Should Marketers Use Cashback Sites

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October 2010


Should Marketers Use Cashback Sites?

Cashback sites are continuing to deliver vast volumes of sales for the advertisers that work with them. There has been considerable growth in the sector over the past couple of years and has shown no sign of slowing. Cashback sites will typically be among the top earning affiliates on most, if not all, affiliate networks.

Affiliates within the sector

There are a number of cashback sites that merchants are able to work with. They vary from sites that pay all of the commission as cashback rewards (so called ‘100%’ cashback sites) such as Quidco and Top Cashback to points based sites such as Maximiles and RPoints. It’s also important to consider company loyalty schemes run by companies such as Asperity. Some of these sites charge an annual membership fee (including Quidco) while others are free to join (Top Cashback).

Typical site users

One important consideration for merchants in deciding whether to work with cashback sites is the type of consumer who uses them. Feedback we have received indicates the typical cashback consumer:

  • Is a savvy online consumer
  • Appreciates that there are savings to be had online
  • Accesses multiple points of reference
  • Is loyal to a cashback site or the cashback concept

Contrary to popular opinion, research seems to indicate cashback users are also more likely to be drawn from a higher income demographic and therefore have an increased propensity to spend more, with the cashback reward driving up average basket values.

Where cashback works best

Cashback sites can drive incremental sales in a number of sectors but where they can especially add value is in sectors where there is little product differentiation or if there is a switchers market – e.g. Insurance/Broadband. With a carefully planned strategy you can effectively take market share from competitors. Similarly, the products that an advertiser sells have an impact on how effectively they will work with cashback sites. If the product is something that is widely available from a whole host of merchants e.g. an electrical product that is offered by a number of retailers, the amount of cashback can be used as a competitive advantage. By offering a higher rate of cashback, market share can be taken from competitors. Cashback site users are able to filter the results by amount. Where a product is available from a number of merchants at a similar price, the cashback user may be unlikely to show brand loyalty to a store and will instead opt for the highest cashback rate; in a sense brands share the loyalty to their offering with the loyalty to the cashback site and model.

An exclusive rate for one of the cashback sites will often result in greater exposure across the site which should in turn lead to an increase in market share. This will also feed back into the popularity listings to ensure better placement for your brand. This can be rotated across the various cashback sites so they are all able to demonstrate how effective each of them is at promoting your brand. The diagram below indicates how two merchants in the same sector were able to take market share from one another when strategically working with cashback sites:

On the other hand, if the product that is being sold is exclusive to you as an advertiser then the key question is whether the customer is brand loyal and would have bought the product from you regardless of cashback being offered. This is not to say merchants in this situation shouldn’t use cashback sites but they will need to understand various performance metrics at play such as new customer numbers, average spend and how incremental the sale is.

Merchants who run lead based campaigns would be advised to avoid promoting through cashback sites, as sign up campaigns can be abused in order to earn cashback unless additional checks and balances are put in place (quality of the leads for example and setting the CPA at a level that takes account of the potential lower quality of leads through an incentivised channel).

It’s worth noting that consumer forums will often feature where to get ‘free’ cashback and lead based programmes are usually referenced in this instance.

When promoting through cashback sites, the greater the checks and balances process at the merchant’s end, the less chance there is for fraudulent or unethical activity to be carried out through them. For example, if a telecoms merchant is able to track through from application to connection, then cashback could only be paid once the connection has taken place. If you are a retail merchant, cashback can be paid once the returns/cancellation period has passed.

Increased conversion rates through cashback sites

The nature of cashback sites also means that the conversion rates from these sites tend to be high. When a consumer clicks through to an advertiser on a cashback site, there is a good chance they will have already carried out their research and will be in a position to buy.

In order to increase conversions further, it is important that merchant descriptions are kept up to date and also take account of products an advertiser sells that may not be eligible for cashback. It’s also vital to include details of any existing voucher codes that may generally be available online and whether cashback will be paid on purchases that have also involved a voucher code. If this is the case, margins must obviously be worked to include cashback, voucher code and affiliate network fees. Recently for example, a credit card company saw a major increase in applications when the copy and details were updated on the merchant page of the cashback site they were featured on.

It is imperative that the merchant copy, images and dates are all exactly correct, as when the copy is out of date, applications can drop considerably.

In summary if used effectively, cashback sites can add significant value to an affiliate campaign. As long as there are terms and conditions in place to protect the merchant and conform to the merchants KPI’s, they can form an integral part of an advertiser’s online strategy.

Matt Swan

View this article live on Econsultancy


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