This Pathway Requires

A multi-party arrangement (triadic) where an Organisation identifies two (or more) different customer groups A and B; and brings them together on the Organisation’s digital or physical marketplace.

The value proposition of the Organisation is transactional, and lies in the matchmaking between A and B via this new marketplace. Trade was one of the first activities of mankind; but making a business from running a marketplace has only recently become widespread. This pathway requires:

  • Identifying potential buyers AND potential sellers; AND making them arrive at the same time to the marketplace (a double challenge)
  • Creating high level of trust with these each of these two groups – that they can fulfil needs by trading on the digital or physical marketplace organized by the Firm
  • Charging mechanisms are almost always a fee based on actual trade
  • Construction of the marketplace and the mechanisms of customer engagement are rarely outsourced

Successful C2C exemplars include: Airbnb who identified people’s homes as an asset to be rented out, created trust among renters and those who do the renting, and created sufficient value to be able to collect significant fees for its service. Stock markets are well known B2B platforms that started in the physical space and are now almost exclusively digital. In many cases creativity about what is to be traded is the key to success. Failure rates are very high for this business model – designing the offer and building the trust takes time and effort.

Scalability – Typically high.

Profitability – Margins are typically small – profits rely on volume.

Risk – Entry from copycats and envelopment from multisided business models. This model also requires that customer groups A and B are entrepreneurs.

Transform your thinking of the
Matchmaking Business Model

The BusinessModelZoo™ provides insight to help you understand and navigate the opportunities and rewards as well as risks and threats to the matchmaking business model it faces from the other business model pathways.

Matchmaking business models are typically low margin businesses, and the best way to enhance profitability is to either add a portfolio of services or to move to a multi-sided offering.

Adding additional services that are based on the product business model or on the solutions business model are one of the best ways to increase profitability. Such services are typically offered to both sides of the market place. For example, auction houses offer valuation services for a fee, and Airbnb offers services to would-be landlords that allow them to prepare their properties for rental.

Adding a new customer group that brings a new additional revenue stream on account of their interactions with my current customers is an essential element of becoming a multi-sided business model. Such actions will be challenging, costly and is typically only achieved in stages, but might be a very profitable final end point. The new customers are likely to be advertisers, and whoever they are it is essential that they engage with my existing customers in a value adding manner. I will need enhanced capabilities to service this new group of customers (the advertisers). Once again, to be really effective as a multi-sided business model, I will have to digitize many elements of my offering.

Matchmaking business models are typically low margin businesses, and the best way to enhance profitability is to either add a portfolio of services or to move to a multi-sided offering.

Matchmaking business models work best in an environment of firms using the product business model. Solutions business model typically have a high “stickiness” and so when an industry transitions to using a solutions business model, my matchmaking business model maybe under threat.

It may be very difficult to counter an effective multi-sided business model competitor, especially if the multisided organisation is able to use one of its customer groups to subsidize the costs (and prices) of its offering. If the appearance of the extra customer group debases the offering in the eyes of your customers (as in say advertising supported educational offerings) you may be able to resist by maintaining the integrity of your offer. Otherwise you might be forced to change to a multisided business model (see text above).

Discover other Business Model pathways

Explore all four business model pathways for developing your business. Each describes an ideal model of how a business can engage with its customer, deliver value, and monetize the result.

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