August 20, 2018
Kahuna Marketplaces: The Marketplace Health Dashboard
As a marketplace operator, there are 2 primary challenges you’ll face in your line of work. The first is trying to solve the chicken and egg problem and get your marketplace flywheel moving from scratch. The next major hurdle for novice and established operators is building loyalty and affinity for your platform. In this post, we’re going to focus on the latter challenge.
Unlike traditional businesses where the seller only needs to cater to the needs of buyers in order to build loyalty, marketplace operators have to balance the needs of multiple stakeholders—buyers and sellers. In order to do this, marketplace operators need to build their platforms with both perspectives in mind.
Let’s take a closer look at the top ways to improve buyer and seller loyalty within your platform.
Although buyers and sellers are equally important for marketplace operations, sellers are more difficult to obtain because they have to invest time and, in some cases, money to use a platform. Virtually all sellers spend time setting up their storefront, uploading relevant photos, and setting descriptions and titles for their listings.
Reduce listing friction
The key to success with retaining sellers is to make it as easy as possible for sellers to make money. This is best done by streamlining the listing process so items can be placed and sold rapidly.
One such marketplace that embraces this model is Carousell. They’re notable because they make it possible for listings to be created in a matter of seconds. Sellers simply snap a photo of their item, enter some details, and they’re good to go. By removing the friction of listing creation, they’re able to entice sellers to create more listings on your platform. You can learn more about the secrets behind Carousell’s success, in our initial episode of MarketplaceConnect.
Setting tiered fee levels
Another way to build value for sellers is to focus on encouraging repeat business. Rewarding power sellers by setting fees based on transaction volume is a perfect example of this technique. For example, a casual seller making less than $1,000 can be charged 3% per transaction. Established sellers making more than $1,000 might be charged 1.5% per transaction.
With marketplaces or any business, money talks. This is why quickly paying your sellers goes a long way to improving your general operations. Aside from improving satisfaction, rapid payments enable sellers to invest in their business and achieve rapid growth.
Successfully streamlining the payment process goes beyond quickly issuing payments. Reducing the risk of fraud also is essential to maintaining the integrity of your property. By using escrow accounts, you can require buyers to pay for goods/services up front, and release the funds when the good is sent, or services are rendered.
Although the escrow process technically adds a minor delay to the payment process, the peace of mind it provides keeps sellers at ease, while also encouraging buyers to transact via the platform.
Building loyalty with buyers is more difficult because unlike sellers, these users aren’t locked into your platform. It’s easier for a buyer to browse 10 different marketplaces than it is for a seller to list on 10 different platforms.
Loyalty programs have been a staple of the retail industry for more than a few decades. It’s a simple concept—you encourage users to spend more money on your platform by providing rewards in the form of credits to be used for upgrades, or buyers can receive cash back.
While offering cash back isn’t going to be practical for all marketplace operators, including established ones, offering credits to be used on your platform is a cost effective way to get users hooked and coming back frequently.
Gamification often involves taking elements of game playing and applying those to activities such as online shopping. For example, a marketplace can offer credits for promoting a listing on social media, or simply logging in a certain amount of times within a month.
Listia is a marketplace that uses gamification to build loyalty around its marketplace. Within the property, users are provided with “XNK” when they complete tasks or sell goods through the platform. XNK, pronounced as “ink” is the custom currency for the platform. Since there’s no way to convert XNK to cash, in order to spend the currency, buyers/sellers have to keep trading on Listia. This leads to increased loyalty and retention. You can learn more about Listia and their innovative business model here.
While gamification and loyalty programs both are effective ways to boost your revenue, those methods often cost marketplace operators money, something that isn’t always sustainable or attractive, especially when they’re already battling thin margins.
This is why marketplace operators need to focus on becoming the go-to destination for commerce as opposed to just remaining an ordinary property to transact. This is where providing an exceptional experience comes into play.
There are a few ways you can go about this, but in particular you should look into using intelligent messaging to enhance the buyer experience. This enables you to tailor communications to the individual buyer and deliver an experience that’s catered to their wants and desires. For example you can recommend products to buyers that are similar to the items they purchase. You can also only send messages at the times when the buyer is likely to engage with them.
Loyalty is important. You must make a concerted effort to focus on it and here’s why: competition. Competition in marketplaces/classifieds is only growing by the day. Without having a plan in place to create a loyal following and retain customers, you’ll fall trap to the one-and-done syndrome.
To learn more about how the marketplace business model can help improve your profitability, check out The Kahuna Blog. Simply click the button below!