No budget, no problem: How to get your partner marketplace paid for

April 29, 2024
No budget, no problem: How to get your partner marketplace paid for

In 2024, unlocking budget from leadership is a tough endeavor. They’re likely more concerned with how to reduce costs than increase them. But marketplaces are unique. They inherently create shared value with the businesses who have listings in the marketplace.

When a company decides to build a marketplace, they’re committing to creating value not just for themselves, but for every business that’s listed on the marketplace. Ultimately, companies make a bet when they launch a marketplace: by providing a platform for value exchange between third-party sellers and customers, they’ll create network effects and scalability which will take their business to the next level.

Therefore, some companies are willing to invest upfront in setting up and operating a marketplace. And most companies see the marketplace as their asset, and thus, assume the financial responsibility for it. 

But not every company has to pay out-of-pocket for their marketplace. And in many cases, they shouldn't.

Although the marketplace owner is poised to make hay through their platform strategy, the marketplace also drives substantial value for the companies listed in the marketplace. They get evergreen exposure to their target audience, who will automatically trust those providers because they’ve been pre-vetted by the marketplace owner.

The partners' marketplace listings will increase brand exposure and present a unique and highly relevant value proposition to a target audience. And when visitors are interested in that value prop, they can connect directly with the partner, install apps and integrations, and otherwise take actions that drive value for the the company listed in the marketplace. 

When you launch a marketplace, you give partners a growth opportunity which they would not have had prior. In a world where demand gen is getting more and more difficult, and social proof and digital buying processes are becoming the status quo, companies are willing to pay for this opportunity.

Your partners will be happy to chip in for the cause, with the mentality that everyone is making this possible together. Their willingness to pay presents an opportunity for marketplace owners, or companies interested in launching a marketplace but held back by the upfront costs, to directly subsidize or pay off their costs (or even profit from their marketplace).

And to be clear, this is before any of the benefits of having a marketplace are taken into consideration. We’re strictly talking about a direct payback from participants who receive value from the marketplace.

3 ways to pass your marketplace costs onto listed partners

  1. Charge partners a marketplace fee: when a partner joins your marketplace program, require a modest annual fee to be listed: ranging from $50 - $500 per year. This is a shared investment in driving value together. Charge an amount large enough to cover marketplace platform fees, but small enough so that partners can pay with their personal credit cards and reimburse the expense without having to get approvals. This is the most straightforward and predictable way to pay off your marketplace. The downside is, it’s a cost prior to value being received, as opposed to the next option. 
  2. Establish a standard referral commission: There are two approaches to referral commissions - Pay Per Lead (PPL) or revenue shares. Partners aren’t on the hook to pay anything until they’ve received value so they’ll be happy to pay for the value received.
    1. PPL: Establish a standard fee for leads generated for partners through your marketplace. (Wondering how to track these leads? Get a demo to see how easy Partner Fleet makes it.)
    2. Rev shares: Establish a standard % revenue share that partners agree to pay when a lead is sourced from your marketplace and the deal closes. This is the most complicated model to pursue, but it's most directly tied to revenue, and therefore opens the door for much larger revenue for the marketplace provider. 
  3. Charge for marketplace benefits: Partners receive more value from your marketplace when they’re prominently featured and have robust, captivating listings. Sell time-restricted premium marketplace packages to your partners. This option is usually something to layer into an already successful marketplace program that has strong data points to inspire partners to lean in further. 

How to charge partners a marketplace fee

Let’s say your annual marketplace platform costs are $50K (using a marketplace platform… costs to DIY will be much higher). 

To pay off your marketplace with the listing fee option, you have two variables to consider:

  1. Number of partners
  2. Amount charged per listing

Fixed partners, variable fee.

If you have 300 partners, you’ll need to charge $167 per listing to break even. 

If you have 100 partners, you’ll need to charge $500 per listing to break even.

Fixed fees, variable partners.

Or you could make the listing fee fixed and the number of partners the variable. Then you’ll need to set a target goal to pay off the marketplace by increasing partner recruitment.

So let’s say you set the annual listing fee at $200. You would need 250 partners to break even. 

How to establish a referral commission

PPL (pay per lead) option

For the PPL option, the same model works except you need an educated guess on how many leads you’ll be able to drive to partners from your marketplace. So the two variables are:

  1. Cost per lead
  2. Number of listings

So if you decide to charge $35 per lead, you’d need to drive 1,429 leads per year to break even, which is 119 per month.

(This model incentivizes you to prioritize promoting your marketplace, which can have many additional benefits to your own lead gen efforts.)

Rev share option

For revenue shares, the variable is the % of revenue you would take from the deals. If you decide on 10% of the first year, you’d need to source $500,000 in revenue for partners. 

It should also be noted that you can combine these in any way that makes sense for you and your ecosystem. For example, you could charge an entry fee for the marketplace, plus a per-lead fee. That way, you’re aligning to two different ways partners receive value, and the costs are individually justified.  

This is great in theory, but your leadership team will probably want to know whether it’s viable.

We recommend surveying a subset of your partners, and asking them the following questions:

  1. Would you be excited to be showcased in a [company] marketplace?
  2. Do you think this would drive value for your company?

Would you be willing to pay an annual fee to be featured? If so, how much?s

  1. $100 or less
  2. $200 or less
  3. $500 or less
  4. $1,000 or less
  5. I wouldn’t pay

Would you be willing to pay per lead?

  1. $30 or less
  2. $50 or less
  3. $70 or less
  4. $100 or less
  5. I wouldn’t pay
  6. Would you rather pay a fee to be listed (fixed, predictable) or a fee per lead generated (variable, but connected closer to value)?
  7. What amount would you be able to pay without approvals?
  8. Would you be able to pay on your personal card and reimburse the expense?
  9. Feel free to send thoughts, comments, and ideas here.

The message to your partners is important for this. We recommend something like this:

Hi [Partner],

[Your company] is considering launching a marketplace to showcase our integrations, apps, and service partners. We found that there’s significant interest from our customers for a way to discover and adopt these solutions on their own, instead of having to talk with a [your company] team member. 

The costs to build a marketplace are substantial, but with participation and support from our partners who stand to benefit from the marketplace, we believe we can bring the costs down enough to justify investing the time and resources. 

To validate this, we’re looking for feedback from a subset of our trusted partners.

Would you please fill out this survey with your thoughts?

We appreciate your help on this!

Once you’ve collected the data, you’ll have a good sense for whether your partners would be willing to pay, what they’re willing to pay for, and how much they’re willing to pay. You can use this data to create a pitch for leadership.

Pitching your leadership

Your pitch to leadership should incorporate a few main components:

  1. Problems (with data)
  2. How the marketplace solves the problems
  3. Investment required
  4. How you’ll subsidize,break even, or profit on the required investment
  5. Additional benefits yielded from your marketplace strategy

If you’ve framed up the problem and solution, and have a great plan to break even on the project, it should be a slam dunk for leadership. 

If you want a much more thorough overview on pitching your partner programs to leadership, check out our Guide to Pitching your CXOs.

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