Measuring Success: B2B Marketplace Metrics and KPIs

Marketplaces are unlocking seemingly endless new streams of revenue for B2B businesses. 

Some 72% of B2B businesses that launched a marketplace witnessed their market share grow in the past two years. Plus, according to a recent study, companies that launched a marketplace experienced:

• 44% growth in customers
• 42% growth in revenue
• 36% growth in average order value

With the advent of the multi-vendor marketplace platform, it’s never been easier for an existing B2B enterprise to launch its own marketplace.

But how do you know your marketplace is on the path to success?

First things first, you need to look beyond the online shopping cart. An effective marketplace strategy helps enable several parts of your business — from advertising to customer retention to supplier enablement.

Identifying the key success metrics to watch, setting clear goals around them, and checking in consistently are all essential for establishing your ROI.  

Measuring the right metrics helps keep you and your team informed on what’s working for your marketplace, and, more importantly, what’s not. Then you can iterate accordingly so no one is wasting time or effort on the wrong initiatives. 

In this blog post, we’ll define marketplace KPIs — these are the metrics you’ll want to pay the most attention to — and explore the different categories of B2B marketplace metrics to keep an eye on, including:

• ‎Li‎quidity metrics
• Trust metrics
• Business scale metrics
• Profitability metrics
• User behavior metrics

First, What Are Marketplace KPIs?

KPI stands for key performance indicator. 

KPIs are strategic B2B marketplace metrics that a business can use to track progress toward goals. They should be quantifiable metrics that enable a marketplace operator to assess the performance of their online business over time.

In short, KPIs are a way to consistently assess whether your marketplace is moving in the right direction. 

For example, if one of the goals of your marketplace is to improve your customers’ purchasing experiences, an effective KPI to watch could be the net promoter score (NPS). This is a rolling score, based on feedback from customers, that will help indicate whether they're happy with their experience.

KPIs are especially important for businesses at the beginning of their marketplace journey. The most effective marketplace launches take an iterative crawl, walk, run approach to enable learning and faster time to value. Your KPIs will help steer each step in the right direction, so you can make data-based decisions to help meet your ultimate marketplace vision and goals. 

Let’s take a step back and look more broadly at the B2B marketplace metrics to rely on for measuring success. 

The Main B2B Marketplace Metrics and KPIs to Track

You can break down the main B2B marketplace metrics to track into five distinct categories, according to McFayden’s Marketplace Best Practices. Metrics within these categories should provide the marketplace operator with all kinds of critical information, such as how much the marketplace’s inventory is worth, the level of revenue a seller is expected to bring in over time, and much more. 

Ultimately, the metrics and KPIs you focus on will depend on your end goals.

1.‎ Liquidity Metrics

With a marketplace, there are buyer- and seller-liquidity metrics to analyze. The former looks at how likely it is that a marketplace visit will result in a sale. The latter expresses the percentage of listings that generate sales over a specific timeframe.

Search to Fill: How often do searches or requests result in a sale? Search to fill is the metric that answers that question as a percentage.

Supplier Utilization: Reflecting the percentage of vendors who are experiencing higher customer traffic, supplier utilization is a metric that can help you flag your strongest vendors as well as identify what types of products or services customers are most interested in. 

Time to Fill: This measures the speed at which marketplace orders are being filled or services are being provided.

2.‎ Trust Metrics

These metrics are important to watch because building trust is crucial for a marketplace’s success. The relationships you build with your buyers and sellers are of incredible importance, especially as order sizes increase. Without trust, buyers and sellers alike are not likely to return to your marketplace.

Customer Retention Rate: If you want to see how effective a customer loyalty program is, you can look at the customer retention rate. It presents, as a percentage, the share of repeat customers during a specific period of time.

Ne‎t Promoter Score: The net promoter score is a single-question market research tool. It asks buyers (or sellers) “How likely are you to recommend our marketplace to a friend or colleague?” on a scale of 1 to 10. Respondents who answer between 9-10 are valuable users known as promoters. And it goes without saying, the more promoters your marketplace has, the better your business will do.

Customer Resolution Time: Excellent customer service is a fundamental component of building trust. To gauge how well a marketplace serves its customers, the customer resolution time looks at how fast customer interactions are resolved on average.

3.‎ Business-Scale Metrics

Consider these B2B marketplace metrics as the big-picture metrics. Business-scale metrics give an overview of costs and revenue as well as an indication of how profitable a marketplace is. 

Gross Merchandise Value: GMV is how much all the products or services on a marketplace are worth (not counting returns and cancellations).

Net Revenue: Calculate net revenue by multiplying GMV by the per-transaction commission rate, which is the percentage marketplace operators receive for each transaction.

Customer Acquisition Cost: CAC tells marketplace operators how much it spends on average to acquire a new customer. It includes hard costs, which are direct expenses like lead-generating campaigns, and soft costs, like headcount expenses related to gaining customers.

4.‎ Profitability Metrics

B2B marketplace metrics like gross sales — while important — don’t tell the whole story. Marketplace operators need to drill down further into profitability metrics to determine whether their marketplace is in the black.  

Average Order Value: Otherwise known as AOV, it's the average amount of money a customer spends per transaction. This is a valuable metric to understand changes in buying behaviour and to identify opportunities to offer more of what your existing customers are looking for. Learn more about the definition of AOV.

Concentration Analysis: Concentration analysis focuses on relationships between buyers and sellers and various groups within. It can reveal geographic or demographic trends that allow you to make more informed decisions and investments. For example, if most of the marketplace sales are coming from businesses in Florida with over $100 million in revenue, it makes sense to disproportionately target those customers.

Seller Acquisition Cost: A similar calculation to the CAC, but for sellers. For example, if a marketplace operator has a seller acquisition cost of $5,000 and attracts 5 sellers, their initial spend per seller is $1,000. However, let’s say each of these new sellers processes 1,000 sales. At that point, the seller acquisition cost works out to $1 per transaction. Taking things one step further, you can then apply the SAC to your margin. Suppose the operator earns a $10 commission per sale. Subtract the $1 acquisition cost, and you’ll have the net margin per transaction.

Seller Lifetime Value: An estimate of the revenue a given vendor will generate during their time spent participating in your marketplace.

Monthly Recurring Revenue: Another key profitability metric, monthly recurring revenue is the average revenue per customer times the number of customers. This metric is based on the reliable income a marketplace makes each month and is mostly applicable to subscription-based models.

5.‎ User Behavior Metrics

Behavior metrics are a valuable way to understand how customers are using your website — including what's resonating and what's not. These are helpful to ensure you're staying focused on providing the best possible experience for customers.

Monthly active users: This KPI is purely based on traffic. Monitoring how many people are coming to your marketplace each month will help you understand growth over time and conversion rate.

Bounce rate: Bounce rate looks at who's leaving your site right after they land. Bounce rate is a metric you want to keep low. If your bounce rate is high, it likely means the user didn't find what they were looking for, which can be attributed to a number of things, including poor UX or misleading titles.

Time spent on site: The opposite of bounce rate, time spent on site lets you know how long people are engaging with your marketplace. Dig deeper to understand what exactly users are doing when they're on your site so you can make continuous improvements.

Conversion rate: This is one of the more important KPIs to track, as it tells you how many people are actually following through with making a purchase on your site. Comparing the conversion rate on various pages will help you identify challenges so you can test new improvements. Sometimes optimizing your conversion rate can come down to something as small as button size.

Ho‎w Decision-Makers Define Marketplace Success

Nautical commissioned Forrester Consulting to conduct a survey of over 100 distributors across North America that have launched a marketplace.

The study finds that increasing sales is the most important outcome of launching a marketplace, with 88% of respondents indicating its significance, and 51% of respondents noting that it was "very important". That being said, increasing sales is closely followed by success measures like:

• Scaling without increasing headcount
• Increasing product assortment
• Increasing product availability
• Fast time to market
• Agility to respond to market shifts

3 Tips for Measuring Success with B2B Marketplace Metrics

Having access to data and knowing the main B2B marketplace metrics to measure is important, but so is how a marketplace operator uses the numbers. Follow these three tips for measuring marketplace success.

1. Set goals: Make sure you have targets to work toward in terms of your marketplace KPIs. Your goals should be specific, measurable, attainable, and tied to a realistic deadline. They should also be written down and referred to often so no one forgets about them.

2. Track consistently: KPIs are commonly tracked weekly, monthly, quarterly, and annually, but whatever you choose, be consistent. We recommend checking in on KPIs more often than not, to help you be agile and iterate as needed. 

3. Adjust accordingly: Listen to the data. For instance, if the marketplace customer resolution time seems high, invest in this aspect of the business. If a certain vendor is popular, seek out other vendors with complementary products or services.

 Measuring marketplace success

To be a contender in this fast-paced new age of B2B ecommerce, it’s clear that understanding B2B marketplace metrics is a must. Having a firm grasp of these examples of B2B ecommerce KPIs and metrics will allow you to successfully navigate the early expansion stages and continue to adapt to the changing marketplace landscape. 

🔵 Download this free study for learnings from 100+ B2B companies that have launched a marketplace. 🔵

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