Customer Segment Quote by Alexander Osterwalder
““One way multi-sided platforms solve this problem is by subsidizing a Customer Segment. Though a platform operator incurs costs by serving all customer groups, it often decides to lure one segment to the platform with an inexpensive or free Value Proposition in order to subsequently attract users of the platform’s “other side.” One difficulty multi-sided platform operators face is understanding which side to subsidize and how to price correctly to attract customers.””
About This Quote
Source Book: Business Model Generation by Alexander Osterwalder & Yves Pigneur, 2010
Platforms attract users on both sides by subsidizing one group, creating value that draws the other side, but must choose the right side and pricing.
In simple terms: Platforms give one side a cheap offer to pull in the other side.
Key Takeaway
Identify which user group to subsidize and set balanced pricing.
Themes
business strategy
platform economics
pricing
network effects
Mood
analytical
strategic
optimistic
Type
theoretical
practical
When to use this quote
- launching a new marketplace
- expanding an existing platform
- setting freemium pricing
- balancing costs and revenue
- strategic partnership negotiations
Key Concepts
two-sided markets
subsidization
value capture
customer segmentation
Questions to Reflect On
- Which user group provides the strongest network effect?
- How can you test subsidization without large upfront costs?
A Different Perspective
If the subsidized side fails to attract the other side, the platform may incur unsustainable losses.
