Businesses have a huge opportunity to stand out in online marketplaces


They have already been a game-changer for many consumer industries, but COVID-19 has dramatically accelerated their transformation with more and more online shoppers now browsing and buying exclusively from online marketplaces.

Whether it’s retail giant Amazon, travel agency Airbnb or educational platform Udemy, they all provide a fantastic example of why businesses can no longer ignore the opportunities represents the digital marketplace if they want to stay competitive.

New research from Inriver has found that 44% of all online product searches now begin in digital marketplaces, more than twice as many as in search engines and nearly five times as many as those that begin on the brand website.

Yet many companies still struggle to succeed in these areas, failing to adapt to their unique environment and competing with hundreds of similar offerings.

Strategy

The good news is that some of the traditional retail rules still apply to digital marketplaces.

Product differentiation is still one of the most important ways to create competitive advantage, for example.

But the bad news is that it’s becoming seemingly impossible to offer something truly unique in such a crowded and competitive playing field.

With marketplaces set to become even more powerful in the future, now is the time for business leaders to develop a strategy to successfully stand out and differentiate their offering.

Clearly define target customers

More than ever, business leaders must focus on the target of their product or service.

Large online marketplaces attract consumers with a wide variety of needs and preferences.

Rather than trying to please everyone equally, leaders should narrow down their target customer segment.

For example, a boutique hotel offering rooms on Airbnb might target business travelers, families, or independent travelers looking for a unique experience. The clearer a company is about its target customers, the easier it can deliver unique value to those customers.

The massive volume of transactions on major sites means that even a seemingly small customer segment can represent a lucrative market opportunity.

And marketplaces’ smart search filters and matching algorithms mean their target customers will always be able to find the brand.

Provide a compelling narrative about your value

Most e-commerce platforms allow business owners to describe their product or service in their own words, but many businesses are not taking full advantage of this opportunity, which is one of the most important tools to help consumers to understand the value of the offer.

For example, my staff and I recently analyzed the stories of nearly 160,000 Airbnb listings and found that a compelling story increases demand for a listing by up to 41%.

The study showed that online marketplaces like Airbnb tend to attract customer segments that are explicitly looking for new products and experiences. Business leaders can specifically target these customers with stories that highlight how their offering is new and unique.

Or if they’re in a particularly popular neighborhood, the host might describe how travelers anticipate the thrilling experience of exploring the neighborhood or the convenience of walking home after a night out.

When telling a story, business leaders should make 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 of how superior it is to alternatives.

Business leaders need to solicit feedback from potential target customers to understand if their content truly resonates with them.

Communicate the narrative throughout the profile

A company should not limit itself to the description to tell its story; every element of a product page is an opportunity to communicate value.

They say a picture is worth 1,000 words and photos are an especially important tool for easily communicating how consumers benefit from using a product or service.

For example, a photo showing the living room of an Airbnb listing used as a mobile office can easily indicate how the property caters to the needs of business travelers.

Investing the time to think about which photos will most effectively convey the best aspects of a business’s offering, and working with an agency or photographer to ensure the photos are as compelling as possible, will make a huge difference.

Solicit feedback to avoid 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 significantly reduce an offering’s appeal to some customers.

But setting unrealistic or misleading expectations ultimately increases the risk of disappointing customers, which can lead to negative reviews.

Taking the time to talk to a diverse selection of potential customers and people unfamiliar with a product or service, to understand if and how a market profile might mislead them, is essential.

By listening to a range of voices, business leaders can learn how consumers from different backgrounds might interpret their claims.

Karl Taeuscher is a Senior Lecturer in Strategy and Entrepreneurship at Alliance Manchester Business School.

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