Building a marketplace presents a unique challenge in that your supply side and your demand side need to grow somewhat comparably or you risk eroding the acquisition work you did on whichever side is growing faster (I’m a firm believer that businesses should be obsessed with retention).
We saw uneven growth occurring at Voray and started riffing on ways to address that dynamic. For us, the marketplace was small-format, custom-curated events for senior executives. On one side we had the demand, our event sponsors, enterprise software companies and professional services firms. And on the other side we had the supply, senior executives that our sponsors wanted to build relationships with. As we scaled our event operations, we found that the long B2B sales cycle, sponsor budgeting timelines and high price-point of our events was making it difficult to forecast which audiences we’d be bringing together and the frequency with which each audience would be gathered. On the other hand, our community of senior executives loved our events and was vocal for a more regular cadence of events. How could we start ramping up the sponsorship side of the marketplace to match the frequency of events our team and our community was prepared to deliver?
After significant discussion, we decided to try to reverse our event production order of operations. Historically, Voray had always custom-built events for our sponsors based on the audience they wanted to meet. We’d produced hundreds of events. We had a good idea of which audiences we could deliver and which audiences our sponsors wanted to meet. We could also identify other potential sponsors based on their ideal customer profiles (the audiences we’d deliver), which would help create a larger potential sponsor pool.
So we decided to build the event first, then sell it. That would give our community the additional events they wanted, protecting the considerable investment we made in building each community. At the very least it was a retention strategy on the supply side. It was also much more cost-effective operationally than our custom events because we had a greater insight into event interest from the community. And if we could prove that we could drive sponsorship from this strategy, then our marketplace could grow at the faster rate we’d established on the supply side.
Given we were compromising the nature of our traditional value proposition (custom-curated events built specifically for each sponsor), we decided to lower the price. After some discussion, we first created an offline auction in which interested sponsor could bid on the event and be given updates as the price moved over time. We established an opening price (direct venue cost), a “Buy It Now” price and an auction end date.
We planned a four event test run over the span of a few months. We reached out to current, former, and prospective sponsors. We produced events in NYC, where our costs were lowest and our community deepest. We chose audiences we wanted to engage and didn’t have upcoming events for. Our goal was to prove we could sell events built in this manner.
The result? It didn’t work! For a few reasons. Our event production timeline was 30-60 days. That was generally too short for our sales cycle, so we found it difficult to close new sponsors in time. Also, the price point was high enough that interested sponsors preferred to pay the difference for a custom event. Existing sponsors were too accustomed to the wholly custom-built events, even if they were getting the same audience. It was a perception issue. Lastly, and perhaps most importantly, we had trouble driving urgency on decision-making. With a clear event date, we knew when we had to sell it by, but sponsors didn’t have to do anything. We were basically sitting on a depreciating asset. And while we could have dropped prices to a level that might have driven more demand, we had no appetite for event production losses and stuck to our breakeven floor.
What did it cost? Well, we allocated some business development hours there, but we also created leads and some of those leads eventually purchased our custom events. We built marketing collateral, but the work was minimal. We used a competent, but junior employee for auction tracking and communications. We were able to sell a few auction-style events, but not all. We rolled the remaining events into renewal and upsell incentives for existing sponsors and it likely helped close renewal packages. We kept the distraction to a minimum and didn’t justify the risk beyond our stated goal of offsetting costs of community-first event production with sponsorship revenue.
We learned a lot. Lost a neglible amount of time and resources. Moved on quickly when we failed to meet our success criteria. Didn’t waste developer time. Prototyped our new product with nothing but a deck and a sales script. Used our existing event production processes for our operations team. Aligned considerable upside with a very defined maximum loss. And we didn’t disrupt the business outside of the folks that were needed to launch our product tests. All in all, I’m really proud of how we approached, conducted and resolved our new product experiment. On to the next one!
