How do I change the business model to a successful one?

Our users weren’t happy with us; they didn’t find what they expected. Our content was always a differentiator and provided an easy way to compare prices, our primary business model back then.

To comply with my non-disclosure agreement, I have omitted and obfuscated confidential information in this case study. All information in this case study is my own and does not necessarily reflect the views of KuantoKusta.

This post continues from the previous one: Don’t play the game, change the game. I would advise you to read it first if you haven’t read it.

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When 2018 we started the change to a marketplace at KuantoKusta, we knew little about marketplaces. We were good at comparing prices.

But because we’re going to be a marketplace, we played by the rules the established market has said we should play.

The problem with playing a game we are not good at is that there’s a great chance of one being beaten.

The competition was extreme.

Our users weren’t happy with us; they didn’t find what they expected. Our content was always a differentiator and provided an easy way to compare prices, our primary business model back then.

Our primary business model was Pay-Per-Click (PPC). A store is displayed on a product page, and if a user clicks on that offer, the store pays a click, like google ads.

This works because the traffic was excellent, and users were in a final decision call to make a purchase.

Because we were changing to a pure marketplace, and the market worked like that, we featured the marketplace stores on the top of the product page, our main converting page, even if those stores didn’t present a good deal.

The main difference was that in a PPC store, the user could click and visit that store’s offer and buy from them. If it were a marketplace store, you’d buy directly inside KuantoKusta, which provides safety in the process (get your order or get your money back).

Our users didn’t get it. Other stores that stayed in the PPC model weren’t happy to be buried in the product page. We weren’t making any more money. We were losing it quite fast. So it was a loose-loose-loose situation.

So I was running one day, like on many runs, and I was thinking about all kinds of things, including this problem.

We are losing it, so how do I change the game? How do I change the game? How do I change the game?

By playing by our rules, not the marketplace’s rules.

We would need to offer what our users and partner stores wanted: compare prices, make safer purchases while saving money, and decide to buy directly from a store or buy several products in one basket from different stores.

There’s a crucial catch here. If a store is in the PPC model, they would have to show the same price both on their’s site store and in KuantoKusta.

When a store is in the Marketplace model, this doesn’t apply, mainly because of the store’s commission fee to the marketplace.

This fee usually means that the store has to increase the product’s price to sell them in the marketplace.

So we need something different.

We need commission fees and conditions made for our market context.

We’ll help users buy at the best prices with payment security and allow the stores to have two baskets where they’ll win money in both KuantoKusta and on their sites.

So we introduce the DUO, a business model that combines PPC and Marketplace, two buttons, the user can choose which he preferers.

The lower commission fee still made us money, and the stores could now migrate to this new business model.

Instant success! This was 2019, and the following year, following other improvements on the product, the company saw historical results!

Because the different stores were not sorted by lowest to the highest price, it had a simple algorithm highly based on the individual PPC each store paid; it was necessary to design a new one that could offer the same chances to each store to position itself on the product page and not based on PPC (marketplace stores don’t pay per click, they only pay if there’s a sell inside the marketplace). I’ve created this algorithm to be fair for all while having sufficient parameters not to be guessed or gamed.

This DUO model, combining PPC and Marketplace, was further developed in other European countries in the following years.

As the famous advertising man Bill Bernbach once said, “Creativity is the last unfair advantage we’re legally allowed to take over our competitors.”