How We Embraced Third-Party Distribution to Drive Revenue Growth

Rethinking Marketplace Relationships

When scaling a business, there's a common scenario that plays out far too often: Companies pour money into marketing campaigns, watching their impression numbers soar without seeing any tangible results. It's a story we've seen repeatedly at Pieo, and it raises an important question: Are we sometimes too focused on vanity metrics, and overlooking opportunities as a result? 

The Real Cost of Customer Acquisition: A Wake-Up Call‍

Recently, one of our hospitality clients came to us with a familiar problem: They were spending heavily on marketing, particularly in paid social, upper funnel metrics such as impressions and reach were celebrated, but these interactions were not leading to regular sales; Their cost of acquisition was sky high and it was impacting their ability to grow. 

Here's what their situation looked like:

• High marketing spend across paid social and search
• Impressive reach and impression numbers 
• Slow growth on their primary channel - Instagram
• Low conversion rates on their own website

The celebrated reach and impression metrics were masking a major issue, unsustainable customer acquisition costs. As a self-funded business, they found themselves in a position with limited cash reserves to continue funding marketing efforts and needed to generate sales quickly to build their cash position. 

All of the aforementioned challenges can be solved given time, but in this scenario there was an immediate need to drive revenue. 

The Counterintuitive Solution: Embracing the 'Competition'‍

What if I told you that the solution to their problem wasn't in optimising their current marketing campaigns. Instead, it lay in embracing what many businesses love to hate: third-party marketplaces.

This might sound counterintuitive. After all, marketplace fees can seem steep, and many businesses resist what they see as 'giving away' their margins to these platforms, and losing control of their customer relationships. 

But let's consider the alternative, What if we stopped viewing marketplace fees as an expense and started seeing them as our cost of acquisition? Stopped thinking about losing control or customer relationships and focused on the opportunity to build new relationships. 

This simple reframing changed the businesses perspective and provided a launchpad for growth.

Consider these numbers (anonymised but representative):

• Previous Cost of Acquisition (CAC) through paid marketing campaigns: AED 500
• Average marketplace commission: 15-20%
• Average order value: AED 800
• New effective CAC through marketplace: AED 120-160
• Difference: 60% reduction in CAC 

This presented an opportunity to reallocate ‘marketing budget’ to marketplace fees, shifting focus to drive immediate, and profitable, revenue growth.  

The Strategy in Action: Leveraging Marketplace Dynamics‍

Acknowledging that the business needed a better understanding of who their customers were, and time to build their reputation, we decided to go where the audiences are, and build a direct acquisition strategy in parallel. 

Rather than fighting against well-established marketplaces, who spend heavily on customer acquisition, particularly in paid search (where they had virtually unlimited budgets), we developed a strategy to work with them. 

Here's how we approached it:

We analysed audience search behaviour and marketplace ranking algorithms to understand what drives visibility, and bookings. This wasn't just about keywords; it was about understanding the entire customer journey within these platforms. Rather than simply listing and hoping, we implemented a data-driven approach to optimisation to rank quickly, and win new customers. 

In addition to the quality of the listing, and photos used, we developed a framework for customer service interactions and implemented strategic pricing and promotions. The simultaneous focus on factors that influence search results led to:

• Initial momentum through competitive introductory offers
• Increase in the number of customer reviews and user-generated content
• Inbound partnership opportunities

Not only did this propel us to the top of the rankings, it also enhanced social proof for potential customers which improved the likelihood of conversion from direct acquisition campaigns.

Importantly, the change in strategy directly impacted revenue with a 534% increase in bookings and a 174% increase in Gross Revenue.  

Avoiding the Marketplace Trap‍

A common concern about this strategy is becoming overly dependent on marketplaces. Here's how we prevented this:

Strategic Cash Management

• Used marketplace-generated revenue to build cash reserves
• Invested in improving direct booking capabilities
• Allocated a fund for direct acquisition marketing initiatives

Leveraging Social Proof

• Transferred marketplace reviews to owned channels
• Used UGC in direct marketing efforts
• Built brand credibility that transcended the marketplace

As we only incurred costs after the sale was completed, we built cash reserves and set up this business for the next stage of growth. We viewed marketplace success as a stepping stone, not a final destination. Leveraging them to fund our path to a more diversified acquisition strategy.

The Power of Pragmatic Growth‍

Our experience has shown that sometimes the best path forward isn't the most obvious one. While many businesses view third-party marketplaces as necessary evils or direct competitors, we've found that embracing them strategically can be transformative. By reframing marketplace fees as acquisition costs and using the platforms as stepping stones rather than final destinations, businesses can generate immediate revenue while building toward long-term sustainability.

The key is maintaining perspective: It's not about choosing between marketplaces and direct channels, but rather understanding how each can serve your business at different stages of growth. In a world where many companies burn through capital chasing vanity metrics, this pragmatic approach to customer acquisition might just be the difference between sustained growth and stagnation

Ready to Transform Your Customer Acquisition Strategy? Whether you're struggling with high acquisition costs or looking to scale efficiently, we can help you develop a strategy that works for your specific situation.

Remember: Sometimes the most effective path to growth isn't the most obvious one. It's about being pragmatic, data-driven, and focused on sustainable results rather than adhering to conventional wisdom about how things "should" be done.

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