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MenuWhat's the average CAC value or range for a Marketplace client?
We are building a crowdsourcing marketplace, where we will have clients on one side and freelancers on the other side. Let's say we have the freelancers side under control and we don't need to acquire freelancers at the moment. What would be a regular CAC value in order to acquire clients in our platform?
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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.
The acquisition cost depends on the channel you will use to reach out your clients and your ability to target them.
At first, you will probably spend quite a lot in order to find the right mix for targeting and you will hopefully improve that.
What I would do is to put a small budget and test (a lot) what are the best acquisition channel and targets.
In my case, I had the opportunity to build a platform of 200 000 users just by using the right channel and targeting the right people in 9 months with no users at all at all in the beginning. We have decreased our acquisition cost by more than 50% since the launch.
But if I can add a remark, I was not focused on the cost to acquire a user, but simply to be able to acquire some. The first objective is to understand how a client is interested by your plateform (the value of your freelancers) and how much you would get out of a client and then try to optimize its acquisition process.
I'd happy to share more with you if you want.
Alexandre
I believe that the CAC (customer acquisition cost) is not a relevant measure for a marketplace. It is relevant for a recurring-payment SaaS product.
I suggest finding a more meaningful measure for a marketplace, e.g. Cost per Sale in Marketplace (CSM?).
Then you can measure the average sale price in the marketplace, the average commission your business takes, and go from there estimating the required cost per sale in the marketplace to make it worthwhile.
For example, if your sales transaction price in the marketplace averages to $100, and you take $5, you need to make sure that the cost of making that happen is not more than $5 (and preferably much less).
I've successfully helped over 150 entrepreneurs, startups, and businesses, and I would be happy to help you. Please send me more information before scheduling a call - so I can give you maximum value for your money. Take a look at the great reviews I’ve received: https://clarity.fm/ripul.chhabra
The average CAC value or range for a Marketplace client is industry dependent:
1. Paid Search - Average CAC by Industry (2018):
Across All Industries: $49.86
a. Advocacy: $96.55
b. Auto: $33.52
c. B2B: $116.13
d. Consumer Services: $90.70
e. Dating & Personals: $76.76
f. e-Commerce: $45.27
g. Education: $72.70
h. Employment Services: $48.04
i. Finance & Insurance: $81.93
j. Health & Medical: $78.09
k. Home Goods: $87.13
l. Industrial Services: $79.28
m. Legal: $86.02
n. Real Estate: $116.61
o. Technology: $133.52
p. Travel & Hospitality: $44.73
2. Display Advertising – Average CAC by Industry (2018):
Across All Industries: $75.51
a. Advocacy: $70.69
b. Auto: $23.68
c. B2B: $130.36
d. Consumer Services: $60.48
e. Dating & Personals: $60.23
f. e-Commerce: $65.80
g. Education: $143.36
h. Employment Services: $59.47
i. Finance & Insurance: $56.76
j. Health & Medical: $72.58
k. Home Goods: $116.17
l. Industrial Services: $51.58
m. Legal: $39.52
n. Real Estate: $74.79
o. Technology: $103.60
p. Travel & Hospitality: $99.13
Besides if you do have any questions give me a call: https://clarity.fm/joy-brotonath
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When creating a marketplace, does it make more sense to focus on stimulating demand first or supply?
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Holding funds in a 2-sided marketplace?
Check out https://www.balancedpayments.com/ They are made for marketplaces. Airbnb CEO among others invested in them and they have some of the best pricing/payout fees. Also some good info on http://www.collaborativeconsumption.com/2013/10/08/online-marketplaces-are-hard/ One of Balanced Payments co-founders is writing this blog series on marketplaces.MA
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How important is it for a marketplace startup to drive enough demand (customers) for your supply (sellers) to make a full time living off of it?
It's very important. (first, read this article by Josh Breinlinger - http://acrowdedspace.com/post/47647912203/a-critical-but-ignored-metric-for-marketplaces) The way you achieve success in a marketplace is by driving liquidity for both your supply & demand. Demand-side Liquidity = When users come to your marketplace, they can achieve their goals. Supply-side Liquidity = When supply comes to your marketplace they can achieve their goals... which are almost always to make money. If you're making a large amount of your supply-side users a full-time income, then you're helping them achieve liquidity. Now it's not so black and white and it doesn't always have to be a "full-time income." It depends what their goals are. E.g., 1) At Airbnb, renters aren't looking to quit their day jobs and become landlords full-time... they're just look to earn a substantial amount of income to offset their rent, mortgage, etc. So in this case, I would probably goal on # of renters that earn >$500 / month... and (in the first 1-5 years) try to grow this number by 10-20% MoM... and maybe by just 5% once you're in the mid-high tens of millions in yearly revenue. 2) At Kickstarter, the goal of the supply-side is to get their project successfully funded. They don't care if the project creator is "full-time"... they just want to make sure they meet their funding goal. This is why they talk about their 44% project success rate all the time - http://www.kickstarter.com/help/stats 3) At Udemy, our instructors want a substantial amount of their income to be driven from their Udemy course earnings... so we look at how many instructors are earning >$2k / month.DT
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How can I calculate my CAC (cost of customer acquisition) accurately?
At WP Engine, everything in marketing and sales is included in CAC. Salaries, commissions, coupons, direct advert spend (which you're saying you don't yet have), fees, travel and other costs associated with conferences, etc.. My advice is to err on the side of putting too much in CAC, because that helps you honestly understand the costs. Ignoring some costs just because they don't scale with company size or marginal new customers doesn't make sense to me, it simply means that certain components of your CAC you expect to get more efficient over time. Indeed, they had better! So measure it, instead of ignoring it. You also might find that some of those direct-spend channels are not as inefficient as they seem compared to things like SEO efforts. Or the reverse! All good things to explore of course. I'll also note that at $19/mo in the crowded space of CMS offerings you will find that very few channels will be efficient compared to the revenue you're generating. It sounds like you know that, and are dealing with it with "scalable" efforts like content marketing, however again you should be ruthless in understanding how those costs are really translating into orders and whether that's a financially sensible total strategy.JC
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Freemium v.s. free trial for a marketplace?
It depends on a number of factors but I'd boil it down to two key things to start: 1) What is your real cost to provide a free plan or trial? 2) Who exactly is your customer and what are they used to paying and who and how do they pay today? When you say "online workforce marketplace" it sounds as though you're placing virtual workers. If that's the case, or if you're paying for the supply side of the marketplace, the question is how much can you subsidize demand? Depending on where you're at in the process, I'd also question how much you can learn about the viability of your marketplace by offering a free version, assuming again, that free is actually a real cost to you. I was part of a SaaS project that started charging people for early access based mostly on just a good landing page (we clearly stated they were pre-paying) and were amazed at the response. I've also run a SaaS product that offered free trials and realized that the support costs and hand-holding and selling required to convert from free trial to paid wasn't worth it, this despite the product's significant average ARR. You might be better off providing a "more information" sign-up form (to capture more leads) and let them ask for a free trial while only showing your paid options. I've been amazed at the lead capture potential from a simple "have questions? Click here and we'll contact you" This is all the generalized advice I can offer based on the limited information I have, but happy to dive-in further if you'd like on a call.TW
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