Proven Tips to Avoid Ineffective Marketplace Development

Online platforms (marketplace) is one of the booming business trends since the dotcom era, they consume more market value each year since 2015. The research of the world platform market in the sharing economy segment predicts the annual turnover of industry for 335 billion till the end of 2025. The idea of sharing goods and services among individuals and businesses either for free or for a fee is becoming increasingly popular. You don’t have to store the goods, just be an intermediate between the customer and contractor. The accessibility of mobile technology and the Internet lets us manage share-based transactions smoothly. Most popular marketplaces are Uber, Airbnb and Amazon.

Ready to build a peer-to-peer marketplace?

Even though building an online marketplace from scratch requires much time, effort, and expense, it gives you unique business logic and original user interface and user experience.

Take a look at Karzal, for example.

Karzal is a digital renting platform for machinery, equipment, household appliances, and other goods that we recently developed. It’s an excellent example of how genuine your marketplace can look. Unfortunately, the product owner missed some pain points, we’ll discuss them further.

As well as outstanding appearance, your marketplace can also have the architecture that will suit your application best. It will be more flexible than a platform-based product, allowing to change more code for better performance. You are free to choose the technology stack for your project, which makes your product more scalable.

The number of new marketplaces is steadily growing. However, in reality, only 1 or 2 out of 20 of them work successfully. Most of the problems come from poor planning and management.

Appservice team has a three-year experience of building online marketplaces from scratch. We prepared a list of problems and solutions based on our own development experience.

1. Scattering across key features.

Many startups seek to cover a wide range of services from the very beginning. Thus target audience, product placement, and market capacity become unclear. That leads to an enormous marketing budget that some companies can’t afford. Small companies without brands will be destroyed by competitors.

Solution: Find and sell niche products, they are targeted to a specific group of buyers. Focus on several key features for promotion and development to cover a narrow category of customers and increase your revenue. Thus you reduce your costs for development and launch a product getting user feedback for further improvement.

2. Wrong market placement.

Building a brand from scratch is a hard job to do. To get first loyal customers and make people aware of your product you’ll need a solid marketing budget. Don’t try to work internationally from the beginning. It will take extra costs and bring you more competitors.

Solution: Mind the MVP basics and try to deliver the product fast and cheap. Operate in one or two cities to estimate the scale of demand for your services and advance your product functionality. It will help create your own local brand and build a base of loyal customers without taking risks.

3. Charging high transaction fees

The transactional business model is one of the ways of monetizing a marketplace. Offering contractors a platform for selling goods and services, startups charge either a percentage of the total amount or a fixed fee for each transaction conducted on their website or app. To maximize profit and recoup production losses for 1-3 years, they impose huge fees of 10-20% and, therefore, lose a lot of their clients.

Solution: Combine various business models to monetize your marketplace. In addition to charging a 3-7% fee, allow your contractors to promote their products and services by publishing ads on your marketplace or charge them fixed subscription fees. It will help you increase your revenue and grow a massive base of contractors.

4. Engaging too many contractors 

Due to lack of experience, many marketplace owners want to collaborate with as many contractors as they can. It leads to high competition for a potential client’s order on the market. As a result, both customers and contractors slip away because the former is not able to make a choice and the latter experience low conversion rates.

Solution: Make sure the number of contractors you plan to work with is sensible and meets your business capabilities. Furthermore, you can limit the number of customers’ responses to an application in order not to spam clients. Calculate your potential orders the number shouldn’t be less than 10-15% of the whole value. The average profitable conversion rate is about 2-3%. 

5. Offer unnecessary functions to attract clients

Many startups choose to develop customer account functions into apps and websites instead of integrating convenient and functional CRMs. It takes lots of time for analytics and resources. As a result, they develop a raw version of a customer account that is not adaptable to the client’s business needs. Besides, many clients use their own CRMs, and it is impractical to duplicate the information.

Solution: Find out what CRMs most of your contractors use (Zoho, Pipedrive, Oracle, Salesforce) and integrate them for efficient customers’ orders accumulation and management. It will enable your contractors to provide services to their customers using their usual software. You can make the service fee-based.

6. Ignoring the entertaining features.

New marketplaces are coming to the market every day. You have to be different or outstand somehow. Make a research in popular trends. Maybe you’ll find something that entertains your customers or makes their life easier.

Solution: Go beyond allowing clients to order a service. Better create additional functions like an Instagram mask or integration with other apps as a supplement to the service instead. It will help you promote the service you sell and attract new customers.

Why choose Appservice?

Appservice is experienced and knowledgeable developing different kinds of platforms based on sharing economy principles. We’ve built and smoothly run peer-to-peer marketplaces. We can re-use existing functionality and adapt the custom features for your platform, due to our expertise in this domain, allowing you to save time and money. We’ll help you to develop a functioning marketplace that will generate traffic, boost your sales, increase your conversion rate, and help you build a solid base of loyal vendors and customers.

Planning to build a successful marketplace? Feel free to

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MVP – AppService guide to product development

If you’re planning to launch a new product, you’ll need an MVP. A Minimum Viable Product is a tool to determine a product’s potential on the market. The MVP model can be used to develop any product, including mobile apps and websites.

Even though an MVP only has a basic set of features, when applied properly, it can help you scale your business. One of AppService’s business focuses is creating an MVP together with our clients to transform their ideas into a businesses and get users’ feedback. Below is our guide to MVP creation milestones.

Identify and evaluate the problem

The idea of product creation generally evolves from a hobby or professional activity. As the sphere is well-known, it’s easier to identify the pain or solution. It’s extremely important to test the idea for market demand beforehand. Interviewing potential customers is the easiest way to get relevant feedback. Additional tips include:

  • Dividing the audience into product users and customers who pay for it. These roles are not always the same because motivations are different (e.g. employees will actively use corporate software but the CEO will decide to purchase it)
  • Evaluating users’ interest
  • Testing a user-friendly business model

Make a list of MVP features and pare it down

The most in-depth, high-quality feedback will determine the product’s functionality and its main advantages. At this stage, it’s crucial to:

  • Define a basic set of functions
  • Select users
  • Identify goals and objectives for CustDev analysis
  • Prepare CustDev questionnaire (forms for analytics, a system for automatic analysis)

As a result, consumers will evaluate the idea and it will be easier to determine the next steps.

Begin development and testing

After CustDev is conducted and development decisions are made, the next phase is SOW creation and basic product architecture prototyping.

Working with the development team on the first stage means having functional requirements set out and a basic prototype created by the beginning of the second stage. The team creates Technical Specifications following the results of CustDev, so you can see an accurate, complete image of the product together with the estimated time and cost of development. After that, the working team is created.

MVP development itself includes interface design, and front-end and back-end development. When a customer is in contact with the development team at every stage, communication is more efficient because the client:

  • Follows the development steps and can make changes to the project in real time
  • Can monitor results
  • Helps solve project issues on-the-spot

It saves significant resources and has a positive impact on future cooperation. For those reasons, the use of Scrum is preferable.

The Scrum framework allows us to identify all the weaknesses in the early steps. That’s why it’s better to plan sprints together with the customer to estimate the implementation period and track the overall result of each sprint. The number of sprints should be agreed with the client, and a certain amount of resources allocated. In this way, it’s possible to predict and monitor the budget and timeline.

Launch an MVP and get feedback

After development is completed, the product will be launched. The landing page, promotional pages in stores, banners, presentations — everything should be ready to attract the first early adopters.

Some projects promote their betas before an official release. It helps to see real feedback and transform the features of the product beforehand.The support and development processes are carried out throughout the life cycle of the product.

AppService has developed MVPs for websites and applications. We offer full consultations for minimum viable product development. We not only help in the implementation of the idea at each stage, but we also form a cohesive team that will launch the product on time and support it throughout the life cycle. As a result, in 3 to 12 months of collaboration, the product will be launched and the idea will become a business.

Are you interested in developing your MVP with us? Don’t hesitate to

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Dedicated Development Team

Businesses who need to quickly ramp up their development, cut the costs and reduce time to market use different models of cooperation between the customer and the contractor.

There are four most common models of such cooperation:

Outstaffing – remote employment, when a hired person carries all the duties for a certain company, being employed by another company.

Outsourcing – hiring a party outside a company to perform services and separate business processes.

Turn-key development – hiring an experienced development team for a project. The team fully designs and constructs the project for the customer (you’ll find more information in our MVP development article).

Dedicated development team – hiring a team of developers who work for the customer’s tasks only. The customer is a part of a workflow in this case.

Dedicated development team combines outsourcing and turn-key models of development. In this article, we will take a closer look at this particular model.

Dedicated Development Team

Dedicated development team model builds a team for the project’s needs from scratch. The customer actively participates in team-building and communication processes for the whole project. The work can be split into 3 steps: drafting of the project plan, team-building, product development.

Step 1 Project plan drafting

  • define the main product sections
  • determine the functions of each section (better to form functions as user stories)
  • set the date of the final product release
  • make a plan of sprints including the priority features
  • choose a contractor
  • define the technology stack
  • make a resource plan, specify which resources do you need to fit the date.

Step 2 Team building

When the project plan is ready, we may form the team. This step is crucial for both sides. The contractor should choose the candidates for the project, the customer should negotiate the final team. The most important criteria are:

  • professional experience of candidates and their stack expertise
  • experience in the field of development
  • personal characteristics of the candidate for the team and project manager

When choosing a team, you have to define team roles. After that, you should start properly to get the successful implementation of the product in the end.

Step 3 Product development

We recommend having 3-4 weekly sprints for the final team formation. During the sprints, you’ll form the project environment and release 2-3 main functions. Thus you may define the team roles and switch team members if necessary.

During the workflow, you may change the original plan. The main reasons for that:

  • user feedback makes you change the functionality of the project
  • the need to expand or narrow the functionality after release
  • sprint review to change the priorities of the market or Product Owner

Project plan review involves some risks:

  • timing change
  • cost of project implementation change
  • the functionality of the product change.

The product owner is the key team member who is responsible for revision management.

While the workflow changes, the project plan has to be adjusted after every sprint. In other cases, it doesn’t work. For the plan adjustment it is necessary to involve: Product Owner, Scrum Master (or Project Manager), Analysts, and Architect (or Tech lead).
The customer or his representatives take an active part in the work of the dedicated development team. The customer representatives have the right to initiate team review, change the goals and functions of the project, etc.

Advantages of the dedicated software development team

In-house development or dedicated development team?