There are many revenue models available for the marketplace. Each of them has its own pros and cons. But the commission and subscription model is famous and one of the most commonly used models in the marketplace. Let’s discuss them.
Commission Revenue Model
The commission model refers to the revenue model where a user is charged a fee for each transaction. It is perhaps the most famous marketplace income model. When the buyer pays the seller, the marketplace charges an amount based on a percentage or fixed sometimes. The platform has to decide whom to charge the commission, seller or buyer. Another scenario is charging commission from both parties.
Popular Yet simple revenue model. Marketplace will generate revenue from each conversion.
Pros
Helps in attracting more suppliers
Since the user has to pay only when the items are sold or bought, they do not have to risk their money by placing their business on the platform.
Simple
A commission revenue model is simple because you will earn whenever the user pays for the product or service.
Challenges
Security
If your platform doesn’t offer enough value to the user, then marketplace leakage can happen. This means the user will find its way directly to the supplier rather than dealing with your platform.
Eensure the protection of the user’s deal, and money, so that they can feel safe and do the transaction.
Pricing
The next challenge is setting the price for your service. Whether you want to charge based on the percentage or fixed price. There is no correct response to this inquiry. Charge the fee according to the marketplace. For example, whether it is a seller or buyer-oriented marketplace.
Subscription Revenue Model
The subscription model refers to the recurring charge to access the platform or service. This model is built on creating a long-term relationship with the customer who will pay regularly. Generally, the marketplaces that use the subscription model don’t interfere in the transactions between the users.
Benefits of Subscription Model
Sustainable and Encourages Long-term Relation
The subscription model lets you know the monthly revenue regularly. It’s a great revenue model for the marketplace if you have a trusted community. This will help you in maintaining a long-term relationship with your customers as they will pay regularly.
Attracts more Clients
This revenue model seems convenient to the user. As they do not have too big an amount instead they can pay for it in a small chunk. They can also pay for it yearly.
Challenges of the Subscription Model
Higher Cost
Once in a while the absolute expense of the membership estimating may go higher than the all-out costs for the buying permitting charge.
Provide the Value
In the end, you are offering the membership against the subscription fee. So provide enough value to the user so that users can understand the value of the membership. In short, they should have a nice experience with your service or product, saving time and money.
