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MenuWhen working on a double-sided marketplace how do you work out cost of customer acquisition?
When most of the significant cost is driving the non-paying side to to the site which in turn will attract the supply side?
Answers
I'm the CTO of https://3dagogo.com a marketplace of proven to print 3D designs.
We look at the two sides differently. There's not a single customer. In our case you have designers and purchasers ( sometimes the same person can be both ).
Cost and methods for acquiring designers are very different than those to attract purchasers.
I would clearly separate the sides and come up with separate cost structures.
In my opinion when you're looking at the marketplace from the purchaser perspective, the other side's acquisition costs can be seen as fixed marketing costs.
Customer Acquisition Cost (CAC) is calculated by dividing all the Sales and Marketing costs involved to acquire a new customer within a certain timeframe. To get your customer acquisition cost (CAC), divide all sales and marketing costs by the number of customers acquired over a given time period. CAC is an important metric for growing companies to determine profitability and efficiency.
Related Questions
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When creating a marketplace, does it make more sense to focus on stimulating demand first or supply?
Focus on the more difficult side of the marketplace. For instance, if you think it'll be easier to get suppliers, then focus first on getting buyers - always be working on your toughest problem (aka your biggest risk). You'll find some great blogging on Marketplace and Platform topics here http://platformed.info (read the ebook too!)CM
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Broad niche or Targeted niche which way to go?
I always suggest going "uncomfortably narrow" initially so that you can really dial in the user experience and build liquidity first. Going broad will be tougher as there's too much noise to signal. Also, it's best to fake the supply side initially of you can to improve the buyers side first, then figure out supply & quality afterwards if customers are buying and you've proven out a demand strategy that will work.DM
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What is the best growth hacking strategy for a travel website?
Before you spend $ or time marketing your service / website, ensure that your brand itself is quite strong. For example, if your name or domain is awkward, ambiguous, or off-putting, then every dollar and hour you spend promoting your brand will work less efficiently in your favor than if you were spending the same amount of money and time marketing something more robust and attractive.JP
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What's the average CAC value or range for a Marketplace client?
I think you're looking at this the wrong way. Your customer acquisition cost is not something you should benchmark against other businesses. Without knowing more, like your short and long-term goals, it's impossible to answer. Two companies with similar business models may have different answers to this question. A venture-backed startup trying to keep up with aggressive revenue goals may be able to stomach an astronomical CAC. A bootstrapped startup that is not seeking venture money may aim for slower growth and much lower CAC. I suggest setting up a call with a marketing or finance expert to determine what CAC is appropriate for your company and how to get there.TL
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How to solve a chicken and egg problems for a marketplace like Uber? What is the best way to acquire demand side?
The best way to solve chicken and egg problems for marketplaces is to prove market need on each side independently first with a low-cost MVP-type test. Once you've proven the market on both sides with metrics it is much easier to leg in supply and demand with a strategic or enough funding to match a market on a local or niche level to ensure liquidity. For a deeper analysis, here is a post on medium that I wrote... http://bit.ly/1k2vYbY Also, feel free to schedule a call with me if you'd like to dig deeper.DK
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