The service industry is booming at a fast pace. This is the right time for service-focused marketplaces to thrive, and if you are looking to start one, there is no other perfect time. For instance, platforms like Thumbtack, TaskRabbit allows you to book different services and then there are freelancing sites like upwork and freelance catering to professional services. A service platform is an online platform that encourages and arranges to buy and selling of services between users who seek services and service providers. Different services marketplace platform follows different business models based on how they charge users for the services they offer. The common reason why service-based start-ups fail is that they choose business models that don’t scale to ensure sustainability.
Here are different business models for marketplace monetization.
Transaction based
In this business model, the service platform takes a share of each transaction generated through the platform. A transaction based model also showcases high scalability- The more sales the platform generates, the more revenue it brings in. For e.g., Platforms like TaskRabbit works on this model. Both customers and suppliers have to pay a fee when they sell or buy anything. By cutting away the upfront costs of listing and risk of not earning sales, this business model encourages more sellers to join the platform, thereby increasing the supply. The platform takes a service for successfully matchmaking both buyers and sellers. The fee varies across platforms and can range from 5% – 40% based on the value of the transaction and the support services offered.
Subscription-based
In a subscription-based business model, users are billed on a recurring basis and receive the services every month based on their requirements and convenience. For example, Alfred offers home services like hiring house help with a starting price of $22 every week that is billed monthly. The benefits of this type of business model are that once a user signs up; there are chances that they will use the services for long. So it becomes easy to predict the revenue. Service marketplace offering this type of business model also offers the convenience on buying service for one time instead of paying for the same services. It also offers the flexibility to pay for one time instead of paying extra fees for each purchase. Furthermore, the period renewals are often offered at interesting discounts and hence improve overall customer satisfaction.
Lead-based
In this type of business model, suppliers or service providers pay to send quotes to customers. The online marketplace for services connects both customers and service providers based on the specific requirements of the project. Service providers who express their interests and availability to make bids for customers to choose from. The exact cost of this pay-per-quote mode depends on the type of services customers look for.
For example, the Thumbtack business model is a similar one. In the beginning, it worked on a transaction fee-based business model and then later switched to a lead-based model. As these platforms don’t incur any money from users, it is quite easy to earn a large user base fast. After gaining more users, you can easily get service providers to engage in the platform with a simple up-sell. The business models encourage suppliers to pay to bid on a project and this leads to more qualified options and it is easy for customers to find the right supplier.
The right approach to create a service market place
To be upfront, there are no ideal or wrong approaches. You must start with the following factors like technical skills, building the platform and budget. You also have to consider the basic features required for your service marketplace like Thumbtack.
Responsive web design– Customers must be able to easily access your platform from multiple devices like smartphones, laptops, and tablets. Responsive design is all about making your platform seamlessly available and accessible across multiple devices.
Location-based listing– Users who seek specific services must be able to locate the service providers based on their location and vice versa.
Google maps integration– For customers to locate service providers in their area and vice versa, your platform requires Google map integration.
Multiple payment options– You must offer multiple payment methods to customers like debit cards, credit cards and wallets to process payments securely and seamlessly.
Email messaging– An email messaging system is an essential feature in any services marketplace platform to facilitate hassle-free communication between service providers and customers.
Multi-currency support– If you are offering services based on specific locations, multi-currency support is essential as it has to support transactions in local currencies.
Social sharing– Social sharing becomes crucial to earn quality social traffic that helps in improving brand reputation on social platforms.
Which market place business model is right for you?
When it comes to service market place business models, there is no best model as one size doesn’t fit all. Before choosing a revenue model for your business, keep the following in mind-
The industry and your competitors
Drive insights from existing business models and learn why they follow that approach and what the profit figures and challenges are. If nobody else is following what you have in mind, then probably, you could be wrong.
The size of your platform
Some revenue models work for some platforms of a certain size, but don’t work for other businesses. Some work well in the early stage but as you have more business and traffic volumes, you might have to change the approach to suit the current scenario.
The geographic location and culture of the target market
The approaches that work well in one location might turn out to be a flop in other regions. Hence it is important to understand what works for the location you focus on.
Convincing people from all over the world to book services from your service marketplace website is not easy. Building a successful marketplace involves a lot of work. As observed, a service-based business can choose to invade the market with a full-stack approach and different business models. By transforming the offline service into an effortless online transaction, you make these services easily available to customers. Despite the competition, when you choose the right business model and niche, success will follow.
Jessica Bruce is a professional blogger, guest writer, Influencer & an eCommerce expert. Currently associated with ShopyGen as a content marketing strategist. I also report on the latest happenings and trends associated with the eCommerce industry.