Guru.com and its new ranking system
Posted in general | Posted on 30-07-2008
Service employers couldn’t have asked for better. Guru.com, the online service marketplace, recently announced that their ranking system will be changed starting from January 2009, with a focus more on quality and customer satisfaction. Employers can now expect less headache in selecting a good service provider. As a Guru vendor I was initially a little apprehensive about the whole thing, until I read the details of the new system. To make it short, the new ranking system will be truly beneficial for clients and also freelancers who are really interested in doing some quality work for them.
What’s changed ?
The new algorithm will not look at how much money you have made from Guru or the feedback ratings you have garnered from clients. Feedback rating actually will not even have a place in the new ranking system. What will now matter most is how successful you are at attracting new clients (marketing), how much money you are able to make per client (sales) and how long you are able to retain a client over time (work quality).
The death of the raw score.
The current Guru ranking system calculates the rank using the following crude formula:
Raw Score = Sum [ Invoice Amounts * Feedback Ratings ]
For eg. if you have generated 4 invoices from clients your raw score can be calculated as below; the higher the raw score the higher your rank on Guru.
Do the math: The new ranking system.
In the new system quality will be more predominant. Your rank now will be based on 3 core indicators:
1. Customer Acquisition Rate ( CAR )
2. Customer Earning Rate ( CER )
3. Customer Retention Rate ( CRR )
The formula for calculating your Quality Score is given below, you can rank yourself higher on Guru by increasing your Quality Score.
Quality Score = CAR x CER x CRR
The Guru site elaborates all the metrics in quite detail so its no good to do the same here.
The Customer Acquisition Rate measures your ability to acquire new clients. In the old system if you were working with only a handful of clients and generating loads of money your rank would be higher. Now if you are unable to get new clients regularly your rank will start slipping; no longer you have the option to be content with working with your regular lot of customers, whatever the amount you make. Presently most vendors on Guru throw proposals at the wall and see what sticks. Now that is not wise. You have to really think it through if you really want to bid for a particular project and deliver a quality proposal for the same. This increases your likelihood of clinching the project deal and also increasing your CAR in the process. Finally its time to rev up your marketing department.
The Customer Earning Rate measure the average amount of money a freelancer has made per employer per month within the last 12 months. This is one of the important metrics as it shows which freelancer is currently most active and ready to take work.
The Customer Retention Rate measures the average amount of time a freelancer maintains a relationship with an employer. To qualify for this indicator the freelancer must have received a payment from the employer within the last 12 months. For e.g if you had acquired a new client 2 years back and are still getting hired by the same, then that shows that the client is satisfied with the quality of your work and is willing to work with you in the future.
The wonderful part of all this is that the algorithm calculation is totally transparent, so you can really get yourself to rank higher by following the rules consistently. Guru also has added a Quality Score calculator on their site for easy calculations. Finally developers (at least those using Guru) will bring (or rather have to bring) quality in their process and more importantly employers can expect to get superior work done for competitive prices.
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Seems to me there are some issues with this ranking system.
1. The CER, as you’ve pointed out, is a metric for your “sales” ability. But why is that a good thing for the employer? The CER, since it is per employer, would seem to incentivize providers to milk 2x more money from 1 client rather than working with 2 clients.
2. Doesn’t the CRR run counter to the CAR? Providers would increase their CRR if they earned the majority of their earnings from a few long-term clients. However, this would mean that they would be lowering their CAR since they would not be able to, at the same time, acquire more new business (assuming they have finite capacity).
Does Guru.com have a community forum? How are the other users reacting to this new proposed ranking?
-Yang
Regarding your first point, the CAR represents the “sales” ability and not CER. Yes! People will try to increase their CER by focusing on small number of clients, but their is a danger of putting all your eggs in a small number of baskets. What if rather than working with 10 clients you work with only 3 clients and 2 of them leave your service for other provider. Regarding the milking of money from one client, I think employers are quite enlightened now regarding the cost of development, and will not hesitate to switch developers if the cost doesn’t make sense.
Regarding your second point, the CRR is capped at 12 months. Your relationships with clients before the last 12 months are not counted. Here is what Guru has to say about CRR:
Of course if they keep working with the same clients without acquiring new customers (because they have finite capacity as you said) than their CAR will be low and hence their Guru rank. But this is precisely what is required. If a developer is already working with only a select number of clients and he doesn’t have the capacity to take on more work from other employers, than there is no reason to rank him higher.
As per my information at present there is no forum on Guru.