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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 this 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 TopCashback 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 a merchant 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 a merchant 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 a merchant 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 a merchant 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 a merchant’s online strategy.

Matt Swan

Published 22 October, 2010 by Matt Swan

Matt Swan is Client Strategist at Affiliate Window and a contributor to Econsultancy.

25 more posts from this author

Comments (7)

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AndyC

Excellent piece Matt. Agree with everything you wrote, especially regarding 'lead' based merchants ensuring they approach the cashback model with caution and that if they do work with cashback sites, they should be able to identify the cost per sale of their cashback exposure and work this back into the cashback they offer (if they still want to work with them). One point I would add is that cashback partners can also offer branding and customer engagement with your brand; especially Quidco who can run competitions which are not centred around going for the jugular and achieving a quick sale. In terms of these competitions one the best I saw was by 'On The Beach' who hid the Quidco logo somewhere on their site, with consumers having to visit almost every page in a desperate attempt to find the logo and on doing so could Email in to be entered into a prize draw to win a holiday.  

about 6 years ago

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ken

I agree with most of what you said though i have to admit as an agency side affiliate manager i think you've not fully considered the implications on a clients margins enough, what also hasn't been considered is the impact cashback sites have on consumer behavior, does a merchant really want to be encouraging cashback consumers to continue to shop via cashback, given that this lowers the value of that particular consumer, after all so long as that consumer continues to buy from a cashback site, the retailer will continue to loose a margin on paying for commissions (cashback) and network tracking fee.

about 6 years ago

Matt Swan

Matt Swan, Head of Business Intelligence at Affiliate Window

Hi Guys – thanks for the feedback.

Ken – what I should’ve mentioned is that advertisers need to determine what they see as a valuable customer and work with cashback sites in a way geared towards delivering these.

For example, if the value is in new customers and this is the merchants KPI then a commission structure can be tweaked to pay out more for new customers. Some merchants will only pay out for new customer sales although I think it is also important to recognise the role that affiliates play in customer retention.

In your scenario, if the customer is going to switch to a competitor would it be worth paying cashback to retain a customer? In switchers markets such as telecoms or insurance it may be worthwhile paying out for a retained customer rather than risk losing market share to a competitor.

I agree that merchants need to fully understand the impact that working with cashback sites can have on their margins and the value that they see from such sites. Each sector and merchant will have different objectives and this is where networks and agencies should be advising merchants on what is most appropriate for them.

about 6 years ago

Ed Longley

Ed Longley, Head of Direct Online at Hiscox

An interesting piece, and I tend to agree with Ken. Highly commoditised and comparable products with an annual contract and few major suppliers, such as breakdown insurance, lend themselves readily to serial switching.

The requirement for providers to invest in robust CRM systems, channel specific pricing and considering how they handle 1st year renewals are significant considerations.

about 6 years ago

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Lisa miller

The verdict is out in my opinion cashback sites drive traffic which bring conversion.However for me to say they generate quality conversion bring the issue of attribution.It may not be correct to doubt this sites however i think a more thorough performance should be looked into to clearly indicate how cashback sites convert sales.

almost 6 years ago

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Betz

Hi there, I read your blogs daily. Your story-telling style is witty, keep up
the good work!

about 4 years ago

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iLead Digital, iLead Digital at iLead Digital

Thank you very much the post really has increased my knowledge about Cashback sites. In my understanding, Cashback website such as Shopping Prizes allows affiliates to publish retailer offers and the ability for the users to earn a cashback on their online sales. Affiliates normally share the percentage of the sale commission with the customers as cashback. Cashback websites are the best and easy way to earn online both for affiliate and customers. There are dozens of resources out there that provide professional Cashback website design and development for affiliation.
http://www.ileaddigital.com/services/web-design/affiliate-cms-development

about 3 years ago

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