Research On The Development Strategies Of The Two-Sided Platform To Deal With The Churn Problem

With the development of economy and technology, the two-sided platform as a particular business model is emerging and growing. Due to its special way of doing business, the two-sided platform has significant bilateral market characteristics, including network effects, tilt pricing, multi-platform registration and so on.The bilateral market characteristics make the competition model of the two-sided platform differ from traditional business.First,the network effects make the competition of platform enterprise be a "winner takes all" state,since the user base has become the main competing objectives of the platform companies;Second, the multi-platform registration add the uncertainty of users’selection decision, so the stability of the user base is affected.In the Internet era,the users’needs and preferences are uncertain under the different time and space.The factors,such as the buyers’educational attainment, pay level,and the sellers’business scale,business scope,have led to the users’preference heterogeneous,and made the uncertain degree of users’decision increase,then would increase the churn problem,influence the platform competitive advantage.Therefore, in the development process,the platform companies need to implement the strategies to deal with the churn problem.But the features of the development strategies,such as various types, complicated design process and much cost,lead to the selection and design of the development strategies of bilateral platform being complex.However, the existing literature does not fully explain the system, nor to provide design ideas for the platform managers.As a result, the purpose of this paper is to help the platform managers better analyze the future churn problem;to provide new ideas in the design of the platform development strategies;to help the platform managers achieve the maximize cost-effectiveness in the implementation of the development strategy.This paper takes the churn problem as the starting point.First,this paper analyzes the reason of churn problem. To start with, the paper builds the user utility model,through introducing the uncertainty of users’preferences and the evaluation of the initial users on platform positioning into the Hotelling model.Then the paper analyzes the user scale under the different demand state,in order to reveal the true reasons for the churn problem. Second,this paper summaries the measures taken by successful companies in the development process,such as TaoBao,and propose two platform development strategies,the infrastructure upgrade strategy and the service innovation strategy,then analyzes the principle of the churn platform and the design principles of the platform development strategies.(1) the paper uses the examples of Taobao and Tianmao, all kinds of communication companies to analyze the principle of the infrastructure upgrade strategy to deal with the churn problem,and proposes the corresponding design inspiration.(2) The paper firstly analyzes the principle of the service innovation strategy to deal with the churn problem and the design principles, through transforming the reason of churn problem and the degree of innovation and effects of platform services to the mathematical variables, expanding the user utility model. Third,this paper analyzes the dominant type of strategies which platform enterprises should select to deal with the churn problem and the focus of the design of platform development strategies.To analyzes that problem, this paper firstly analyzes the relationship between the platform development strategies and the capital investment of the platform during each upgrade,then introduce the relationship to the utility function to build the platform capital-profit function and capital-user utility function,lastly analyzes how the enterprise industry position, industry characteristics and other factors impact the choice of the dominant type of strategies, and determine the various types of strategy implementation we should focus on the design direction.Finally,this paper provides the revelation for platform managers according to the results of the study.Above all,the research methods of this article mainly include literature research, case analysis, MATLAB numerical calculation method.Through deeply studying the reason of the churn problem, the mechanism of the platform development strategy dealing with the churn problem and the choice of the dominant platform development strategy,this paper get the following three conclusions:(1) The two-sided platform did not change,so the positioning of the initial users’evaluation for platform still remain in place. When the user needs and preferences change,the degree of matching the positioning of the initial users’evaluation for platform and the user needs and preferences reduce. As a result, the platform user run away from the platform because their needs can’t be met and their utility reduce.(2)The infrastructure upgrade strategy is a strategy which is the platform enterprise upgrade and optimize the transaction space,the interaction rules.Its principle of dealing with the churn problem is directly developing and providing the new infrastructure platform to quickly meet the new demands and preferences of the user,forming the new positioning of the initial users’evaluation for platform to meet the changing needs of users in the industry. When the managers design the infrastructure upgrade strategy,they should concern about the future development of the industry,the future needs of the users, the positioning of the initial users’evaluation for the competitive platforms and the development goals of the platform business,then should use the media to publicize,such as the Internet, advertising.The service innovation strategy is a strategy which is the platform enterprises develop and provide the new services according to the the individual needs of users and the development direction of the platform.Its principle is the value which are generated by innovative services let the users who has been lost come back, so the user scale which are the platform maintained and increased are greater than the user scale which are fled from the platform. But the type of innovative services must meet the established criteria. When the platform managers are designing the innovative strategy, they should improve the capabilities of forecasting and market researching, the capabilities of planning, designing and developing the innovative services, in order to the innovative services can meet customer needs,improve user effectiveness,and increase internet income.(3) To achieve the cost utility maximization, the platform enterprises need to implement the infrastructure upgrade strategy and the service innovation strategy together, but determine the dominant type.But in the selection process,platform managers should try to "ignore" the existing position in the industry, and carefully consider from other sides.The platform managers can determine the dominant type of strategies and the various types of strategy implementation we should focus on the design direction according to the factors,such as the industry characteristics.The platform which has strong interaction effects tend to choose the service innovation strategy as dominant strategy,and they focus on reducing the sellers’development costs in the design process;but the platform which has week interaction effects tend to choose the infrastructure upgrade strategy,and they focus on increasing the effectiveness of the interaction in the design process.