What Are the Key Metrics of a Marketplace?
The key metrics of a marketplace have to give you a whole picture of your app’s performance — both from the financial perspective and product development side.
Measuring marketplaces for goods vs. services
There may be some differences in the metrics for a marketplace app for services versus goods.
For example, a marketplace app for online courses may place more emphasis on metrics such as course enrollment and completion rates. A marketplace app for goods may pay more attention to metrics like the number of transactions and average order value.
What are the 4 types of metrics?
You can split the marketplace metrics into four buckets to keep analytics organized and draw better business insights and learn to recognize patterns.
- Customer satisfaction
Now let’s go over the four buckets and point out the most important metrics that will help you build a well-performing marketplace.
Usage metrics tell you what users do in your application. Mobile analytics help you track the visited screens, the used features, and the amount of time users spend on each screen. These metrics will help you understand how users are using the product.
Usage metrics include:
This measures the number of unique users who have used the app within a given time, e.g., daily or monthly active users.
The average amount of time that users spend using the app during a single session. This metric is especially useful when you combine it with other metrics such as screen views, transactions, or interactions in the app.
You can track the number of times a specific screen is viewed by users. This can help you understand which screens are the most popular and which ones may not be receiving as much attention. This way you can introduce changes in the screens (or even eliminate them to streamline the user experience).
This measures the average number of times that a user opens the app over a specific period.
Drop off rate
Drop off rate within a specific step in the funnel can help you eliminate the friction points that decrease conversion rates.
Transaction metrics are related to the buying and selling of products on the app, such as the number of transactions, average order value, and conversion rate.
Average order value
This measures the average amount users spend per order. A high average order value suggests that users are finding high-value products and are willing to spend more money.
Conversion rates measure the percentage of users who make a purchase after visiting the app. A high conversion rate suggests that users are finding the products they want and are comfortable making purchases through the app. This can also measure the percentage of users who complete a specific action (e.g., signing up for a service).
Abandoned cart rate
This measures the percentage of users who add products to their cart but do not complete the purchase. A high abandoned cart rate may indicate that users are having difficulty checking out or are encountering issues with the app. It can also mean that customers are not yet ready to make a purchase.
Abandoned cart rate is a useful metric to build a remarketing campaign where you remind the user about the product across the advertiser’s partner network.
The buyer-to-seller ratio is a measure of the number of buyers compared to the number of sellers in a marketplace. You can calculate this ratio by dividing the number of active buyers by the number of active sellers. For example, if there are 50 active buyers and 20 active sellers in a marketplace, the buyer-to-seller ratio would be 2.5.
In addition to the buyer-to-seller ratio, you can also measure the transactions per buyer and transactions per seller (TPB/TPS) to get a sense of how well sellers can handle the demand for their products or services. This is especially relevant in peer-to-peer (P2P) or consumer-to-consumer (C2C) marketplaces, where buyers and sellers can be both.
Customer Satisfaction Metrics
Customer satisfaction metrics help you stay close to your target audience’s needs and pains.
Customer satisfaction ratings
The average rating that users give to the app based on their satisfaction with the product or service. You can measure user satisfaction through reviews and ratings that users leave on the app or through surveys. A high level of customer satisfaction suggests that users are happy with the products and the shopping experience.
Net Promoter Score (NPS)
A measure of customer loyalty that’s calculated by asking users how likely they are to recommend the app to a friend. To measure the NPS, you need tools that let you implement and track the questions and answers to “How likely are you to recommend us to a friend or colleague?”
An obvious metric that shows the total amount of money that the app generates through sales or in-app purchases.
The percentage of revenue that is left after accounting for the costs of running the business, such as marketing and product development expenses. This metric is important when considering investing in paid campaigns (e.g., Google search ads) as it will help you calculate how many clicks are profitable before a conversion takes place.
Customer lifetime value (LTV)
The total value that a customer is expected to generate over the lifetime of their relationship with your business. A high customer lifetime value suggests that users are returning to the app and making multiple purchases.
To calculate LTV:
- Calculate the average order value for one calendar quarter minimum (the longer the retention period the better).
- Check the average number of transactions per that period: how often on average does a customer make repeat purchases with you?
- Calculate customer retention: how long on average does a customer stay with your brand? These numbers will be different across industries.
Now calculate the LTV by using this formula:
LTV = Average transaction value x number of transactions x retention period.
Customer acquisition cost (CAC)
The amount of money that you spend to acquire a new customer, such as through marketing and advertising efforts. In other words, how much you pay for every customer. For your marketplace to make a profit, this value has to be lower than LTV.
You can calculate customer acquisition costs by dividing the total cost by the number of customers. This will give you a ratio — a good ratio is 3:1 or higher. Anything below is a sign you should take action.
Gross merchandise value (GMV) and gross transaction value (GTV)
Gross merchandise volume or value measures the total dollar value of everything sold through a marketplace over a given period of time. It is calculated by multiplying the number of transactions by the average order value (AOV). For example, if a marketplace had 100 transactions with an AOV of $50, the GMV would be $5,000.
If your business model is based on commission, you may want to track gross transaction value (GTV) instead of GMV. GTV is the total amount of money generated by the transactions made through a marketplace, including the commission that is charged to the customer. It’s calculated by multiplying the number of transactions, the AOV, and the percentage of the transaction that is charged as a fee.
For example, if a marketplace has 100 transactions with an AOV of $50 and charges a 10% fee for each transaction, the GTV would be $5,500.
GMV and GTV can be useful metrics for measuring the performance of a marketplace, but it's important to keep in mind that they are raw figures and should be considered in conjunction with other metrics to get a complete picture of the business.
Vanity Metrics — What You Should Be Skeptical About
Vanity metrics are metrics that do not provide meaningful insights about the performance of a product or business and do not contribute to informed decision-making. Some examples of vanity metrics in a mobile app marketplace or shopping app include:
The number of times that the app is downloaded from an app store isn’t a meaningful insight into the success of the app, as it does not reflect the number of active users or the revenue generated by the app. So, view a high number of downloads coldly.
The number of times that users view specific pages within the app may not be a meaningful metric if it does not reflect the actions that users take within the app or the value that they derive from using it. Alone, this metric is useless.
Time spent in app
The amount of time that users spend using the app may not be a meaningful metric if it does not reflect the value that they derive from using it or the actions that they take within the app. However, it all depends on the purpose of your app — if its main task is to provide users with content and that in itself is your goal then time spent in the app will be a valuable metric, especially to measure which content pieces were consumed.
Social media followers
The number of followers on social media platforms may not be a meaningful metric if it does not reflect the level of engagement or the value that users derive from the app. In other words, you can have a huge following but the number of active and engaged users could be only a fraction of that following.
So keep in mind that informed product decisions should be made based on metrics directly related to the performance of the product or business, such as revenue, profit margin, customer lifetime value, and cost of customer acquisition.
Marketplace Metrics to Track for Ongoing Discovery
There are several ways to measure the outcomes of a product from a feedback loop and ongoing discovery practices. By using these strategies, you can measure the outcomes of your product and make ongoing improvements based on the feedback and data you gather.
Here are a few strategies you can consider:
Build a routine of gathering feedback from customers
Staying close to your customers and asking for feedback in a weekly or bi-weekly cadence is key to making informed product decisions. Ask customers for their opinions and feedback on the product through surveys, focus groups, and customer support interactions. This can help you understand how well the product is meeting their needs and identify areas for improvement.
The closer you are to your customers and their needs (in an ongoing manner) the better you can meet the preferences and desires of your users and identify potential product opportunities.
Analyze usage data
Track how users are interacting with the product, including the screens they visit, the features they use, and the amount of time they spend on each screen. This can help you identify areas of the app that may be underutilized or confusing to users, as well as areas where users are spending a lot of time.
Use A/B testing
Set up experiments to compare different versions of the product and track the metrics that are most closely related to the desired outcomes. This can help you measure which versions of the product are more effective and make informed decisions about which features to prioritize.
The Undeniable Opportunity Hidden in Customer Interviews and Surveys
Customer interviews and surveys are an important part of the ongoing discovery process in product development, as they allow you to gather direct feedback from your users and understand their needs and preferences. By interviewing customers regularly, you can:
Identify new opportunities through user needs, pains, and desires
By regularly speaking with your customers, you can learn about their pain points and the problems that they are trying to solve, which can help you identify new opportunities for product development. You can stay up to date with the changing needs and preferences of your users and ensure that your product is meeting their needs.
Minimize the risk of developing features no one will use
By gathering feedback from your users, you can ensure that you are building features that are truly valuable to them and solve actual problems they’re facing. Customer interviews help you create solutions that the competition might lack — even in highly competitive product areas.
Varied Product Teams for Optimal Results and Data-Driven Assumptions
Analyzing marketplace success along with finding insights about future development requires a thorough understanding of a variety of business and product areas. That’s why cross-functional teams with product managers, product designers, and engineers can leverage their combined skills to know what to measure and how to make sense of analytics in product decisions.
Build a Complete Picture of Your Marketplace Health and Performance
As you can see, several metrics are important for a marketplace mobile application from a business and product perspective. By connecting the dots and making assumptions based on data, product managers and owners can understand the performance of the app and make informed decisions about how to optimize the marketplace. You can also work out your own critical metric aka the North Star metric.
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