Promoting early platform growth
Promoting early platform growth
To increase signups of early users to a new platform (by ~20% in one experiment), tell them about your expected future growth (e.g. "we expect 10,000 people to join this year").
New to Ariyh? Join 6,443 evidence-based marketers for 3min tips 💡 based on research 🎓 to grow your business 📈 If you find these tips useful please share them with your colleagues and friends, Ariyh grows thanks to you!
Today’s tip is brought to you by… Rotterdam School of Management, Erasmus University
Interested in a part-time executive MBA at one of the world’s leading business schools?
Join the Virtual Open Day this Thursday 15th July at 16:00 - 17:30 CET (10:00 - 11:30 EST; 22:00 - 23:30 GMT+8).
Become a responsible, strategic leader for the global digital age and enjoy a global senior network of alumni.
P.S.: I’m a proud alumnus of Rotterdam School of Management myself. Many of the studies covered in Ariyh are from RSM Professors.
📝 Intro
To succeed, most new platforms need to reach a minimum number of users to make them valuable for everyone.
This is even more difficult for two-sided platforms (e.g. buyers and sellers are different people). This is known as the “chicken-and-egg” problem.
For example, a platform might need enough landlords and potential tenants (real estate rental platform) or enough riders and drivers (Uber).
Most new platforms are unable to reach this critical mass and fail.
Today’s research found an easy way to help solve this early-stage growth problem.
Want to sponsor Ariyh? Here’s all you need to know.
Previous tip: The rule of three in persuasion (All tips here)
Tell people about expected future growth to increase signups on early-stage platforms
Impacted metrics: Customer acquisition
Channels: Platforms | Marketing communications
For: Both B2C and B2B
Research date: June 2021
📈 Recommendation
To increase early sign-ups on platforms, tell potential users about your expected future growth (e.g. We expect 20,000 people to join by the end of the year).
🎓 Effects
People are reluctant to sign up to platforms that don’t already have a large user base. Especially when the main value is having other people on it (or enough content or products). This is known as the chicken-and-egg problem of early platform growth.
This applies to most platforms. For example, when there need to be enough:
Similar users (e.g. communities, social media like Clubhouse)
Buyers and sellers (app stores, marketplaces like eBay)
User-generated content pieces (e.g. social media like Instagram)
This study finds that people are more likely to sign up if you tell them about your expected future growth.
In an experiment inviting people to sign up to a new platform - on which a community would form teams to collaborate on Internet of Things (IoT) projects for sponsoring companies:
When existing users were less than 1,000, telling early adopters “We expect X users and Y companies to join this year” increased the signup rate of invites by ~20%
Estimates of the number of users (X) and companies (Y) were an optimistic, truthful number
When existing users were more than 1,000, it started to become as effective to say“To date, X users and Y companies have joined” (actual user and company numbers)
It’s better to not say anything at all than either:
Low expectations for future users
Low numbers of current users
New here? Subscribe for the latest marketing research 💡 from top business schools 🎓 in 3-min practical tips 📈 twice per week.
🧠 Why it works
A newly launched platform is useful to join only if others also join it. Otherwise, it’s a waste of effort, time, and potentially money.
How do we know whether others will join it or not? In most cases, we don’t. So we need to guess with the limited information that we have.
This makes us sensitive to any information we have, even if it’s objectively quite weak, such as a prediction of how many future users there will be.
And if we think others are joining - or it seems likely they will - then we should probably sign up ourselves.
✋ Limitations
This study demonstrated the effect, but these statements are likely to be even more powerful if optimized and tested (e.g. “This platform will soon become the leader in [category]. We expect 10,000 managers, the top 1% experts in [category], to sign up this year. Sign up by [date and time] to lock in your early joiner benefits”).
The findings are based on one field experiment on one platform. While the key characteristics of the platform studied are generalizable to most other platforms, there could be some unseen effects that increase the risk of applying this.
🏢 Companies using this
Most platforms focus on communicating their existing user base rather than projected future growth to potential users. This is a missed opportunity in early growth stages.
⚡ Steps to implement
When inviting people to an early-stage platform, focus on convincing them that the network effects are already there or will be there soon.
Clearly communicate your expected future growth using credible numbers.
If you have a big enough user base, highlight it clearly.
You can also test combining the effects or giving a time-limited invitation to encourage action (avoid using scarcity if possible).
Look for other ways as well to signal to others that people are joining your platform. For example, ask users to share online that they’ve signed up and then reshare their social posts on your website.
🔍 Study type
Field experiment (on 16,349 persons invited to join a new platform about online Internet of Things [IoT] hackathons). United States.
📖 Research
Boudreau, K. J. (June 2021). Promoting Platform Takeoff and Self-Fulfilling Expectations: Field Experimental Evidence. Management Science.
🏫 Affiliations
Northeastern University. United States.
Remember: Because of the groundbreaking nature of this paper, it could be disproven in the future (although this is rare). It also may not be generalizable to your situation. If it’s a risky change, always test it on a small scale before rolling it out widely.
Rate today’s tip to help me make Ariyh's next tips 🎓 even more useful 📈
How was today’s tip?
Loved it | Great | Good | Meh | Bad
Want to sponsor Ariyh or ask a question? -> Reach out at thomas@ariyh.com
New to Ariyh? -> Subscribe below or read other 3min marketing tips here