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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?
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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.
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To answer this, you need to have a working model for your customer LTV (Life Time Value). Most startups can't accurately estimate their LTV, so if you don't have good enough data, then building your CAC based on assumed LTV numbers can be fatal. In this case, it's better to evaluate your CAC costs based on the months of revenue it takes to recover the cost to acquire the customer, and ultimately this calculation should be net of any costs associated with providing the service on a monthly basis and, even more conservatively allow for a healthy degree of churn. Keep in mind that this calculation doesn't evaluate your true profitability only the capital efficiency of your customer acquisition spend. Hope this helps. Happy to talk this through in more detail and with more specifics to your business.TW
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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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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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