The 10 best metrics for marketplace businesses

Published 2 months ago

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Why use metrics for marketplace businesses?

Marketplaces are unique business models that connect buyers with sellers, creating a platform where transactions occur. To ensure the health and growth of these platforms, it's pivotal to measure specific metrics that can gauge performance, user engagement, and overall business success. Key metrics offer invaluable insights into which areas are thriving and which need improvement, helping marketplace businesses streamline operations, optimize user experience, and ultimately drive revenue. By tracking the right metrics, companies can make data-driven decisions that enhance both buyer and seller satisfaction.

The top 10 metrics for marketplace businesses

1. Gross merchandise volume (GMV)

GMV measures the total sales dollar value of merchandise sold through a marketplace within a specific period. It’s a critical indicator of the marketplace’s size and growth potential.

How GMV is calculated: Sum of the sales prices of all items sold during the period.
What tools can be used to get GMV data: Analytics platforms like Google Analytics, Mixpanel, or data from your internal transaction databases.
What average, good, and best in class look like for GMV: A good benchmark depends on the industry, but steadily increasing GMV over time is always a positive sign. For instance, early-stage marketplaces might aim for a GMV increase of 15-25% month-over-month.

2. Active user rate

Understanding the active user rate helps a marketplace business gauge engagement and loyalty among its users, both buyers, and sellers.

How active user rate is calculated: Number of active users (those who performed a meaningful action like buying, listing, or browsing) divided by total registered users.
What tools can be used to get active user rate data: Tools like Google Analytics, Mixpanel, Amplitude.
What average, good, and best in class look like for active user rate: Average active user rate varies by industry, but a monthly active user rate of 20-30% is considered good. Best-in-class can exceed 50%.

3. Customer acquisition cost (CAC)

CAC indicates how much it costs to acquire a new customer, an essential metric for managing marketing efficiency and scaling operations sustainably.

How CAC is calculated: Total marketing and sales costs divided by the number of new customers acquired during the same period.
What tools can be used to get CAC data: Marketing platforms like HubSpot, Marketo, and customer relationship management (CRM) systems such as Salesforce.
What average, good, and best in class look like for CAC: Varies widely by industry, but a low CAC compared to the average customer lifetime value (CLV) is ideal. A ratio of 1:3 (CAC: CLV) is generally considered good.

4. Retention rate

Retention rate measures the percentage of users who continue to use the marketplace over a given period. High retention indicates satisfied customers and effective user engagement strategies.

How retention rate is calculated: Number of users remaining at end of period divided by the number at the start, expressed as a percentage.
What tools can be used to get retention rate data: Cohort analysis tools like Mixpanel, Kissmetrics, or custom-built dashboards.
What average, good, and best in class look like for retention rate: A monthly retention rate of 20% is average, 35-40% is good, and 50%+ is best in class.

5. Take rate

The take rate is the percentage of the transaction value that the marketplace retains as revenue. It’s a key profitability metric.

How take rate is calculated: (Total commission and fees revenue / GMV) × 100.
What tools can be used to get take rate data: Financial planning and analysis tools like Planful or custom transaction data reports.
What average, good, and best in class look like for take rate: The take rate often ranges between 5-20% depending on the industry and competitive landscape.

6. Listing to sold ratio

This metric helps understand the effectiveness of the marketplace in converting listed items into sales, critical for optimizing the seller experience.

How listing to sold ratio is calculated: Number of items sold divided by the number of items listed, expressed as a percentage.
What tools can be used to get listing to sold ratio data: Marketplace management tools or proprietary analytics systems.
What average, good, and best in class look like for listing to sold ratio: Average can be around 10-30%, good is 40-50%, and best in class is 60%+.

7. Customer lifetime value (CLV)

CLV estimates the total revenue a business can expect from a single customer account, helping to make better budgeting and marketing decisions.

How CLV is calculated: Average purchase value multiplied by purchase frequency over the customer lifetime.
What tools can be used to get CLV data: CLV can be calculated in CRM tools like Salesforce, HubSpot, or specific SaaS tools like Custora.
What average, good, and best in class look like for CLV: The higher the CLV, the better—typically, a CLV that is at least 3x higher than the CAC is a good benchmark.

8. Average transaction value (ATV)

ATV measures the average value of each transaction taking place on the marketplace, essential for understanding spend behaviour.

How ATV is calculated: Total sales revenue divided by the number of transactions.
What tools can be used to get ATV data: Sales analytics platforms and transaction databases.
What average, good, and best in class look like for ATV: This varies by industry, but a consistently rising ATV indicates users are finding more value on the platform over time.

9. Churn rate

Churn rate signifies the percentage of users who stop using the marketplace during a given period. Managing a low churn rate is critical for growth.

How churn rate is calculated: (Number of churned users during the period / total users at the start of the period) × 100.
What tools can be used to get churn rate data: Customer analytics tools like Mixpanel, Amplitude.
What average, good, and best in class look like for churn rate: Average varies by industry, but an annual churn rate under 20% is good, under 5% is exceptional.

10. NPS (Net Promoter Score)

NPS measures customer satisfaction and loyalty by asking users how likely they are to recommend the marketplace to others. It’s a strong indicator of user sentiment.

How NPS is calculated: Customers are asked to rate from 0-10. Subtract the percentage of detractors (0-6) from the percentage of promoters (9-10).
What tools can be used to get NPS data: Survey tools like SurveyMonkey, Qualtrics, and specialty NPS tools like Delighted.
What average, good, and best in class look like for NPS: An NPS of 30-40 is considered good; 50+ is excellent.

How to track metrics for marketplace businesses

Tracking these metrics effectively requires powerful and efficient tools. You can use a goal-tracking tool like Tability to save time and help teams stay focused on the right metrics to improve. Tability allows for seamless alignment of metrics with company goals, ensuring that all efforts are directed towards actionable results. Additionally, integrating Tability with other analytics and CRM platforms can provide a comprehensive view of all vital marketplace metrics, enhancing clarity and decision-making.

FAQ

What is the most important metric for a marketplace?

The importance can vary, but GMV is often considered one of the most critical metrics as it denotes the overall market activity and health of the platform.

How often should we review marketplace metrics?

It's recommended to review these metrics at least monthly. However, some high-priority metrics like active user rate and churn rate might require weekly reviews to catch and address issues promptly.

How can we improve our marketplace’s active user rate?

To improve active user rate, focus on user engagement strategies such as personalised recommendations, regular communication through emails or notifications, enhancing user experience, and continually adding value to both buyers and sellers on the platform.

What if our CAC is too high?

If your Customer Acquisition Cost (CAC) is high, consider optimizing your marketing channels, improving the efficiency of your sales funnel, or focusing on organic growth strategies such as content marketing and referrals.

What’s a good strategy to reduce churn rate?

To reduce churn, provide excellent customer service, collect and act on user feedback, offer loyalty programs or incentives, and continually improve the overall user experience on your platform.

By carefully selecting and rigorously tracking these metrics, marketplace businesses can ensure sustainable growth and increased satisfaction among users.