Today, we are starting with a crucial one: Increasing your loyalty, retention, GMV and revenue – simply by keeping transactions on platform. But how?
The first order effect of most marketplaces is discoverability. Marketplaces make offers filterable and searchable, but for many platforms, there’s not much value beyond that.
Some utility marketplaces are able to provide lower costs on the marketplace than off it, others offer insurance and liability protection on top of their offers (think: Airbnb), but for the majority of marketplaces, ease of discoverability is the biggest plus.
That’s not a bad thing! Uber was able to build an empire over the Taxi industry by making the usage a little easier. eBay has been the go-to auctioning place for a few decades now, even though their job often ends after helping you to discover a product.
So, I was surprised when I was hit with the same question a few times over the past few weeks: How do you keep people from settling transactions outside the platform?
I get it – after all MentorCruise takes ~20% on the average transaction, even though from a mentee’s perspective, our job is mostly done after the matching process.
The secret to it all is to make it attractive for suppliers to settle a transaction on the platform.
Simply said: If you’d try to take your offering off the marketplace, it would cost you more than the 20% transaction fee.
How, you ask? Well, there are many ways to do so:
- Reward loyalty by offering goodies. Be it a cut on the transaction fee or a higher ranking on the marketplace
- Be public. On MentorCruise, mentors can become “Experienced Mentors” and “Coaches”. A public badge that is asked for many times!
- Take on the risk. Offer to settle disputes, refunds and payment issues.
- Make ratings public. Make a good rating something to strive for.
- Offer premium jobs/levels/orders to your best suppliers.
The big point is that it should pay for suppliers to stay loyal to you.
If you can create a framework like this, suddenly it doesn’t feel like having to pay a cut to you anymore, instead suppliers are encouraged to build their presence and social equity – something they can only do if they stay on the platform.
So, at the beginning I made a pretty big claim, let’s take it apart:
Increasing your loyalty, retention, GMV and revenue
- Loyalty: Help suppliers build experience, levels and equity on your platform.
- Retention: Reward loyalty with special offers, public recognition and special offers. Take on risks that may drive off suppliers.
- GMV: Build the pull of settling transactions through your platform (e.g. rating only after order -> rewards on great rating -> rating alone becomes worth it)
- Revenue: Bigger GMV already means more revenue – but more risk and value on your side also means you can increase your cut.
I hope this helps to settle this reply. If you are running a marketplace, please let me know your struggles and issues and I’ll try to pull some answer to it out of my hat. Just reply to this email.