Industrial Manufacturers Should Leverage Marketplace Models to Engage with Customers


I was recently asked this question by Peter Evans and the way he posed it was written in a very provocative way, 

Should large industrial manufacturers use a digital marketplace investment to bypass their distributors and go DTC creating a direct connection and access to first party data? Or should they build a hybrid or modified marketplace that only onboards their distributors and leaves DTC to them and remain without first party data?


It Depends - for some scenarios this makes complete sense. Industrial Manufacturers could build marketplaces to engage directly with end users when there's a simple well understood application in a commodity market. AS LONG AS they take into account the cost of having a hybrid model (likely not 100% of their business can be supported in this new marketplace model), the cost to implement the requisite capabilities that their former channel partner was delivering on their behalf is also part of the calculation.

There are many more scenarios where either the complexity of the solution or the end-users ability to tolerate inherent risk in the decision-making process (Beta Risk (β))  where a hybrid approach makes the most sense. The hybrid approach maintains a balance between the manufacturer, distribution, and end customer.


Some definitions and framing to put the question into a common context first:

  • I'm building into this question an assumption that Large Industrial Manufacturers got to market model is primarily B2B2C. 

  • What is the function of a marketplace? To optionally match demand to supply, drive efficiency (reduce friction, increase velocity, reduce variability, maximize optionality (selection, price, availability).

  • For this question, an important consideration is where, how, and how often does value exchange? Is there a "set-up cost" or "transaction cost" potential energy gap to overcome? 

  • Which transactions will be facilitated by the marketplace (Informational, Product/Service, Value). 

  • Where are you in the customer journey (Discovery, Consideration, Trial, Negotiate, Purchase, Repurchase, Service). 

  • Roles and responsibilities (R&R) within the marketplace - for a simple transaction to occur R&R are relatively straightforward to assign to parties. For complicated sales or sales with significant risk, R&R are more difficult to suss out.  

Here Is My Mental Model:

Designing Systems: Client-System Interaction

Case Study: Wiley Publishing selects for faster time-to-market & lower cost of ownership.