How focusing on Shared Success and Customer Win-Wins reduced Customer Acquisition Costs at Marktplaats by nearly 20%
Today, I will share how Marktplaats.nl – the leading Classifieds Marketplace in the Netherlands and the foundation to eBay Classifieds Group – focused on Customer Value win-wins and reduced its business customer acquisition costs (CAC) by nearly 20%.
First, some trivia facts. Marktplaats.nl is the largest Online Classifieds platform in the Netherlands, with 8 million unique visitors and 350,000 new ads per day. In fact, there are more live ads on Marktplaats (18,7 million) than people living in the Netherlands (17 million). Marktplaats was acquired by eBay in 2004 for 225 million euros after a tough competitive battle. Marktplaats - local, nimble, and easy to use - was run by an entrepreneurial team in Emmeloord, and won against a well-funded American arrival. eBay leadership saw the great potential of the Classifieds experience, and in the spirit of “if you can’t beat them, join them,” acquired Marktplaats, creating a foundation for the eBay Classifieds Group (ECG). In turn, ECG was acquired by Adevinta in 2020 for 8 billion euros and delivers strong profitable performance to this day.
Today’s story is about how redefining a “successful customer,” learning from other industries, and breaking down organisational silos resulted in a nearly 20% decrease in customer acquisition costs (CAC). This meant a meaningful uptick in profitability, as well as higher satisfaction with the “value for money” delivered to the business customers.
Marktplaats business seller proposition was introduced in 2006 to a great success. Thousands of businesses were using Marktplaats already, and an opportunity to create a more professional presence, pay only for performance, and define your own budget and price made it an easy sell. Four years later, the business grew well beyond the existing Marktplaats sellers, and was using a professional Outbound Sales partner and leads generation to expand its customer base. The focus shifted from announcing our proposition to the world to a more targeted acquisition, finding prospects with the highest chance of converting from a sales call to a sign up.
Another four years later, the fresh leads lists were getting shorter, and the conversion rates were decreasing. The costs of customer acquisition were growing, the number of new customers declining, and their lifetime value flattening. The team had enough data at their disposal to confirm that there was a problem; it was, however, not sufficient to figure out a solution: how to improve the quality of leads and the overall business performance?
The highlight of today's story isn’t really CAC improvements or profits. It is the three major shifts in operating that made it possible to improve the business results:
(i) A shift in perspective when defining valuable customers. We went beyond the one-dimensional revenue metrics and applied a balanced “win-win” definition, to identify the types of business sellers who were the most valuable to Marktplaats in the long term.
We defined them as sellers whose ads were attractive to buyers and converted well into website visits, who paid a fair price for the service they received, and who in turn were receiving good value for their money and stayed as Marktplaats customers for a long period of time.
Focusing on acquiring and retaining businesses with a high “win-win” profile score instead of those most likely to say “yes” in a sales call decreased the customer acquisition costs while growing revenues and customer success.
At the earlier stages of business growth, when the long-term customer performance data were not yet available, customer segmentation that worked well enough was based on simple revenue rankings. Customers with the highest monthly revenues received the most attention and proactive personal contact, those with the lowest spend received automated email encouragement.
With time, it became clear that the relationship between monthly spend and long-term value to Marktplaats and its users was more nuanced. Shifting the perspective from a one-dimensional segmentation to a balanced “win-win” measure of value to the buyers, sellers, and the Marktplaats business overall helped identify the next wave of successful customers.
(ii) Increased diversity of professional backgrounds on the Marktplaats team made it easier to recognise relevant transferrable practices from other industries, like Telecom, Banking, Media, Hospitality, or Automotive, and thoughtfully advance them in the new context.
A lot of challenges in business performance are universal across different industries. Topics like lowering customer acquisition costs, increasing customer retention and lifetime value, fraud prevention, identifying real rather than stated customer needs have been around before the internet industry. A lot of resources and thought already went into figuring out how to address them well.
Blindly applying playbooks from other industries does not automatically deliver value in a new context. Instead, what matters is having team members with a diversity of experiences – those who can recognize when a borrowed practice from another industry might be relevant, thoughtfully scrutinize how it needs to change in the new context, and then take the risk of doing things differently than before.
The Internet Industry has grown strongly and impressively since the late 90s. It’s been a fantastic place to work, full of young people building up their expertise while seeing immediate and measurable impact of their efforts. You might recognize a company like this: everyone is roughly 28, has worked for a tech company or consulting straight out of the university, and sees themselves as an successful innovator.
There is a risk of serious blind spots related to overstaffing the team with those of similar backgrounds; not having the exposure to recognize transferrable best practices from other industries is one of them. Some of the most impactful innovations at Marktplaats have been introduced by those who joined from the Telecom, Banking, Automotive, or Retail industries, and recognised the opportunities to apply decades of development in the new context. Intentionally choosing an Outbound Sales partner that has been serving many different industries also made it easier to use those best practices to improve performance.
Expanding the team beyond the existing profiles and backgrounds, bringing different points of view and experiences, allowed us to see the opportunities that would not have been visible when everyone on the team had the same history and perspective.
(iii) A culture shift within the organisation: moving from a hierarchical, functionally siloed, waterfall way of working to an active ongoing collaboration across teams.
Conventionally, a company would be divided into the Business Functions and the Support Functions. The “Business Teams” would create the requirements, and the “Other Teams” (Operations, Outbound Sales, Analytics…) would execute on them. For example, to acquire new business customers, the Operations team would receive a file with the leads to contact and the targets on the conversion rate for sign-ups. All they had to do is hit the phones. It was a simple and clear way to work.
Or was it?
It was indeed straightforward to execute on the instructions. Activity-based measurements used by the Operations team and their outbound sales partner – such as the number of calls made and conversion of calls to sign-ups – were useful in quantifying the increasing CAC. The fresh leads lists were getting shorter, the conversion rates were decreasing, the pressure on the team budget increased. But the levers at the team’s disposal were limited. A bigger change was required.
It was really exciting when people from different teams started coming together, not to compete for control or give requirements, but to brainstorm and collaborate on how we might use all the knowledge and experience in the organisation to make a big, audacious change of 20% CAC decrease.
Our bright Analytics colleagues went deep into K-means Clustering Segmentation, uncovering patterns we have not seen before. Our Marketing colleagues verified the findings with the qualitative research and explored the effects of the CLM programs on increasing the “win-win” score. Our Operations team worked with the Outbound Sales partner and with external data enrichment companies to create ranked, targeted outreach lists prioritized on the chances of long-term success. The lines between functional responsibilities were blurring; the common goal of increasing long-term success for all: Marktplaats buyers, sellers, and the business itself – was taking over.
In the end, the impact came from the following three steps.
First, we created a measurable definition of what makes a “win-win” customer. These were the customers who had a high conversion rate (CTR) from their Marktplaats ad to their own website, maintained a healthy price-per-lead relative to benchmarks like Google Adwords, and remained paying customers for a long period of time.
Second, we enriched the company data with the help of Outbound Sales partner, companies like Dunn & Bradstreet, and our proprietary online presence analytics tools to build company profiles most likely to be successful “win-win” sellers on Marktplaats. For example, a company with a well-setup web shop, healthy financials, and good customer reviews would have different chances than a one without online presence and with a long list of customer complaints. We went further than the shallow “are you a good online company” segmentation and compared these profiles to the “win-win” customer profiles of Marktplaats to identify those for whom our platform, proposition, and buyers' intent were the most relevant. To expand on the example above, all things equal, a webshop selling as-good-as-new bookshelf sets would have a better long-term success on Marktplaats than a “design your own fancy furniture online” brand.
Finally, we used these insights to apply the lookalikes methodology to qualify prospective leads, improve our sales pitch with a value proposition based on real and relevant customer stories, increase conversion rate, decrease customer acquisition costs, and grow the lifetime value of our customers.
The moral of the story? It's all about the team and its culture: what your colleagues know, what they see, how they connect and share ideas, makes a gigantic difference to the business results. Oh, being good at customer segmentation analytics helps as well 😉
There are many reasons for the popularity of Marktplaats in the Netherlands: simplicity of its user experience, high success rate in trading on its platform, a recognizable brand with proud local roots and great many stories to tell. You will read in my later posts how the journey of the Classifieds businesses in other parts of the world compared to this playbook, which aspects proved to be universal, and which required a complete user experience reinvention (a hint is in the comments).
But for now, dear readers - if you recognise the story and have your own insights to share from those times - do add them in the comments, and tag your colleagues who were part of this and might enjoy the memories.
Next week, I will be writing about applying best practices from credit risk modelling in the Banking industry to fight online fraud in Marketplaces and SaaS businesses, the impact it had on the customer experience, and the fun the teams had doing it.