| name | hierarchy-of-marketplaces |
| description | Use when asked about "marketplace strategy", "chicken and egg problem", "liquidity", "two-sided market", "tipping a marketplace", "GMV growth", or "Sarah Tavel marketplaces". Helps founders and product leaders build defensible marketplace businesses by sequencing supply and demand. The Hierarchy of Marketplaces framework (created by Sarah Tavel / Benchmark) provides a progression from focused launch to market dominance. |
Domain Context
This skill implements a proven product management framework. The approach combines best practices from industry leaders and is designed for practical application in day-to-day PM work.
Input Requirements
- Context about your product, feature, or problem
- Relevant data, research, or constraints (recommended but optional)
- Clear articulation of what you're trying to achieve
Hierarchy of Marketplaces
What It Is
The Hierarchy of Marketplaces is a framework for building defensible marketplace businesses. The core insight: GMV is a vanity metric. Happy GMV is what matters.
Most marketplace founders race to grow GMV as fast as possible, spreading resources thin across markets and categories. This is backwards. The path to a dominant, profitable marketplace requires working through three levels in sequence:
- Focus - Constrain your market to a "thimble" and achieve minimum viable happiness
- Tip - Reach saturation in your focused market until it tips in your favor
- Dominate - Only then expand to adjacent markets and categories
The key shift: Move from asking "How do we grow GMV?" to asking "How do we make both sides of our marketplace so happy they retain?"
When to Use It
Use the Hierarchy of Marketplaces when you need to:
- Launch a new marketplace and decide where to focus
- Diagnose why growth is stalling despite increasing GMV
- Decide when to expand to new markets or categories
- Evaluate marketplace health beyond top-line metrics
- Compete against incumbents with more resources
- Raise funding and demonstrate real marketplace value
- Choose between depth and breadth in your growth strategy
When Not to Use It
- You're building a product without two-sided network effects
- You have unlimited capital and no competition (rare)
- The market has no potential for winner-take-most dynamics
- You're optimizing a mature, already-dominant marketplace
Resources
Posts by Sarah Tavel:
- Hierarchy of Marketplaces series on Medium
Books:
- Platform Revolution by Parker, Van Alstyne, and Choudary
- The Cold Start Problem by Andrew Chen
Further Reading
