More and more startup founders and developers become aware of the importance of building an MVP version first of all. In the emerging of technological development, there was no reason for programmers to bother themselves with developing MVP. Web services and apps were made in a much more simple way, so the whole testing process was easier. Today it’s getting more and more important to consider MVP development to test your product in the market first. A huge number of startups also make a lot of mistakes at the stage of launching the MVP product. So, firstly, let’s figure out, what actually the MVP is.
What is the MVP?
Are you ready with presenting your idea of service to the world and sure that it will strike your target audience? Then do it! Just don’t do everything at once! Work on an advanced product from the very beginning isn’t a good practice. Many pitfalls can appear and lead the business to failure. If you spend a lot of time on polishing your product, it can take too much time and money. It can come up that your idea has become irrelevant or outdated and clients don’t want to buy your product anymore.
To avoid such a situation, more and more startup founders build the MVP to conduct research on the real needs of the target audience.
MVP (Minimum viable product) is a version of a new product which allows collecting the maximum amount of validated learning with the least effort. It means that you can launch and test your product with a minimum set of crucial features, to save budget. By starting your work with building MVP, you can begin attracting your customers and expanding your marketplace. Start with defining your early adopters and their needs and then develop the core set of feature
s to solve their troubles. After trying working with your app, they will provide invaluable information about possible improvements to the project. This is a time to listen attentively to their input, react and make improvements. After that, you should talk to them again to find out whether all issues were solved.
Even at the stage of building MVP, it’s necessary to know what to build. Nobody wants to end up producing products clients doesn’t want to use. To receive true feedback from users, make your MVP Marketplace good enough to solve identified problems.
What you will get by building MVP
- Understanding whether the product is interesting for users and the functionality is correct
- Finding out which features are useful now and which to add in the future
- Potential buyers and early adopters of your product
- A list of problems that should be solved at the early stage
On the other hand, you will also face some challenges, so it’s better to be prepared to:
- Extra work and commitment
Creating an MVP version of the Marketplace definitely takes less time than building a full-fledged app. But when MVP is launched, you will have to dedicate some extra time to gather feedback, analyze it and think over your next steps.
- Establishing core features can be challenging
The main idea of MVP is to create a marketplace platform with a restricted amount of main features. It will represent the main idea and help to receive the needed knowledge. It can be hard to choose basic features which will amaze your target audience. It’s clear that you will spend less money on developing marketplace MVP than on developing an advanced platform. But don’t start thinking that you can relax and without any endeavors produce a high-quality product. It doesn’t have to be a poorly made item, because people will not want to buy it. MVP should contain the most important features of the marketplace and at the same time be of high quality and efficiency. MVP will save you the time and money necessary for producing an advanced app in the future.
How to start an online Marketplace MVP
A marketplace can be released with numerous features like personalized accounts, listings, search, reliable payment system, messaging channel, and so on. They all seem to be very important and crucial, but you can’t implement them all into the MVP. So how to choose what will take the house?
- Start with basics: analyze the market and identify the solution
MVP is built with the main purpose — to find a solution to the problem that your audience faces. To make it possible, maintain constant communication with users. Having their feedback you can provide continuous improvement. It is very important to enhance the solution by conducting tests without losing the focus on what this solution is.
- Find your niche
When you come up with the solution, take a look at your competitors. The niche you wanted to work in can be already quite popular among other businesses, sometimes bigger or more flourishing ones. So it makes sense to narrow your service and find your own focus in a preferable niche. There are different ways to do it. The criteria can be a geographical location or shifting the focus in terms of offered services or products. For the first release of the product try to narrow the niche as much as possible. Then create an ideal customer profile. It will help you to distinguish a targeted audience and specific features that will suit your market. With such an approach, it’s easier to achieve a critical mass and become a leader in your particular niche.
- Build the Marketplace
After identifying the niche for your product and figuring out the main features, you can build the Marketplace app. This app should be done in a way that will attract users and make them use it and share with others.
- Take your time
Up to Wertz and Tran Kingyens, you should prepare to wait as it can take around six to nine months for the marketplace to start growing after its launch. Every product is unique and sometimes it can take much longer (up to 3 years). You need to develop buyers and sellers communities, and it’s impossible to do in a week or month. But be careful. If you don’t get results after a long time, consider making some changes in your business model.
The Chicken and Egg Problem
At the very beginning, every marketplace faces the chicken and egg problem. It’s the hardest issue that you have to overcome while launching your marketplace. Who to attract first? Buyers or sellers? How to attract buyers when there are no sellers? And on the other hand, how to attract sellers when you don’t have buyers? The marketplace needs to have both buyers and providers of goods, but one won’t come without the other. So what to do?
There are different ways to solve this problem. And building an MVP can help you to do everything right. It allows having a ready for the market version of the product with the basic features and saving of money. Now you can invest this money on developing the platform.
Start with focusing on small. You can begin with targeting a single city or area or even with a neighborhood. Targeting a small area lets you spend less on marketing as you have to embrace a smaller number of customers. It’s also reasonable to get sellers in this area first. Advertise the marketplace to sellers and explain all the advantages they will get. This is also a meaningful choice because if customers start using a marketplace that lacks products and services, they will leave. Customers want to get services or goods immediately. Sellers, unlike them, can wait as they will not lose more in case of a short delay. With an established base of sellers, it’s time to get buyers to use your marketplace platform. When you prove your model to both suppliers and buyers, start expanding gradually, building two communities in parallel.
For example, our team worked on MVP app for US marketplace startup in the beauty industry. Its founder started the campaign by targeting sellers of beauty service in his city of living (Los Angeles). Now the app is successfully launched in the Apple Store and has a 5-star rating.
Mistakes that can be avoided
Building MVP for an online marketplace is a widely used approach that tempts with all its benefits. Nevertheless, startup owners still make mistakes and mess their business up. Let’s take a look at the most common mistakes.
- Building MVP when there is no demand for it
This mistake is surprisingly widespread. Having an idea in mind, startup owners can’t wait longer and want to start working on MVP right away. Unfortunately, not every business idea is brand new and purely innovative. Sometimes it also happens that one marketplace replicates many features from its competitors. In such cases, building a minimum viable product isn’t a good decision. It’s better to focus on the improvement of user experience to validate the business feasibility.
- Neglecting proper feedback
It’s necessary to listen to customers feedback. You are creating the product for people and their attitude is a key element. When they tell you that everything is going smoothly – don’t put on airs and keep improving your product. Also, don’t ignore their signals about having issues with your product and try to eliminate them. On the other hand, try to filter all received messages. Sometimes people write unconstructive feedback that doesn’t bring any value. You need to be able to distinguish such useless information and filter it out. Moreover, it makes sense to add analytics metrics to your marketplace app. You should measure them to get an idea about your MVP success. Such metrics can be retention rate, daily active users, or average time spent on your app.
- Trying to build a perfect marketplace app
Usually, entrepreneurs produce only perfectly made product with a wide set of advanced features. That’s why it can be hard to make up their mind to the main idea of MVP – creating a general understanding of the future product. Even having implemented MVP with a few basic features, you will be able to see customers reaction and understand whether you are moving in the right direction. The most important thing is to implement the right features. And any cool features or beautiful design will not save your product when nobody needs it.
- Excessive savings
Don’t expect that you will not spend money on building MVP and save a lot. If you decided to produce a slapdash MVP, it could eventually cost you more than you expected. It’s better to build a simple, but reliable minimum viable product. Minimum doesn’t mean that the product should be of low quality or underdone. It should provide users with the main idea about your product, at the same time implying minimum investment risk. There is no point in creating a beautiful platform full of bugs, unable to respond to customers requests. Moreover, users will spend money on your MVP. So make sure that their data and financial information is 100% protected. It’s necessary to spend as much money as needed on implementing a secure and reliable anti-scam payment system.
- Obsession with your idea
Your idea may seem perfect to you, but do not get tricked by it. It can influence your understanding of how things are really going. It’s clear that every tiniest feature is valuable for you. But if users tell you that this element is useless, don’t hesitate to drop it. Save this idea, maybe the time will come when you will be able to use it. The knowledge of possible mistakes and willingness to avoid or solve them can help you to ensure your business. Fortunately, there are no insolvable issues. So listen to people around you, to customers, people who work in your industry, developers, and testers. Be flexible and it will help you to avoid mistakes.
Measuring the Success of your MVP
Your MVP is ready and it’s time to launch it. But what to do next? Have you thought about what you need to learn after its release? Do you still remember the purpose of building and launching a minimum viable product? Now it’s time to think about how to measure its success. To find out whether your marketplace is in demand and meets customers needs.
The main questions to ask yourself before launching the MVP
- What information are you collecting with this MVP?
- What assumptions are you trying to validate?
- What determines the success or failure of the MVP?
To answer these questions you need to define metrics for the Key Performance Indicators. There are some universal metrics, which immediately pop up in our minds. These are growth, user engagement, and customer acquisition. But is this enough to measure the success of your business? Not really. You need to consider more specific indicators.
- The average revenue per user
This is a very valuable metric that is very easy to calculate. It shows the average revenue that you have received from a customer. You should define the timeframe and base your countings on it. The best period to choose is a month. Monthly recurring revenue is a simple and powerful rate, which can help you to track new sales, up-sells, and renewals. Here is the formula:
The Monthly Average Revenue per User = Total revenue for month / Number of active users during the same month
Tracking these numbers helps to stay focused on the present and define the moment of the business grows.
- Customer Acquisition Cost (CAC)
This metric is one of the most important data you will need. It will help you to realize whether your marketing strategy is going in the right direction. The sigh of a bad marketing flow is spending more on acquiring customers than you actually earn. It’s easy to calculate whether you are making money or not using this formula:
CAC = amount of money spent on sales and marketing for a period of time / Number of customers, acquired in the same period of time.
It’s obvious, that if you spend more money on winning a new customer that earning from him, you have a problem. Startups at the early stage usually have very high CACs. Every entrepreneur should define the cost to marketing and attracting new customers. It’s quite popular practice to add these costs to the development costs of the company. Initial customer acquisition will happen at the cost of development along with upgrading and up-selling. Following customer acquisition will happen at the cost of the recurring contributions of current customers. The indicator of bad marketing policy is when old customers cancel before they cover the cost of acquiring new ones.
- Rate of downloads and launches
The metrics of downloads and launches is the key indicator. It shows if your product appeals to potential users and makes them download it.
- Users feedback and ratings
It’s great to have a high score in store, but users ratings are even of greater importance. When users leave ratings and feedback, it makes your product look more reliable and attracts new customers. Rating click-through is important too.
- Churn rate
Churn rate indicates the number of users that discontinued their subscription to service at a given period of time. Though this metric seems to be negative, it’s very important to track it and keep tabs on the churn rate. For every marketplace, it is a top priority to keep the number of new customers higher than this rate. If you have different types of users, churn for each type should be measured separately. Formula:
Churn Rate = Number of churns per some period / Number of users at the beginning of this period
- Customer Lifetime Value
This metric basically means how much on average users spend while using your app. By calculating this metric, you are making a prediction on your future profit from customers. And always remember to follow the Build-Measure-Learn rule. It’s vital for Startups to follow this cycle: turn ideas into ready product, measure customers feedback, and decide whether they need to pivot or to keep moving in the same direction. The speed of passing this loop will directly influence the growth of your business.
Launching a marketplace isn’t an easy thing and you never know whether it will work or not. You need to get users in and receive their feedback. Building a full-featured marketplace can be time-consuming and quite expensive. That’s why the idea to build a minimum viable product looks very alluring. Choose the core features to implement in your MVP, find a reliable development team that can help you to build it, and let it bring you the information about the demand for your product.
For getting more information about building MVP for an online marketplace app, contact our team and we will answer every your question.