How to properly determine what you need to charge this service providers
on your on-demand app
You built your on-demand marketplace to turn a profit by charging a fee for the convenience it provides to buyers and the income it provides to service providers. Do you charge fees to your sellers, buyers or both? How much do you charge them? How do you structure your fees?
Assess Costs
Ensure your business is sustainable by assessing your costs. Aside from development, your on-demand platform will likely incur ongoing costs from payment engines, cloud-based solutions, licence fees to third-party solution providers, maintenance and insurance coverage.
Assess Buyer Value
What are Buyers paying for comparable services offline? What is the value of your on-demand convenience? Many on-demand platforms successfully charge buyers up to a 30% premium for their services. While we cannot determine how much of a premium your marketplace will bear, it is clear that some buyers are willing to pay a premium for on-demand convenience.
Assess Service-Provider Value
Find the value you on-demand platform provides to your sellers. What does it cost your service providers to deliver their services? Are you dealing with professionals who have fixed costs or cottage-industry freelancers investing little more than their time? How much do they save by getting free demand for their services through your platform? Are they using their own facilities or providing services offsite?
Uber Eats charges restaurants 30% successfully because increased customer demand with no in-dining or cost-free delivery costs can bear that expense. Rover charges its dog walkers 20% successfully because it leverages a cottage industry where its service providers can meet buyer demand with little to no costs beyond their time. AirBnB charges the buyers for the majority of its service fees rather than it’s hosts at a sliding scale of 10%-15% because its hosts can afford to charge a fraction of the rates offered by the hospitality industry.
Different Fee Structures
Once you have assessed where your on-demand platform offers value, you are in a position to structure your fees. Consider which users you are going to charge and how you are going to charge them – i.e. are you going to build your fees into the service and charge sellers a percentage or separate your fees from the sellers’ and charge them to the buyer or do both?
Finally, at which price point do you wish to enter the market? Are you going to charge a premium, match or even undercut offline industry pricing to build adoption?
Ultimately, only you can answer these questions. Hopefully this article has placed you on the path to making more informed choices in doing so.
