Questions

we run an agency based service that connects customers to writers. This is profitable as we get up to 60% gross margins. We control pricing, management, recruitment, services offered and only just allowed direct communication. The problem here is that our growth has reached a plateau, and due to competitive rivalry and our pricing model, we feel we are losing out on growth. An idea that has occurred to me is to swith to a marketplace model, offer customers and writers more power and work on the network effect (and reduced pricing ) to grow the business. Is this a good idea? If so, how can I pivot successfully? If not, then what wi you recommend. Happy to book a follow on call if your answer is helpful.

First off, congrats on building a business that creates value and growing customers. Based on your description, the current agency based model seems more one of full-service, you may have a good feel on how much your current customers value the model.

With an agency model, the customer trusts your service and subject market expertise to give them the value they are seeking. It also allows you to charge based on the customer, complexity of project, resources needed, skillset etc.

In regard to the market place model, customers are usually looking for flexibility in pricing and also in situations where they are fine with identifying the writer, project managing it. The platform serves as the connector between both parties and helps manage the experience through services to post requirements, manage feedback & communication, payment, reviews etc

Few recommendations:
- Try the marketplace model as an alternate tier for customers that would be open to managing it themselves
- You facilitate the engagement via the platform and take a cut of the transaction from both parties
- It allows you to see how customers choose between either model & make a decision before pivoting.

Each model has its own advantages & challenges. Look at a few marketplaces such as envato, fiverr etc that have accomplished the marketplace model.

Happy to connect further over a call.

cheers


Answered 9 years ago

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