A US based used car marketplace turned to customer insights and identified revenue growth segments.
The used car marketplace startup wanted to understand direct revenues and the costs associated with their business model i.e. a buyer and a seller of used cars. As a startup, they needed to understand the sustainability of their business model and if tweaks were required. They also wanted to understand the cost (as well as) least profitable segments, and use this analysis to focus on the right customers to move towards profits.
To the point cash flow analysis
The customer insights study was focused on identifying the key units – in this case the buyers and sellers, and measure business performance metrics associated with the units
- Calculated metrics of retention, transactions and fees at unit level
- Measured the customer acquisition cost (CAC) for retained vs new customers
- Performed latent class segmentation & identified customer groups
The study helped the startup identify the value of offers they could make to their customers – both buyers and sellers, and which segments would turn profitable during their life time
Customer insights for profitability & cash management
The startup had raised a significant capital in their first round of funding, that was focused on onboarding as many buyers and sellers to their marketplace. With desired growth levels, their focus turned towards sustainability and scaling up the business model. Direct revenues and costs on business units was on top of their mind to drive profitability
Our client needed more than unit economics study to get the answers they were looking for i.e. not just a measurement of retention, new customer acquisition, # of transactions and fees – but an understanding of customer acquisition costs, their lifetime value and the segments that were profitable and the ones that were driving the cost. With our integrated customer analytics study, they understood all that. And more!
Highlight opportunities. Expose gaps
Unit economics looks at direct revenues and the costs associated with basic units of a business model
Combining unit economics with customer acquisition cost (CAC) and segmentation, we are able to answer some key questions for the startup:
a. How sustainable was there customer acquisition strategy
b. Key buyer and seller segments that were profitable and the ones that were money drainers
c. Whether the revenue model being pursued was working, and if any re-alignment is required
The strategy and leadership team, armed with the insights from the study, realised some key challenges to the business model they were following.