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MenuWhat are some best practices for managing independent service providers (ex. Lyft drivers) in a two-sided service marketplace? Increasing retention?
How can you manage performance? How can you engage and incentivize?
Answers
Here’s a focused list of best practices to manage and retain independent service providers (like Lyft drivers) in a two-sided marketplace:
1. Treat Providers as Customers
They’re just as critical as users.
Offer onboarding support like video tutorials and 1:1 chat.
Simplify the application and approval process.
Follow up after their first service delivery.
Ask yourself: Would I enjoy this experience if I were them?
2. Provide Consistent Earnings Opportunities
Make earning predictable.
Show estimated demand by area and time.
Offer guaranteed minimum earnings for new joiners.
Run promotions based on their availability, not just platform needs.
3. Build Transparent, Fair Policies
Trust breaks fast.
Publish clear rules for deactivation or penalties.
Give providers a chance to appeal.
Communicate policy changes early and clearly.
4. Keep the App Reliable and Simple
Fewer taps. Fewer surprises.
Optimize the service flow—no unnecessary steps.
Test features with top providers before wide rollout.
Fix bugs fast and share timelines when something breaks.
5. Recognize and Reward Good Work
Make good behavior visible.
Rank them fairly and allow customer compliments.
Send personal messages or small bonuses for milestones.
Highlight top providers on leaderboards or spotlights.
6. Offer Flexibility Without Chaos
They want control—support it.
Let them choose work hours with visibility into demand.
Allow pause/resume without penalty.
Offer “preferred zones” or customer types when possible.
7. Keep Feedback Loops Open
Don't just collect feedback. Act on it.
Send short monthly surveys with 2-3 actionable questions.
Host live Q&A sessions or town halls.
Show how feedback led to changes.
8. Build Community, Not Isolation
Reduce churn by increasing belonging.
Create forums, Discords, or WhatsApp groups by region.
Encourage mentorship between experienced and new providers.
Share stories of impact, not just transactions.
9. Monitor Churn Indicators
Act before they quit.
Watch for drop in weekly logins or jobs completed.
Auto-trigger outreach if they haven’t logged in for 7+ days.
Survey exit reasons in-app to collect real data.
10. Pay Fast and Accurately
Nothing matters more than trust in money.
Offer instant payout options (even if it costs a fee).
Share daily earnings breakdowns with full clarity.
Resolve disputes in less than 24 hours.
Related Questions
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What is the best pricing (business model) to apply to a marketplace?
I like to separate your question into 2 sub-questions: #1 How do we determine which side to charge? #2 How much is the right amount to charge? On #1, my answer is that you can charge the side(s) for whom you add the most value. In your examples, Uber really solves a big problem for drivers, it's that they sit idle for a good part of the day, so are willing to pay a lot for new leads. (their alternative is no work) Consumers are charged more for the convenience of a private car but they are probably not so much willing to pay more for a taxi, even if they can hail one from their phones. For AirBnB, it's a mix, it's a way for landlords to monetize idle capacity which they are willing to pay for, but it's also a way for a renter to pay less than they would normally pay for a hotel. On #2 (how much), I like to triangulate a number of factors: - What's the maximum amount I can charge one side, while still being a good deal for them. - How much do I need to charge so that I can become profitable? (the economics are quite different if you charge 3% vs. 12%) - What are comparable services charging for substitutes/competitive offerings? I will just add that there is no formulaic way to determine pricing strategies (curated vs. open), and it's a lot more about what's the comparable and what the value delivered is. That's how I approached the question while deciding the business model at ProBueno.com (my startup)MR
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Holding funds in a 2-sided marketplace?
Check out https://www.balancedpayments.com/ They are made for marketplaces. Airbnb CEO among others invested in them and they have some of the best pricing/payout fees. Also some good info on http://www.collaborativeconsumption.com/2013/10/08/online-marketplaces-are-hard/ One of Balanced Payments co-founders is writing this blog series on marketplaces.MA
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Broad niche or Targeted niche which way to go?
I always suggest going "uncomfortably narrow" initially so that you can really dial in the user experience and build liquidity first. Going broad will be tougher as there's too much noise to signal. Also, it's best to fake the supply side initially of you can to improve the buyers side first, then figure out supply & quality afterwards if customers are buying and you've proven out a demand strategy that will work.DM
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How important is it for a marketplace startup to drive enough demand (customers) for your supply (sellers) to make a full time living off of it?
It's very important. (first, read this article by Josh Breinlinger - http://acrowdedspace.com/post/47647912203/a-critical-but-ignored-metric-for-marketplaces) The way you achieve success in a marketplace is by driving liquidity for both your supply & demand. Demand-side Liquidity = When users come to your marketplace, they can achieve their goals. Supply-side Liquidity = When supply comes to your marketplace they can achieve their goals... which are almost always to make money. If you're making a large amount of your supply-side users a full-time income, then you're helping them achieve liquidity. Now it's not so black and white and it doesn't always have to be a "full-time income." It depends what their goals are. E.g., 1) At Airbnb, renters aren't looking to quit their day jobs and become landlords full-time... they're just look to earn a substantial amount of income to offset their rent, mortgage, etc. So in this case, I would probably goal on # of renters that earn >$500 / month... and (in the first 1-5 years) try to grow this number by 10-20% MoM... and maybe by just 5% once you're in the mid-high tens of millions in yearly revenue. 2) At Kickstarter, the goal of the supply-side is to get their project successfully funded. They don't care if the project creator is "full-time"... they just want to make sure they meet their funding goal. This is why they talk about their 44% project success rate all the time - http://www.kickstarter.com/help/stats 3) At Udemy, our instructors want a substantial amount of their income to be driven from their Udemy course earnings... so we look at how many instructors are earning >$2k / month.DT
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When recording income for a marketplace startup, is it typical to use the gross transaction or just the fees collected per payment?
You would include all those lines in your revenue. Typically this looks like: Receipts: [full cash inflows] Fees: [payouts to vendors] Gross Receipts: [subtract] This ALL does into the Revenue category, so that your stated revenue is indeed net of fees, but you can see how it breaks out to understand how money is moving. That's if the margin there is very slim. If the margin is pretty good, and if you believe you can increase that margin materially over time, you can consider putting those fees into your gross margin instead of in your income.JC
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