Michael Blanding wrote an article for Harvard Business School Working Knowledge titled How Uber, Airbnb, and Etsy Attracted Their First 1,000 Customers (13 July 2016). The article is about Harvard Business School’s Thales Teixeira’s research about how platform companies attract their first customers.
« As Teixeira reports in a new HBS case, Airbnb, Etsy, Uber: Acquiring the First Thousand Customers, all three platforms concentrated on getting the service side of the equation first, customers second. »
« “The underlying principle of this is you should help your suppliers portray themselves in the best way possible, even if that is not scalable,” concludes Teixeira. “If you don’t have customers, there is nothing to scale.” »
« Since Uber’s main competition was taxi cab companies, the startup researched which cities had the biggest discrepancy between supply and demand for taxis. They then launched during times when that demand was likely to be the highest, for example during the holidays when people tend to stay out late partying. It also ran promotions during large concerts or sporting events, when big crowds of people all needed cabs at the same time, and an individual might be more likely to take a chance on an unfamiliar company named Uber. »
« Airbnb followed a similar strategy with its rollout, launching in Denver in 2008 to coincide with the lack of hotel space during the Democratic National Convention and adding new cities at times when they had major conventions or other events. »
« In addition to the obvious demand, the strategy has another benefit: “Your competitors don’t see you as a threat, since you are not taking away from their demand,” says Teixeira. By the time you have a foothold in the marketplace, it’s already too late for them to do anything about it. »
« Launching in situations of high demand and low supply also helps startups acquire the right type of customers—those early adopters who might be more forgiving of a company while it works out the kinks. After all, beggars can’t be choosers, and if you are thankful to even have a room during a conference, maybe you’ll forgive the lack of hand towels. The last thing a company wants during its early phases is negative word-of-mouth. »
« “You are still a startup,” says Teixeira. “You have to find people who are willing to accept your flaws and cut you some slack. Satisfying all their needs and wants is just not feasible at this early stage.” »
« To tackle that problem, Teixeira wrote a sequel case study, Airbnb, Etsy, Uber: Growing from One Thousand to One Million Customers, »
« “Only after passing the millionth customer can you go into advertising on traditional media. That’s when you need massive scale, so you go to mass marketing.” »
Articles of Interest 