Aggregator Business Model – What Is It And How It Works? – Explained


What Is Aggregator Business Model?

Aggregator business model is a network model, which provides varieties of services under one brand. In the aggregator business model, the firm – i.e. an aggregator (collector) collects information from other company’s products or services, signs a contract, and delivers its services to their customers.

An aggregator business model is also known as part partnership business model, where the company makes the service provider as their partner.

This model does not hold any manufacturing facilities, instead, they only collect information from the original manufacturers or service providers, and promote it to the customers through innovative marketing methods.

When it does so, it earns a commission, which makes a huge profit by operating multiple service providers.

Understanding The Aggregator Working Model

The aggregator business model operates in the marketplace with several networking units that are interlinked to create a successful business for both aggregator and the partners.

In reality, it includes a sequence of a process that takes to build a remarkable brand.

Let’s check the step-by-step process briefly…

  1. Primarily, the entire process starts from the aggregator who wishes to start a startup company. Aggregators try to find out the best service provider in the niche market and visit them to make further dealings. 
  2. The next step would be signing the contract. The service provider who wants to make a partnership with an aggregator signs a contract by accepting the negotiated pricing strategies, profit margins, and payment methods.
  3. The crucial step to be followed after signing the contract is building a own brand that provides a variety of services. It includes all the necessities to consistently deliver a service. For example, creating a website, building a startup team, and other required resources.
  4. Next, the Aggregator’s focus will be to attract customers towards their brand. The founder with its team will devise marketing strategies, do promotional activities to make their brand reachable to a wide set of the target audience.
  5. Aggregators act as a middleman here, it looks similar to the B2B2C business model but, the difference is that the aggregator model does not hold any manufacturing or warehousing units.
  6. When the list of products is displayed on the aggregator’s website, the customer orders a product by paying the amount. The aggregator passes the order to the partner/provider, and gets the service or product delivered to the customer, and makes a profit by earning a commission.
  7. Partner/service provider’s role is to sell the products or services via middleman/aggregator and earns a reasonable profit. The advantage of service providers to partner with an aggregator is, they will get more customers through a middleman and increases the sales and revenue.

Attributes Of An Aggregator Business Model

Customers

Customers are the most crucial part of any business, as they will create the best value, especially when they consistently buy different products from the aggregator. Aggregator business model will be keen on building a customer base that prefers to get more services from a single provider. It finds it easy to retain them to buy or get varieties of products and services.

In this model, the partners are also considered as customers, because they compare the aggregator and choose the best company.

Industry

The product/service providers who are partnered with an aggregator belong to the same industry. It brings all the service providers under one brand control with high quality of service.

For example, OYO Rooms disrupts the hotel industry with its hospitality and affordable price.

Partnership And Contract

The service providers are the partners who will choose the best brand to collaborate with. They negotiate with different brands and select over best one and signs a contract that gains the best value for them.

Brand

The major part of the aggregator model is focused on building a brand.  The concept of brand building is more relevant to this model and makes an appropriate one. 

Because it lets most of the service providers in the industry come under one name. At the same time to do so, it requires deep research and groundwork to attract all customers, providing nominal quality and price.

Pricing

The pricing strategies of the aggregator model are unique and different. Since it gathers more service providers, unlike other business models, it cannot fix different prices for different products or services. Instead, it has its pricing methods.

Aggregator Revenue Model

Obviously, the revenue stream of the aggregator business model comes through commissions. But pricing methods are different in the aggregator revenue model, which has two categories.

  • One method is – after the provider fixes the final price to the aggregator, it fixes the take-up rate. Then the aggregator will quote the final price to the customer.
  • Another method is – the aggregator directs the customer to the service providers who will charge a certain amount for the service. The aggregator will get the commission amount from the provider after the service is rendered. The commission is fixed in terms of percentage earlier when the contract is signed.

The revenue from this model is not fixed, it changes from time to time. The factors that affect the revenue for aggregators are

  • Competition
  • Entry of new players
  • Customer behavior
  • Pricing and percentage of Commission
  • Market situation

Reader’s Insight:

Let us know if we missed out on anything in this article Aggregator Business Model and share your thoughts in the comment section.


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