Aggregator Business Model and the Disruption
Aggregator business model has taken the world by storm. You can look around yourself and find multiple companies that use this model. Notable companies that employ this business model include Uber, Lyft, Airbnb, Foodpanda, MakeMyTrip etc.
This business model has caused significant disruption in all industries. This model picks up an unorganized sector and offers a certain service under one banner. For example, Uber has transformed the public transit system under their banner.
Definition of the Aggregator Business Model
Companies that adopt the aggregator business model do research regarding the service they want to provide. They use this research to find providers that are willing to be partners of the organization. The providers then sell their services under the partner organization.
The company that employs this model is a brand. Hence, the brand is expected to offer standardized quality and price. The company signs a contract with their partners to ensure this.
The partners of the organization are not employees of the brand. They continue to own the service that they provide. The aggregator brand offers marketing services to the providers.
Features of the Aggregator Business Model
All the service providers working under one brand belong to the same industry. For example, Uber, Lyft, and Careem organize ride hailing services under their brand. Similarly, Airbnb does this for rooms that are up for rent.
Customers of the Aggregator Business Model
This model uses a two-fold customer method. In this method, the consumers and partners are both the customers of the brand. The idea behind this strategy is to attract both the consumer and partner to use the brand.
The brand offers incentives that attract the partners to sell their services through the brand. Similarly, the brand offers exciting deals that attract the consumers to use the services brand.
The Partnership Model
Partners have the choice of accepting and rejecting offers made by the brand. The partners are not the employees of the company.
Moreover, the business uses most of their revenue to revamp the brand. A brand has certain qualities. These qualities sets it apart from its competitors. Different providers offer services under the umbrella of the brand.
Quality of Products/Services
Furthermore, the aggregator brand makes sure that the quality of products and services are standardized. There are dedicated customer service departments created by these brands to make sure the quality of service is optimal.
The Contract between the Partner and the Brand
Before the business proceedings, the partner and the brand sign a contract. This contract contains rules and regulations that need to be followed during the partnership. The terms and conditions are understood between the two parties.
The terms and conditions guarantee that the provider is going to provide exceptional service while the brand will provide the promised customer base to the providers.
A contract may include clauses such as on-boarding terms of the brand, quality management of services, commission and take-up fees, and other crucial details for seamless operation of business.
Aggregator Business Model: How is Revenue Generated?
The revenue model of a brand greatly depends on the services or goods that the offer.
- Uber is a ride hailing company that uses the aggregator business model. In the case of Uber, they charge a commission for every ride that is completed by their partner driver.
- Oyo Rooms is a hotel boking application that uses the same business model. In this case, Oyo asks the partners to quote the minimum price they are willing to ask for their services. Oyo adds a take-up rate to this minimum price. The final price that is quoted to the customer includes the minimum price and the take-up rate.
However, this is just scratching the surface of the business model. Different organizations use differing means to generate total revenue. The likes of dynamic pricing and discounts come into the play when it comes to total revenue generation.
Pricing of the Services/Products
Marketplace business models are different from Aggregator business models. Aggregator brands offer a host of services but all these services have standardized prices. For example, the base prices of Uber Go and Uber X are different. However, all cars that fall in the category of Uber Go have a standardized price.
Is there any competition?
Aggregator businesses can face competition from other companies that offer similar services. Moreover, partners of a certain brand can get into contract with their competitors as well. For example, drivers who drive for Uber can drive for Lyft and Careem as well.
How does this model work?
The model can be further explained in this manner:
- Aggregator courts the partner. They either put up ads for partnership offers or approach different entities. Ride hailing companies put up ads with attractive offers for drivers so that they would sign up with them.
- The aggregator brand devises a partnership strategy and promises a certain number of customers to the partner. The promised number of customers is greater than the usual number of customers that were previously serviced by the partner.
- The service providers agree to the terms and conditions set by the aggregator. On the agreement of terms and conditions, the provider becomes the partner of the brand.
- Aggregator revamps their brand image and launch a host of marketing campaigns to attract new customers to use its services. These marketing campaigns help the aggregator to find business for its providers.
- Customers pay for services and products through the aggregator.
- The services are offered through partner and the partner gets the number of customers that were promised to them.
- Aggregator charges a commission for every sale that is recorded. The commission is the major source of revenue generation
The aggregator business model acts as a middleman between the customers and the service providers. This model organizes a sector that was previously unorganized.
Aggregator business model provides different services under its banner and makes sure that the standard of quality is maintained. Pricing is also standardized for the same service across the board. This model generates revenue through commissions.