How to Determine Important Metrics and KPIs of an Online Marketplace

May 10th, 2023 | 6 min read

Metrics and KPIs (or Key Performance Indicators) are often used interchangeably in daily business operations.

While they have their differences, both metrics are data-driven and help gauge whether the strategies and processes work toward your business goals.

Tracking these will help you understand the performance of your marketplace and make informed decisions to build your business' growth strategy.

Usage Metrics

Usage Metrics track the number of users who visit and interact within your marketplace in a given month, day, or week and how much time they spend on it.

Usage metrics typically fall into three categories: monthly active users, bounce rate, and time users spend on the website.

Monthly Active Users on a Marketplace

Monthly Active Users or MAU is a key performance indicator that measures how many users actively used your marketplace within the past month.   

MAU shows the size of the marketplace's audience and helps to assess growth.

MAU is also a good indicator of engagement, showing how often users return to the website or app.

For marketplaces, MAU is typically higher than the number of registered users. Not all registered users are active on the website or app every month.

Bounce Rate on a Marketplace 

A marketplace Bounce Rate is a metric that measures the percentage of users who leave the marketplace after only viewing a single page.

This metric is crucial for understanding how engaging and user-friendly your marketplace is.

A marketplace bounce rate of between 20% and 45% is considered average, while a lower than 20% rate is remarkable!  

A high bounce rate can hint at several issues, such as a poorly designed website, lack of relevant content, or poor user experience.

Time Spent for Marketplaces

Time Spent on the website, also known as session duration, is the duration a user spends reading content or browsing on the platform.

In an online marketplace, time spent helps determine how much time a website's users spend shopping around from page to page before making that purchase.

A long time spent on a page can also indicate negative aspects, e.g., it could indicate navigation issues in the marketplace.

For example, if your user spends too much time on your checkout page, it could mean that they are having problems completing a transaction.

Marketplace Transaction Metrics

In an online marketplace setting, transaction metrics are not only about the volume of transactions.

These also help you narrow in on metrics that determine marketplace liquidity, seller-to-customer ratio and repeat purchase ratio.  

Marketplace Liquidity

Described as the lifeblood of a marketplace, liquidity is a seller's chances of selling what they list and a buyer's odds of finding what they're looking for.

A marketplace's liquidity is divided into Seller and Buyer liquidity.

Buyer Liquidity

Buyer liquidy represents the probability of a buyer's search on the platform ending in a transaction.

The focus on buyer liquidity is the Search to Fill rate.

An example would be the percentage of product searches on eBay or Etsy that ended up as a purchase or the rate of job posts on Upwork in a given month that leads to a candidate getting hired.

Focusing on buyer liquidity in a marketplace where buyers can complete a transaction or book a service without having to interact with sellers is typical.

Having this deep understanding of how buyers interact with your marketplace can signify future success.  

Seller Liquidity in an Online Marketplace

Seller liquidity is characterized by the percentage of listings that result in transactions; in this case, the Utilization Rate.

In a retail marketplace like Etsy, the utilization rate might be the percentage of products sold in a month (based on the monthly inventory).

In Uber's case, seller liquidity could be defined by the percentage of drivers working full-time in a week.

Seller-to-Customer Ratio

The Seller-to-Customer Ratio is a key performance indicator (KPI) that measures how many sellers are active in a marketplace relative to the number of customers or buyers a seller can serve.

In a typical online marketplace where the platform facilitates transactions between sellers and buyers, getting sellers on board early is more important.

However, creating that balance of buyers and sellers is ultimately one of the biggest challenges the marketplace will have to solve.

Repeat Purchase Ratio

The Repeat Purchase Ratio is the rate of buyers returning for another transaction.

A Repeat Customer Ratio of 20% - 30% is a good sign for the business. However, this varies in the industry.

For example, a service marketplace like DoorDash will have more repeat customers since people eat often and patronize a particular restaurant.

A moving company though may have a lower RPR because people don't typically move that often.

Along the same lines, the Repeat Customer ratio is calculated by dividing the number of repeat customers by the total number.

Multiply the result by 100 to convert it into a percentage.  

Business Metrics

Business metrics are quantifiable measures that can be used to track and assess the performance of your business in critical areas.

The main business metrics are Gross Merchandise Value, Average Order Value, Customer Acquisition Cost, and Customer Lifetime Value.

Gross Merchandise Value

Also known as Gross Merchandise Volume, Gross Merchandise Value or GMV refers to the total sales value of the products or services sold in a given time.

A GMV is used to measure the growth and size of a marketplace, but it's not enough to understand its health on it's own.

Average Order Value

An Average Order Value or AOV refers to the average dollar value a buyer spends on the marketplace.      

AOV can be calculated by dividing the total revenue by the number of transactions on the platform.  

AOV is a key performance indicator that a marketplace uses to track buyers' purchasing habits and the value a business can get from each transaction.   

Customer Acquisition Cost

Customer Acquisition Cost or CAC is a business' cost to get new customers.

This could include the total cost of sales and marketing campaigns, platform maintenance, tech support, and other equipment and properties bought to acquire customers.

To calculate the CAC, the total cost of acquiring customers is divided by the number of new customers acquired over a given time.

Customer Lifetime Value

Customer Lifetime Value or CLV refers to the total revenue you expect to generate from each customer.

This KPI is tied to the Customer Acquisition Cost in that the CLV at minimum, needs to be higher than the marketplace's CAC to have profitable growth.

A CLV is helpful as this can help the marketplace determine the most high-value users on the platform.

With that profile data in one's hands, it becomes easier to build strategies to attract more high-value customers to the marketplace.

To get an estimate of the CLV, multiply the Customer's Average Transaction Size by the Number of Transactions by the Average Customer Lifespan or Retention Period.  

User Satisfaction Metrics

Customer or user satisfaction is key! 

After all, happy customers are more likely to continue using your products or services and even recommend them to others.

There are different ways to measure customer satisfaction; the methods below are the most commonly used ones.  

Customer Satisfaction Score or CSAT

Customer Satisfaction Score, more commonly known as CSAT, is a key performance indicator that helps a marketplace track how satisfied its users are with the platform.

To get the CSAT Score, users are given a one-question survey to rate their satisfaction with the products, services, or the marketplace.

Users can answer using a five-point scale, with a score of 1 being extremely unsatisfied and five being extremely satisfied.

Marketplace owners can use the initial survey to get feedback.

Follow-up questions can also be used to probe deeper into the users' answers to understand the reasons behind their ratings better.

Net Promoter Score

Net Promoter Score or NPS gauges user loyalty by asking them to answer a single question about the likelihood of them recommending a business to others.

The respondents answer with a number from 0 to 10.

Based on their answers, they either fall into one of three categories.

***Promoters present a score of 9 to 10.

Promoters are happy customers who are loyal to the business.

These people will keep buying and referring the marketplace to others, which fuels growth.

***Passives rate with a 7 to 8.

Passive customers are satisfied with the platform but could be swayed by competitors with better offers.

***Detractors hand out a score of 0 to 6.

Detractors are unhappy customers who can damage your reputation by sharing their negative opinion of the company.

Tracking Metrics!

Data collected from these metrics can give valuable insights into the number of transactions conducted on the platform to the average customer satisfaction rating.

With such information, it becomes easier to build strategies, make informed decisions, and acquire additional users to facilitate your marketplace's growth.

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