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“My trusted business connections told me I’m mad:” A charging model where honesty is the only policy
Left: Matchboard Founder, Sharon Melamed
Tue 8 December 2015 - 5:03 pmDigital | Featured | Finance | Industry | Professional Services | Small Business | Strategy | Tech
In this digital age, there are matching sites for almost anything. Whether it be for dating or for finding employment, Google will fetch back a raft of options – all vying for our attention. But despite their best efforts to distinguish themselves, most of them have one fundamental element in common: their charging model. Users are nearly always required to pay subscription or advertising fees before even getting a sniff at a match. That was, until Sharon Melamed brought Matchboard to the scene in 2012.
Matchboard, a B2B matching site connecting businesses with ‘best-fit’ suppliers, only charges suppliers when they have closed a deal with a Matchboard lead. And here’s the punchline – this system relies entirely on honesty.
Sharon said “they have to honestly report to us each month whether they closed any deals, and if yes, provide invoiced amounts. We in turn calculate our ‘success fee.'”
To all those who described her as ‘mad’ when she first floated the idea, Sharon had only one response: “if you put the customer at the heart of your business decisions, it’s hard to fail.”
According to Sharon, market research revealed that an overwhelming amount of suppliers preferred a success fee to a subscription or ‘pay-per-lead’ model. Later – trials involving both models verified that Matchboard’s ‘pay-on-success’ model was not only “far more lucrative for Matchboard, but it was giving customers (the suppliers) what they wanted.”
So perhaps Sharon should be better described as cautiously brave than mad.
Rationalising this new style of payment model, Sharon commented, “people get nervous with subscription and advertising fees with no performance guarantees, and our model refreshingly puts skin in the game.”
While acknowledging that there are risks associated with user “amnesia,” Sharon commented that suppliers are willing to pay a lot more for a deal they’ve banked than a lead. “It’s a psychological thing,” she said.
And here’s the [quite literally] million-dollar question: is this honesty model working for Matchboard? The answer is simply, yes.
In the 2014 financial year, Matchboard saw its revenues increase by 65 per cent, and for 2015, revenues increased by as much as 80 per cent.
“More than $15 million of deals have been invoiced as a result of our matching, with an estimated $20 million still to be invoiced on deals that have already been signed.
“The companies that have used Matchboard vary from tons of small businesses to the who’s who of corporate Australia – many of the major banks, telcos and energy companies have put requests on our site,” Sharon said.
There could be number of takeaways from Matchboard’s game-changing experience. For some, it might be the inspiration to implement the honesty model to other platforms; but for others, it might just be a restoration of faith in humanity.
“People are more honest than you think, and the ‘trust economy’ is disrupting the world: just look at AirBnB, eBay and even Uber. There’s an element of people trusting each other in every one of these models,” Sharon said.
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