• Darren Cody

Need To Know Marketplace Metrics & KPIs

General Good Practices:

  1. Log Metric definitions and make sure the whole team understands. Different platforms / tools will calculate differently than intended.

  2. Define the quality and state of a metric or segment of Users you consider worthy or measuring. For example, include only the segment of Users who completed the first page of the Signup Process instead of Users who view the first page of the Signup Process.

  3. Define a Metic Tracking plan while designing the database and how data will flow or be archived.

  4. Not all KPIs are 1-dimensional - Repeat User Actions can dramatically affect a KPI, so it is important to Segment Users based on their Time on the Platform by using their Account Created Date.

Product KPIs:

KPI Name: Signup Process Conversion

KPI Calculation: Number of Users Who View First Page of Process to Number of Users Who Complete the Process

KPI Purpose: Understand how the Signup Process is performing to decide when it is worth paying for Ads.

KPI Benefit: Lower your CAC (Customer Acquisition Cost)

KPI Name: Posting Process Conversion

KPI Calculation: Number of Users Who View First Page of Process to Number of Users Who Complete the Process

KPI Purpose: Understand how much potential Supply is lost due to poor conversions.

KPI Benefit: Lower your SAC (Supply Acquisition Cost)

KPI Name: K-Factor Ratio

KPI Calculation: Number of successful referrals from a User

KPI Purpose: The Number of organic signups the platform gets from a single User through a referral program

KPI Benefit: Achieving a K-Factor of 1 or more is considered good performance.

KPI Name: “Stickiness” Frequency of Use (DAUs/MAUs)

KPI Calculation: Engagement as a ratio of short-term versus long-term return frequency

KPI Purpose: Understand how “Sticky” your platform is.

KPI Benefit: The higher the engagement is, the better your platform is.

KPI Name: Bounce Rate For Landing Pages

KPI Calculation: The percentage of single-page sessions

KPI Purpose: Understand if Users are seeing with they want to see on the page they enter from.

KPI Benefit: This will indicate if messaging / copy is off, or if the page has poor UX.

KPI Name: AFC (Average Funnel Completion Time)

KPI Calculation: How long it takes the average User to complete a tracked event (Signup, Posting, Booking, etc.)

KPI Purpose: Understand if your tracked event has been optimized as much as required for maximum conversions.

KPI Benefit: A strong indicator of your UX, it is excellent, medium, or poor. Compare the time it takes for your Product Manager to complete it vs the Users.

KPI Name: RUA (Repeat User Actions)

KPI Calculation: Number of times a User repeats an action in a given timeframe.

KPI Purpose: Some KPIs aren’t 1-dimensional and it morphs into CTS (Cost to Serve). If the User repeatably posts Supply on your marketplace, the LTV (Life Time Value) of that User exponentially increases.

KPI Benefit: Understanding the value of having stronger adoption via repeat actions.

Ops KPIs:

KPI Name: CAC (Customer Acquisition Cost)

KPI Calculation: Marketing Spend / Number of Successful Signups

KPI Purpose: Understand how much each User costs to Complete their Profile

KPI Benefit: Lower the CAC, the better and more optimized your Marketing efforts will be

KPI Name: SAC (Supply Acquisition Cost)

KPI Calculation: Marketing Spend / Number of Successful Postings / Average Number of Postings per Supply

KPI Purpose: Understand the cost of gaining new Supply

KPI Benefit: Know how much it costs for Marketing or to “open” new geography.

KPI Name: SFR (Search to Fill Rate)

KPI Calculation: Number of searches / Number of Bookings in a month

KPI Purpose: Part of Buyer Liquidity - How easy it is for Demand to find what they need.

KPI Benefit: Helps understand if you are gathering the right Supply in the right categories or locations.

KPI Name: Demand to Supply Ratio

KPI Calculation: Number of Demand Users / Number of Supply Users

KPI Purpose: This varies depending on the type of marketplace you are creating. 1 Supply User may only be able to service 1 Demand User or 1000 Demand Users.

KPI Benefit: Understand where you need to adjust your focus to acquire more User types to make the Supply meet Demand.

KPI Name: CTS (Cost to Serve)

KPI Calculation: Budget for Support Team vs Number of Support Tickets.

KPI Purpose: The Higher it is, the more likely you should invest in User Training Solutions such as a Knowledgebase or ChatBot.

KPI Benefit: This allows you to understand how complex your platform may be and how you can support it with automation or self-serve options.

KPI Name: Gross Margin

KPI Calculation: ( Net Revenue - COGS (cost of goods sold) ) / Net revenue

KPI Purpose: Determines the health, or profitability of a business in that sales are at least able to cover the costs associated with that sale. If your cost of goods sold goes up faster than your revenue growth, then you’ve got a problem as it indicates you are spending proportionally more to make the extra revenue.

KPI Benefit: It allows you to see the viability of your business. If your gross margin is small, or even worse, negative, then the business feasibility is poor. Not to be confused with net profit margin.

KPI Name: Net Profit Margin

KPI Calculation: Net Income / Net Sales

KPI Purpose: It is your after-tax profit generated by each sales dollar and therefore it tells you how profitable your business has been.

KPI Benefit: Ultimately, it is the most direct KPI to indicate how much money the company is actually making.

Marketing KPIs:

KPI Name: Net promoter score

KPI Calculation: Average score of a 0-10 question of “How likely is it that you would recommend [product] to a friend or colleague?”

KPI Purpose: To judge user satisfaction.

KPI Benefit: It directly informs you how much network effect you could possibly have, if users as satisfied, if the users are getting value, and ultimately if there is product market fit.

KPI Name: Organic traffic (number or percentage)

KPI Calculation: Number = Number of sessions that originated from organic traffic. Percentage = number of sessions that originated from organic traffic / all traffic

KPI Purpose: The assess how well known the marketplace is. The more well-known it is, typically the more organic traffic there will be. If all traffic is from social or ads, then organic is low and therefore there is probably very little brand recognition.

KPI Benefit: Gives a glimpse of just how ‘popular’ or mainstream your marketplace is. For example, people typically don’t google amazon, and if there are social media shares, that would be fairly minimal in comparison to people going directly to amazon.com or using the app. Compare this with a relatively unknown mom-and-pop marketplace powered by Shopify. It is unlikely those websites will have much organic traffic and instead would be relying on the ad or social media traffic.

KPI Name: Social media referral traffic (number of percentages)

KPI Calculation: Number = Number of sessions that originated from social media referrals. Percentage = number of sessions that originated from social media / all traffic

KPI Purpose: It not only tells you how people it is on social media but also how interesting your marketplace’s marketing is performing.

KPI Benefit: it is a great indicator of product market fit. Typically, more social media traffic means more people are actually interested in whatever the marketplace is selling.

KPI Name: Email open rate

KPI Calculation: Emails opened / emails sent

KPI Purpose: To determine how effective, or interesting, your email marketing is performing. Email marketing is one of the most cost-effective forms of marketing and therefore optimizing emails based on data is crucial

KPI Benefit: It is incredibly easy to measure and gives good insights into both how interesting your marketplace is, and how captivating the emails are. If the open rate is high, then you likely have very well-optimized emails AND your marketplace provides a lot of value

KPI Name: Ad click rate

KPI Calculation: clicks / impressions

KPI Purpose: To determine how effective your ads are

KPI Benefit: Keeping track of this metric will drastically help you reduce unneeded spending


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