The article includes insights from esteemed professionals within the affiliate space, many of whom I’ve been lucky enough to work with over the years.
Do incentive sites drive any incremental value for merchants?
One of the key points of the article was to dispel the myth that loyalty sites simply drive sales that advertisers would have achieved anyway. So how does an advertiser know whether or not cashback and vouchercode sites are driving sales that are genuinely incremental?
Firstly, it’s important to define what you mean by incremental sales.
To some advertisers, incremental sales may refer to sales from new customers who haven’t previously engaged with any other form of trackable marketing. Therefore, it can be assumed that these customers only converted because you were visible on such sites. To others, it may be the incremental value derived from increased order value. Once you’ve defined these objectives, you can begin to understand what role these sites play a role in your overall marketing mix.
Here are some questions that you can ask yourself to help identify if these sales and revenue are truly incremental to your business.
- Would this customer have bought without the incentive?
- What is the value of these customers compared to other customer segments (e.g. via other online channels)?
- What is the life time value of these customers compared to others?
- Do you have a clear view of the journey taken to get to your site? Have they only seen you on a cashback site, or have they had multiple exposures to your marketing activity across other channels?
Is it the end of Performance Marketing as we know it?
The second key point of this article addressed the question of whether or not cashback sites will eventually spell the end of performance marketing as we know it.
I would argue that the performance marketing industry is continually evolving and that over the years various affiliate types have had the same arguments leveled against them, including PPC affiliates.
It’s fair to say that cashback and vouchercode sites have certainly made an impact on the marketplace. It’s true that for many online consumers, these sites have become an integral part of their purchase process as people are trying to get the best deal they can. That is only human nature, especially in times of recession.
These sites have also established a strong brand loyalty with their member base, and have invested heavily in above the line advertising. Quidco, Topcashback and vouchercodes.co.uk were all investing in TV advertising in 2012.
That being said, I would argue that companies selling online have played their own role in commoditizing the marketplace.
Take the competitive insurance space for example, there are no less than 30 different car insurance providers currently offering up to £70 cashback on Quidco.
In addition to this, some of the main comparison sites such as Go Compare and Confused are offering cashback simply for doing a quote. A customer would be mad not to buy via a cashback site for what is deemed a compulsory purchase as they could earn themselves £70 in the process. If there were only a couple of players in this space, offering a much lower cashback amount, then the role these sites play in the customer purchase decision process would be dramatically reduced.
Take another example of broadband and digital TV. Both Virgin Media and Sky are offering in excess of £160 cashback for new customers. Why wouldn’t you be tempted to buy via these sites? If these companies were to dramatically reduce the cashback they offer, then they could in fact change the nature of this marketplace.
In essence, I would argue that brands in this space can over-inflate the marketplace by competing for customers by offering best in class consumer offers, often at overinflated rates. By doing so, they are in essence the driving force behind this particular market, and not the loyalty sites themselves!
There are some basic rules of thumb that I would encourage brands to think about when either considering entering this marketplace, or looking to understand any existing activity.
Define what you mean by incremental sales. This could be new customers, increased order value, driving repeat visits.
Clearly define your strategy and ensure you have the necessary measurement tools in place to monitor performance. For example cashback and vouchercode sites can be great for clearing old stock (especially if that stock is costing your business money in terms of storage costs).
Don’t look at your own activity in isolation, it is important to be aware of what competitors are doing in this space. Why offer £100 cashback if your key competitors are offering £30. Yes you will get a significant share of the market but you could still achieve this at a much lower rate and could be helping to overinflate the market.
Don’t look at cashback or vouchercode customers in isolation; they should be viewed as a clearly defined segment within your overall customer base.