B2B marketplaces: why they succeed, why they fail (and how you can avoid the pitfalls)
For decision-makers in the B2B tech space, buying software is often on your plate regardless of the business function of your role. From marketing teams to HR organizations, finance pros to IT groups, there’s a software solution for just about every challenge.
But buying software can be a challenge in itself. Finding solutions that work with the tech stack you already have in place isn’t always straightforward. Plus, every company has unique procurement processes ranging from simple to incredibly complex. Add in the typical SaaS sales process that includes calls, meetings, demos, email threads, and contract negotiations—it can all be a little much. While adding tools to your belt is designed to help, you might find yourself taking an Excedrin.
Enter marketplaces. Marketplaces aren't just online stores; they're vibrant ecosystems where buyers can conduct research, compare solutions, and transact seamlessly. It's a far cry from the static, one-size-fits-all approach described above, and they’re now more popular than ever.
In fact, it’s predicted that 10% of all global enterprise software purchases by 2030 will happen in marketplaces. Zuora, a marketplace platform provider, saw its revenue grow nearly 3.5x in the last six years. CrowdStrike has seen over $1 billion in sales from its listings in the Amazon AWS marketplace. (IoT Analytics)
Clearly, marketplaces are proving to be mutually beneficial for buyers, partners (sellers), and the platform owners themselves, but why? Here are a few reasons:
Choice: Marketplaces offer a diverse selection of software solutions, catering to every niche and budget. Buyers can find the perfect fit that meets their individual and business needs.
Transparency: Marketplaces offer clear pricing structures, user reviews, and open comparisons. Buyers can make informed decisions, confident they're getting the best value.
Control: Marketplaces empower buyers to research, compare, and purchase at their own pace.
Community: Marketplaces aren't just platforms; they're vibrant communities of businesses sharing experiences, insights, and recommendations. This collaborative spirit builds trust and reduces buying anxiety.
As more companies start implementing marketplaces to co-sell with their partners because it’s the way buyers prefer to shop, it will be tempting to jump into the great marketplace race already well underway.
But not every marketplace is created equal. Some will succeed, like Microsoft’s Azure marketplace or the AWS marketplace that boasts nearly 25,000 unique listings (IoT Analytics) Others will struggle to achieve their goals.
Here are a few of the attributes that we find as part of successful marketplace environments:
Clear purpose: Successful marketplaces don't just exist; they solve a critical problem. Whether simplifying software discovery, slashing procurement costs, or offering niche solutions, they address a genuine need for buyers and sellers.
The power of two: Imagine a dance floor with only one person. Not exactly a party, right? The same goes for marketplaces. A healthy balance of high-quality partners and engaged buyers is critical. Attracting diverse, reputable sellers and cultivating a strong buyer base creates a network effect, drawing even more users to the platform.
Stellar user experience: Successful marketplaces boast intuitive interfaces, user-friendly search, and clear comparison tools. Streamlining the buying and selling journey keeps users engaged and coming back for more.
Impactful listings: Just showing software isn't enough. Think of it like a bookstore that only lists titles but offers no recommendations or events. Successful platforms go the extra mile, providing product trials, demos, expert consultations, or educational content. This builds trust and enhances the overall value proposition.
Community: The Secret Sauce: Fostering a thriving community around the marketplace builds trust and loyalty. Responsive customer support, forums, reviews, and feedback mechanisms showcase commitment to user satisfaction and continuous improvement.
On the flip side, here are the top five reasons that B2B partner marketplaces fail:
Lack of product-market fit: Not addressing a real need or targeting the wrong audience leads to low adoption and engagement. Market research and validation are crucial before launching a marketplace.
Chicken-and-egg problem: Marketplaces often face difficulty attracting enough buyers or sellers to create a valuable network for the other side. Strategies like onboarding anchor vendors or offering incentives can help overcome this initial hurdle.
Poor user experience: Just like a stellar user experience makes a thriving marketplace, a bad one is a recipe for failure. Complex interfaces, unclear pricing, and cumbersome transaction processes frustrate users and drive them away. Investing in user-centered design and making the platform intuitive is key.
Partner inequity: Favoring one side of the marketplace, like prioritizing high-margin partners over competitive pricing, can alienate the other side and damage long-term trust.
Insufficient marketing and community building: Failing to generate awareness and build buzz around the marketplace makes it difficult to attract users and create a vibrant community. Active marketing campaigns and fostering user engagement are essential.
Navigating the B2B software marketplace landscape is no easy feat, but by understanding these key factors, platforms can increase their chances of success. We see the successes daily here at Knack with our clients who have implemented them.
Remember, it's all about solving real problems, providing value to both sides, and creating a user-friendly and engaging experience. What’s your favorite B2B marketplace out right now? What do you love about it? Sound off with us on LinkedIn—the link to follow is below.