How To Balance Supply And Demand In A Two-Way Marketplace

Working within a two-way marketplace business model can be difficult. This type of marketplace involves two separate groups of individuals who benefit from the relationship with one another. This is a popular model with many popular businesses today, particular with apps such as Uber, Tinder, and Airbnb.

It depends on both parties to provide value to the relationship with one another, and the business that mediates this exchange has a challenge on their hands when there isn’t the right balance of supply and demand.

Picture a world where Uber exists, but there are thousands of people looking for a ride and with no Uber drivers to take them anywhere. A world where there are millions of things listed for sale on Ebay, but no one buying them. A world where there are people looking for jobs but no employers are listing on Indeed.

This may sound like a dystopian reality, but it’s what would happen if supply and demand were not carefully balanced in this type of marketplace. Without both sides of the equation, these types of businesses would not flourish, but they didn’t start out as successful networks right out the gate.

How do businesses that follow this model strike the right balance? That’s a great question. 

How To Balance Supply And Demand In A Two-Way Marketplace

1. Focus On Your Supply

Before anything, you need to focus on your supply. All successful companies that use a two-way marketplace would agree that your initial focus should be on this half of the equation.

It is important to start with enough of a supply that consumers are drawn to the product you have to offer, and that a variety of choices are available to them. No one would sign up for Tinder if there were, say, three people on there available for a date, right?

Airbnb began by building strong relationships with their initial supply, providing free photography to those looking to rent out their homes, as well as meeting with them in person and discussing the benefits.

While it would take a little time to gather a following, this initial interaction with those providing the supply helped immensely. A strong, quality supply will attract demand when executed properly.

2. Fulfill The Demand

Focus secondly on the demand side of things by advertising all you have to offer. Convince your potential customer base that your options are better than any competitor, including the more traditional forms of what you offer.

Why is Indeed better for finding jobs than, say, ZipRecruiter? And why is that better than looking for job listings in the newspaper? These are questions you want to answer when advertising your company – why do the people in your network have the best there is to offer?

3. Build Trust

While the business within a two-way marketplace is just a mediator between the consumer and the “product,” they are in charge of assuring that both sides of the equation are trustworthy. To keep the demand, you want to assure customers that the thing they are receiving is safe, reliable, and quality.

After my initial hesitation to sleep in another person’s house, I finally warmed up to Airbnb and use it for almost every trip I book. I trust, both from what I hear in the news, from reviews, and from word of mouth, that this app will hook me up with a safe, clean place to spend the night.

Reviews on their website for each available home assure me that the product I’m getting is going to meet my needs. By creating trust between both sides, supply and demand will grow simultaneously.

4. Start Small

The best way to start out is small. Picking a very small and specific market for your business will help you build up and gain traction, as well as allow you to test out what techniques are best when you grow into other markets.

The talent app Special Guest helps link up venues and individuals with performers that fit their specific needs, and while they are not nation-wide yet, they have built up strength in a variety of markets around the country. If you’re looking for Las Vegas Magicians, they’ll be able to set you up right away.

As this company builds traction and gains both a strong supply and demand as well as trust within the industry, they will be able to find you a performer anywhere in the country.