of demand driven by Tripadvisor/Viator. (This is less true for branded attractions like museums).
3. Discoverability advantage (High): Tripadvisor offers travelers the ability to select attractions based on traveler reviews -- making it easier to find the best option in a commoditized sea of attraction providers. It's also very hard to cross-shop attractions.
4. Trust advantage (High): Tripadvisor benefits from the social proof of having millions of travel reviews for attractions on its platform. It's also safer to purchase with Tripadvisor than giving payment info to a small attraction business in a foreign country.
5. Fulfillment advantage (Medium): Tripadvisor can streamline the fulfillment process by offering ticketing, skip the line passes, directions to venues & pickup locations, important attraction info, and other elements via the Viator / Tripadvisor app.
   

The key takeaway? Play to your strengths and focus your marketplace capabilities in areas where you can carve out sustainable advantages. As Airbnb showed in displacing incumbent vacation rental platforms, the right recipe of differentiation can completely redefine a category.

I hope the Market Capture Framework provides a helpful lens to pressure test your marketplace strategy. Prioritize understanding your customers' needs and delivering unique value. Demand will follow - and with it - the opportunity to build an enduring platform and business.

How does your marketplace stack up across these five dimensions? What's one thing you could do differently to better capture demand? I'd love to hear your thoughts!
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You can connect with Ravi to discuss this post in the Everything Marketplaces community here. A big thanks to Ravi for also being active in the community, where he is often sharing his marketplace experience, insights, and helping early stage founders.