Wednesday, October 5, 2016

The Key Metric Traction In Marketplace

The Key Metric Traction In Marketplace
Creating the business in marketplace is an exciting task, and that can potentially become a tremendously profitable business due to network effects generated, but connecting supply and demand is not a chore at all simple, implying it is vital to know which levers on which to act, did you know? Marketplaces or business models both sides are one of the most used by far startup model in the world, and are based on creating a system that puts supply and demand efficiently (or at least in a more efficient than the current ) which it is often disruptive in the sectors it operates. That is precisely what we are doing in Startupxplore, trying to create a method for connecting supply and demand efficiently and allow the process of investing in startups as simple as possible. They are business models that enjoy interesting by network effects, ie, the fastest growing value to their users and that feeds a virtuous circle:

A marketplace virtuous circle: the more demand, more supply and back again
This implies that the marketplaces are the paradigm of scalability because they can potentially be very large, but the reality is that this is one of the most difficult business models to implement, and above all that more difficult time making them work . This among other things is because in the early days no supply because there is no demand and vice versa, so that the "effect of the chicken and the egg" suffer. And while slowly picking volume and momentum, it is a process that takes many months if not years, and which at first we must also fight the feeling of "emptiness bar" that occurs.

The key is that the virtuous circle (which in practice is the engine of growth of any marketplace) work the best, and this requires not only that there are customers (demand) and providers (supply), but there is a turnover between them and interact as efficiently as possible, and that means control aspects as% unmet demand or time it takes to cover demand on average.

The first objective is to get a marketplace liquidity or critical mass, ie, reach the point where there is enough supply (suppliers) and demand (customers) contact (the goal is to grow not only users but transactions). Liquidity therefore has much to do with the expectations you have a client to sell something on your site / service contract / obtain investment in a marketplace Some of the key aspects that are used to assess the strength of a marketplace and they must control beyond a startup key metrics already discussed (and which applied differently depending on how you work and what is base) are:

GMV (Gross-Merchandise Value): The total volume transacted in the marketplace, that is, the total amount of all services / projects / operations that have been made through the marketplace (not that we have won).

Take rate: This is the% value or the platform earns commission on each trade. The higher, more profitable but also more friction in many models start using a take rate of 0% to completely eliminate friction (eg Wallapop or Selltag) but this makes the model even more dependent on foreign investment .

Fill rate (or% cover demand): The% of demands that included customers (whether service requests, new projects, travel, operations) and which has been effectively treated and covered with tender within the platform. A key indicator of value to both customers and suppliers gain and surely we should take to study why the rest of the demand is not covered and that "phase" of the operation has been stopped.

Avg operation / service: Similar to the "average basket" in e-commerce, this metric speaks the average amount of each transaction (whether a project price, average amount of a service or volume of a transaction).

Active members (both supply and demand): As most know, is not the same as having a user who is registered once and has not returned to use the platform for 3 months for a short time each user and returns use our services. Is a key measure, understand and promote active users both demand and supply side (eg metric as DAU, MAU WAU or depending on the speed of our marketplace).

Recurrence of users: Similar to the above but not the same - at this point we want to measure in each of the sides (supply and demand) how many times on average create projects / services required / pose operations (demand) and the number of times participates in projects / close operations / cover services.

Supply / demand: It is dividing the total number of users on the demand side (customers) by the total number of users supply (suppliers). It is a very important figure, because if major imbalances in supply or demand occur not only a decline in operations but also the dissatisfaction of one side (ideally should have a little more demand than supply will materialize, but if there is too much demand without cover customers feel that the marketplace is useless). If we do use active users and not just registered users, will have a more accurate picture of this thing, but do not forget that inactive users can retrieve them.

Avg fill time. It is the average time it takes to meet demand from a client that enters the marketplace, and is a key metric that indicates the speed operations close to our end-to-end marketplace, and satisfaction directly impacts the demand side.

Cohorts / funnels of supply and demand: How could it be otherwise, funnels powered cohorts are absolutely key to study how it flows on the one hand demand and supply on the other. The goal is to understand what has happened "stops" things that remain and identify what we can do to eliminate the friction that prevents the change from one phase to the next and work to eliminate it.

Recommendations / feedback: One of the keys in any marketplace is the trust of clients and suppliers, and to promote it a very common way is to allow feedback can be given of the operations / services / suppliers or even customers. And like any important element in the model, it is important to have a metric that allows us to measure it, so it is advisable not only to know the number of recommendations / comments feedback but also any different effect occurs in people who leave feedback or suppliers with feedback.

Average time delivery: In those marketplaces where physical objects are sold used to measure the time from the payment of a product is received until it ships which is directly correlated with customer satisfaction. 

Rate of returns / complaints: The objective of this metric is to measure the percentage of transactions in which the customer complains or asks to be returned the money because he was not satisfied with the product is closely linked with the fill rate or percentage cover and is key to understanding how well demand side demand expectations are met.

Average time first sale: To measure this factor, as we are reminded Hector in the comments, is key, as it is closely related to the satisfaction of the supply side and in cases where it is short more activity thereof is seen as to add new products and promote them on their networks.

Phase-acceptance-marketing-data
These are in my experience the main levers on which we can act to measure, improve and grow a marketplace, but in the end: The key to a marketplace is that more and more transactions between supply and demand, and every time they happen more quickly and successfully.

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