Growth Frameworks For Your Marketplace: Analysis of LinkedIn's Gamification Strategy

Growth Frameworks For Your Marketplace: Analysis of LinkedIn's Gamification Strategy

Introduction:

In today's digital age, marketplaces have become increasingly popular and essential for connecting buyers and sellers. However, driving growth in a marketplace can be challenging, as there are often constraints on either the supply or demand side. This article will explore growth frameworks for marketplaces and analyze how LinkedIn successfully drives engagement through gamification.

Determining Constraints:

The first step in driving growth for a marketplace is to identify whether it is supply-constrained or demand-constrained. This can be determined by assessing which side of the marketplace the founder is more concerned about in the mid-term. Understanding this constraint is crucial as it will shape the growth strategies moving forward.

Growing the Supply Side:

For supply-constrained marketplaces, the focus should be on increasing the number of transactions with suppliers to turn them into "power sellers" or "power users." This can be achieved by deepening the relationship with suppliers, making the marketplace their primary channel and source of income. By understanding the norms of the platform and specific customer needs, the quality of user experience, customer experience, and overall revenue can be increased. It is also important to analyze the unit economics and lifetime value (LTV) of supply-side acquisition to ensure cost-effectiveness.

Growing the Demand Side:

On the other hand, demand-constrained marketplaces should prioritize product innovation and expansion to capture more users. LinkedIn's gamification strategy is a prime example of driving engagement on the demand side. The platform utilizes a profile completeness bar, which not only displays the percentage of profile completion but also motivates users with the statistic that complete profiles are 40 times more likely to receive opportunities through LinkedIn. This appeals to basic human satisfaction and acts as a powerful and rewarding motivator for users to update their profiles and remain active.

Gamification on LinkedIn:

LinkedIn's gamification strategy goes beyond the profile completeness bar. The platform also emphasizes the importance of the "Skills & Endorsements" section, stating that those who use this feature get 13 times more profile views. This endorsement feature serves as an intrinsic reward, providing users with a sense of personal achievement, professional growth, and increased credibility. By visualizing their skills and strengths, LinkedIn has made a "boring" service more engaging and enjoyable for its users.

Geographic Expansion:

When considering geographic expansion, both global and local marketplaces have their unique challenges. Global marketplaces benefit from global network effects, where the value to consumers is driven by the total number of users on the network. However, scaling quickly becomes critical to defend against competitors and avoid losing valuable supply. Local marketplaces, on the other hand, derive most of their value from adding more users within the same local market. To expand beyond the dominant market, a common strategy for local marketplaces is to achieve market leadership on the constrained side of the market and replicate this success in other geographies.

Actionable Advice:

Based on the insights gained from growth frameworks and LinkedIn's gamification strategy, here are three actionable advice for marketplace founders:

• 1. Understand your marketplace's constraint: Identify whether you are supply-constrained or demand-constrained to tailor your growth strategies accordingly.

• 2. Deepen relationships with suppliers: Focus on turning infrequent engagement into power sellers or power users by becoming their primary channel and source of income.

• 3. Utilize gamification elements: Incorporate gamification elements, such as progress bars and intrinsic rewards, to motivate users and drive engagement on the demand side.

In conclusion, driving growth in a marketplace requires a deep understanding of the constraints and effective strategies to address them. LinkedIn's gamification approach provides valuable insights into engaging users and driving growth on the demand side. By incorporating these principles and taking actionable steps, marketplace founders can set their platforms up for success and unlock their full potential.