Product management (PM) in Digital Consumer Marketplaces (DCM) presents unique challenges and opportunities that differentiate it from traditional PM roles. A marketplace PM must adeptly balance the health of all sides of the marketplace while optimizing for individual participants.
Core PM skills such as customer obsession, data-driven thinking, experimentation, collaboration, and execution velocity remain critical; however, the unique dynamics of marketplaces require additional understanding and mastery. Below are five essential tenets for excelling in product management within marketplace businesses.
What is a digital consumer marketplace?
A digital consumer marketplace is an online platform facilitating transactions of products, services, or digital goods between buyers and sellers. Marketplaces can take various forms, including:
● Two-sided marketplaces (e.g., Airbnb: guests vs. hosts)
● Three-sided marketplaces (e.g., DoorDash: customers, restaurants, dashers)
● Four-sided marketplaces (e.g., Instacart: customers, retailers, shoppers, advertisers)
A common characteristic among these marketplaces is their lack of inventory ownership. For instance, Zillow does not hold houses, Uber does not hold cars, and DoorDash does not hold food or groceries. This model allows for scalability and reduced overhead costs.
Unique tenets of product management in a digital consumer marketplace
- Mental model of a marketplace:
Identifying the true end customer is crucial in any marketplace business. For example, in DoorDash, the question arises: are the customers the restaurants, the drivers, or the consumers?
Failing to recognize the correct end customer may lead to optimizing the experience for the wrong side. Zillow, a two-sided marketplace (customers vs. agents), clearly identifies "customers as the North Star."
Similarly, DoorDash prioritizes the end consumer (demand side) while leveraging technology to empower providers (restaurants and drivers). As a PM, understanding this construct is vital for making informed decisions that impact long-term outcomes.
- Network effects associated with the marketplace:
Network effects are a defining characteristic of marketplace businesses. In essence, network effects refer to the increased value of a platform as more participants join. For instance, as more restaurants and drivers join DoorDash, the platform attracts more consumers, leading to enhanced options and faster service.
Conversely, more consumers attract additional restaurants and drivers, creating a positive feedback loop. Zillow experiences similar network effects, as an increase in agent listings attracts more customers, which further drives agent participation. A PM must grasp these dynamics to develop strategies that initiate, accelerate, or optimize network effects.
- Measuring success for the marketplace:
Understanding the north star metric for the entire marketplace, alongside leading metrics for each side, is essential for marketplace PMs. The North Star metric serves as the primary indicator of marketplace health while leading metrics provide detailed insights into individual participant performance.
For instance, DoorDash's north star metric could be the total number of completed deliveries, which reflects overall marketplace performance by integrating customer orders, dasher availability, and merchant participation. Success hinges on maintaining a balance between supply, demand, and platform engagement.
Metrics such as order frequency, basket size, and average delivery time for customers, alongside delivery acceptance rates and earnings for dashers, provide a holistic view of marketplace performance. Linking these indicators to the North Star metric allows PMs to drive strategic initiatives that promote balance and sustainable growth.
- Experimentation thought process:
Experimentation in marketplace businesses is complex and requires a nuanced approach. Unlike traditional A/B testing, marketplace experiments must account for network effects, necessitating careful design and execution. PMs face trade-offs between precision, speed, and complexity. Key experimentation techniques include:
● Single-sided A/B tests
● Pre/post analysis
● Market-based tests
● Synthetic control tests
● Switchbacks
● On-off tests
Mastering these techniques is essential for distinguishing oneself as a marketplace PM.
- Collaboration across the sides of the marketplace:
Effective collaboration is critical for PMs in marketplace businesses. Small changes on one side can significantly impact the other side. Therefore, proactive collaboration and communication are vital to mitigate risks.
PMs must engage closely with cross-functional teams (product, engineering, operations) to align on goals that create value for all sides. Acting as a mediator, a PM ensures that features or policies do not inadvertently create friction or imbalance within the marketplace.
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