What Are The Most Important Marketplace KPIs?

Key Performance Indicators, or KPIs, are a means of evaluating a company or one of the company’s practices. Using the various objectives that make up the company’s KPIs, you are able to gain an understanding of what is working and what isn’t with regards to the company reaching its operational and strategic goals. The information gathered from studying the KPIs is integral to knowing what steps a company needs to take in order to improve, grow, remain strong, etc. so developing a successfully elucidative list of KPIs to track is a critical component of truly understanding a company’s state of being.

The collection of Key Performance Indicators that we have established at Applico is related to Service Marketplaces, where the consumer demand is amassed through an app or a website and satisfied through the completion of offline services. When thinking about KPIs, it is useful to analyze the data through a variety of lenses, which will give you a more comprehensive overview of the company in question. Important dimensions to evaluate KPIs include: active vs non-active users, the service type, geography, peak vs non-peak users, the top 20% usually support the bottom 80% of users, by month, and by year.

These KPIs fall into 5 broad categories that help organize important information about consumers and producers on a given platform:

Matchmaking Liquidity
Trust & Safety
User Behavior
Network Effects
Profitability

Matchmaking Liquidity

This first set of KPIs relate to the ease with which the platform facilitates the transaction between the consumer and producer. Essentially, you want each transaction to be seamless so that there are as few barriers as possible to completing each transaction. In order to determine how seamless the process is, you need a list of indicators. On the consumer side, there are 4 primary Key Performance Indicators to be aware of: the amount of time it takes to book, how many listings are viewed before booking, the average time it takes each consumer to choose a listing, and the average number of clicks each booking takes. For producers, there are also 4 KPIs: the onboarding success rate (the rate at which new hires succeed or fail), the average time it takes to deliver a given service, the amount each provider is utilized on average, and the average amount of time each producer allocates to working through the platform. Related to both consumers and producers are the KPIs: average booking notice and average distance differential between consumer and producer.

Trust & Safety

This category of Key Performance Indicators provides extremely important information surrounding the app’s reputation among consumers and producers. Without trust and an expectation of safety, there really isn’t any future for a service marketplace app. The breakdown of consumer-oriented KPIs in this category entails the following list of metrics: the consumer rating, the rate of consumer retention, the percent of consumers who reported, the consumer cancellation rate, the consumer resolution time (how long it takes to resolve a consumer’s problem), consumer sentiment, and the consumer Net Promoter Score (the percent of consumers who are Promoters that keep buying and refer new consumers minus the percent who are Detractors that are actively unhappy with the product gives you the Net Promoter Score – Passive consumers are excluded in this calculation). For producers, the list of KPIs is very similar: the producer rating, the total number of producers, producer cancellation rate, producer resolution time, producer sentiment, and the producer Net Promoter Score. Using this data, you can go further to calculate the Fulfillment Rate and the overall Net Promoter Score.

User Behavior

Collecting data on general user behavior helps you gain an understanding of what the general experience is like for users and whether or not that experience is a generally positive or negative one. On the consumer end, the KPI list looks like: the consumer active to inactive ratio, rate of consumer retention, repeat consumer contribution, the booking abandonment rate, consumer cross-pollination (how much consumers bounce back-and-forth between competing apps), the frequency with which consumers engage, cross-channel conversion (how much/successfully consumers can move between devices), and the average number of bookings per month. Once again, the producer Key Performance Indicators list is along the same lines as the consumer one: the producer to inactive ratio, the producer retention rate, repeat producer contribution, producer cross-pollination, producer frequency rate, and producer channel conversion. You can utilize these findings to determine a few overarching KPIs, including Platform Leakage, Platform Cross-Pollination, and Prosumer Conversion.

Network Effects

Understanding Network Effects – the ways in which a company’s network of consumers and producers is impacting the functional and financial value of said company – is another important aspect of understanding platforms in the service marketplace. The consumer-driven KPIs in the Network Effects category are: total consumers, the percent of new consumers from referrals, consumer churn rate (the rate at which consumers stop using the app), the percent of consumers who pay, and consumer app downloads. The Key Performance Indicators for producers related to Network Effects include: the total number of producers, total bookings, the percent of new producers from referrals, producer concentration (the geographic location of producers, are they scattered afar, highly concentrated, etc.?), producer app downloads, the percent of producers allowed on, and producer churn rate. Additionally, the main KPI to keep in mind that incorporates both consumers and producers is the producer to consumer ratio.

Profitability

The final category of import when cataloguing a platform’s Key Performance Indicators is Profitability, breaking down the mechanisms by which it is either losing or making money. The profitability KPIs for the consumer users are: consumer acquisition cost or CAC, consumer concentration, average booking value, consumer lifetime value or CLV (how much money the app earns per consumer throughout the amount of time on average each consumer remains a customer), and CLV return on CAC (essentially the return on investment for consumers, calculated by [CLV-CAC] / CAC). The Key Performance Indicators for producers in the Profitability category are: producer concentration, average booking cost, producer acquisition cost or PAC, producer lifetime value or PLV, and the 1 year PLV return on PAC. The Profitability category also has the very important overall financial Key Performance Indicators that incorporate the data from both producers and consumers. These include the total addressable market (the total pool of revenue available for a given platform to go after), market share (the portion of the market a given platform controls), revenue, monthly recurring revenue, EBITDAM (earnings before interest, taxes, depreciation, amortization and marketing expenses), net profit, take rate (the rate at which people download the app but don’t use it), and burn rate (the rate at which the company is spending money in relation to its income).

Filed under: Platform Innovation | Topics: marketplace, platforms