Peer-to-Peer (P2P) Model-Collaborative Consumption

By Krishna Choudhary

The Sharing Economy

A peer-to-peer (P2P) economy is a commercial or economic model that is also referred to as the sharing economy. By pooling human and physical capital, this model makes it easier for buyers and sellers to conduct business. This involves the consumption of goods and services with mutual ownership and value by a group of people. It is a decentralised model in which two individuals engage to buy and sell goods and services directly with one another or to create goods and services together, without the use of an intermediary third-party or a business company.

Companies in the sharing economy make money by linking buyers and sellers rather than directly providing products and services to individuals. This model has the potential to generate more revenue in the future. For more than a decade, eBay and Craigslist have profited from the peer-to-peer business model. Uber, Lyft, and Airbnb are examples of younger companies that have modelled their businesses to meet a range of consumer needs.

Understanding Peer-to-Peer business model through the example of Airbnb

The Bottom Line

Thanks to more accessible transportation and housing, the sharing economy continues to expand at a rapid rate. Companies such as Airbnb have taken advantage of technological advances to build platforms that enable people to share daily necessities. Although it does not explicitly market products or services to individuals, the platform connects people who want to do business with one another. Airbnb’s revenue continues to rise as a result of a large number of bookings by only paying a fee service fee.

The secret of Airbnb’s success

Airbnb owes its success to the proper management done by its team. This helped them to formulate marketing strategies that led to its success. Various strategies and areas which facilitated Airbnb’s Business Model Innovation were-

Customer segments: Airbnb started with customer innovation by creating a new market of people who would rent rooms in other people’s homes. Before Airbnb, it was inconceivable to let the random stranger sleep in one of the rooms of your house. Most investors refused to invest in Airbnb because of that and later they deeply regretted it. This can be seen as a prime example of Strategic Planning.

Airbnb was trying to reach customers looking for something other than the standard hotel experience. The market for these customers already existed on a different platform Craigslist. To reach these customers, Airbnb first created an in-app option to link Airbnb listings to Craigslist. Although this gave more traffic to Craigslist, it allowed them to reach more customers. This is the excellent use of the function of management, Organizing.

The main problem of this market was mostly due to trust issues because most people were worried about the idea of letting someone else live inside their home either with them or alone. This is a normal fear that many people still have even with Airbnb and it was the main challenge that Airbnb had to overcome. They managed to do it thanks to Trust by Design. Using a robust system of identity verification and reviews for both hosts and guests, Airbnb managed to create a community of people that strive to behave nicely to each other. Out of all the integral aspects of management, there is a factor that paves the way for the organisation towards absolute success. Controlling involves monitoring tasks and plans, gathering inferences and examining work, and taking the right decision to optimise results.

Value Proposition: This trust was carefully designed by the Airbnb Team. And design fits right into the value proposition. So, Trust by Design is the main piece of Airbnb business model that allowed it to grow so fast. Their marketplace creates two main value proposition advantages- Prices are lower than traditional hotels, and there’s an infinite variety of housing offers, not just typical hotel rooms with double beds. You can find exactly what you need depending on the number of people that are in your travelling group and the housing criteria you’re looking for.

Airbnb is not a real estate rental company, but an online marketplace that puts guests and hosts in contact so they don’t have all the real estate and operational fees that hotels have. In the case of hotels, their buildings are their key resources, but it depends on whether it’s a franchise or fully owned. But for Airbnb, it’s mainly marketing, maintenance of their platform, and customer service.

Their marketplace creates two main value proposition advantages- prices are lower than traditional hotels, and there’s an infinite variety of housing offers. Airbnb constantly keeps optimizing the design of its service. They aim to — Reduce customer journey steps, Make everything faster and easier.

So, Airbnb started with customer innovation, and once they got into the existing vacation rental market, they innovated on the business model in the value proposition block- trust, lower prices, and offer variety.

If you look at the brand identity/logo of Airbnb, it says it all. Airbnb calls its new logo Belo, saying it represents “the universal symbol of belonging”. This is an impactful marketing strategy.

All of these marketing and financial strategies, clearly depict an excellent use of all the functions of management namely- Planning, Organizing, Staffing, Directing and Controlling.

The article is written for 180 Degrees Consulting, Delhi Technological University, under the campaign #DemystifyingBizModels. To read more content shared by our other consultants, please check out our LinkedIn page- https://www.linkedin.com/company/180dc-dtu

The DTU branch of world’s largest university-based consulting firm, 180 Degrees Consulting.