Will CashBack sites kill Affiliate Marketing?

[angelabx]

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It suddenly hit me a few days ago when a friend of mine said he found a great deal using my price comparison search site. He looked really smug when he told me that the merchant he found was offering cashback through a cash back site he was a member of so he saved 3% by buying it through them even though he found it on my site.

It's obviously no coincidence that every merchant I promote is also likely to be offering cashback through a cashback site as we all have one thing in common - we're affiliates.

I can see the day when most people will belong to cashback sites and do their shopping through them. If I wasn't an affiliate myself I certainly would!

This could completely destroy the income of every other type of affiliate I fear and could bring the end of affiliate marketing as we know it.

Good content rich sites would do the pre-selling but the final transaction would always take place through a cashback site.

So I ask ...

1) Are cashback sites bad for the future of affiliate marketing?

2) Should we, as affiliates, give preference to those merchants that prohibit cashback and incentive sites?

[pricethat]

In my opinion cashback sites are the easy sell, after all anyone can give something away. You could always use the theory that no one would ever buy other things because you can pretty much always get a better deal on ebay and it could be fair to say that based on rejection rates we see from merchants the quality of powerseller merchants is probably better than the big brand names but still people buy from the big names as well.

Yes cashback sites are a pain the ass, but now there are so many of them more and more merchants are giving in to them just because they fear that they are missing out on an opportunity to be honest.

My personal way to combat them would be to pay less to cashback sites than to mainstream affiliates, thus making sure they are not erroding the market value at the expense of other affiliates, means less to give back and would mean that only the cashback sites with genuine communities would survive, the level of commission being paid to proper marketing people would ensure that we have more money to market the products, thus excluding cashback sites from evolving at the expense of other affiliates and the merchants.

Fair enough the ones that already own site like these might have a little community, this should not go away if they were genuine communities and not just solely existing because of cashback.

Seperately i think the points based ones are a little better than just straight cashback, especially as they collect them for other things, bit like a tesco club card but at the end of the day if non of these sites existed would it change the face of online shopping, would there be more online shopping or less? If the answer to that is no change then there is no value... apart from to the cashback sites.

I am not worried, there are much greater evils out there than cashback sites and to be honest i think they are part of the mix now so just a case of getting on with it....Maybe the cashback sites are the future, maybe it is us old school marketing people that have to catch up with the new things,the times so to speak.

Can't say too much though the owner of this forum has a cashback site

[angelabx]

Can't say too much though the owner of this forum has a cashback site

And I can't blame him one bit! Maybe we should all have one.

I do feel that in 2-3 years time most online shoppers will belong to a "cashback club" and "normal" affiliates will just pick up the bits left.

Shoppers will still find deals etc on content rich affiliate sites but will complete the purchase on a "cashback" site that they belong to.

It's a tough one but a subject that certainly concerns me.

I think networks should be concerned too. If it ends up that 80%-90% of sales go through cashback sites there will be little need for affiliate networks.

Interesting!

[D-Mac]

Any guesses what % of affiliate sales are through a cashback site?

[mallyord]

I've used www.quidco.com for most of my purchases online.

[Azam.net]

Cashback sites provide a great opportunity for shoppers and may take a larger chunk of the slice, but they will never be the online type of sites making decent money from affiliate marketing. The vast majority of internet surfers are cynical and dumb and could never get their head around the concept of cashback shopping ("get cashback for shopping online? yeh, right!")

Just as the vast majority of people still use BT for their telephone calls despite billions spent on telling people that you can call the other side of the world for a tenth of BT's rates, the majority of people will be too lazy/sceptical to use cashback sites.

And remember: most people can't carry out a basic search in Google, nevermind have the ability to sign up to and use a cashback site.

[deadgoodundies]

Part of the problem from a merchant POV though is that with some networks because the affiliate doesn't have to register ALL their sites you never know if it would be a cashback site or not, the only way would be to match up sales with your own referrer log (not an easy task if you have a busy site).

[angelabx]

Part of the problem from a merchant POV though is that with some networks because the affiliate doesn't have to register ALL their sites you never know if it would be a cashback site or not, the only way would be to match up sales with your own referrer log (not an easy task if you have a busy site).

True but if you clearly state that you prohibit cashback and incentive sites then they'd be stupid to include you because if they got caught you could refuse to pay which would drop-them-in-it with their members.

We run a few affiliate programmes (as a merchant) and we prohibit cashbacks and incentives. So far only one cashback site has tried to list us. The rest have skipped us.

Azam - You could well be right but I do feel that those who are "clued up" enough to actually buy online would probably also be capable of joining up with a cashback site. It's early days but I feel that in 12 -24 months time cashback sites could have a real impact on affiliate sales.

[Shane]

I do feel that in 2-3 years time most online shoppers will belong to a "cashback club" and "normal" affiliates will just pick up the bits left.

not something I fear.. there are far too many people out there that just can't be assed to mess about signing up to member based sites even if they would get cash back.

cashback site relationships with some merchants have not always been rosy... Cost per Lead stuff in particular needs to be carefully managed or can be open to abuse

I've also seen more than my fill of cashback/reward site emails with "click this very expensive sector PPC listing the advertisers have no idea is being used in this way and you'll earn xx pence per click or xxxx item free.." which just is plain wrong unless the merchant is happy with this kind of ppc exploitation... but I'm pretty sure they have been totally unaware of it.

the only preface in small print was along the lines of "Please ensure you have an interest in dating/loans/mortgages/gambling before clicking any links" which was far burried by the "CLICK A LINK NOW GET XXXX " type headline banner.



Personally I don't fear cashback sites, I think they play a valid part in the mix, specially if they run a residual income scheme like matt.. fire and forget marketing.. I never have to validate, chase pendings or update a site yet I earn money ongoing ... I can send them in from a competition site and 5 months later get paid something because they ordered a new PC or took a credit card.. sure I don't get paid the full amount I would if they went via me but I don't have to run a site, upate a database, chase networks and merchants for that income.

if you fear them I'd say join them.. get some members banged in there and get some residual income out of them .. or get your own site up but it's a lot of work.

[Hero]

Reward Sites/Loyalty Schemes have a very big customer momentum at the moment, whether by offering points or cashback. From the customers' perspective, they get the cake and eat it (I'll never manage to remember that proverb properly!). For merchants they give them the chance to approach customers who are very internet savvy and want to get the best value for money.

The downside for the merchant is that they usually need to offer a "special promotion" to appeal to both the reward scheme and the customer. By paying a commission on top of the discount, they thin their margins incredibly. So, many merchants, wisely IMO, offer lower commissions to these schemes or form special deals where the reward site splits the commission with the customer in a fairer way.
Justhom, the answer to your question is fairly simple: the merchant has a good tracking in place to see where their traffic is coming from, and is able to identify these sites. Merchant tracking is the norm now, so an affiliate manager can pick it up easily even in a very busy site. Plus, it's not in the reward site's interest to "hide" themselves, as they won't be able to negotiate better deals with the merchant. Of course you can never rule cheeky affiliates out.

The biggest problem for the merchant is that they never end up owning the customer, who will always go through the reward site. There will never develop a loyalty between the customer and the merchant, as the customer will be buying from whichever merchant they can get a better deal from, rather than service, quality, reliability etc. Sure, one would argue that the merchant would never get them in the first place, but then there might be a question for the merchant to ask: do they really want these people as customers if they cannot target them effectively?

In my view though, if I may say so, is that the reward sites is a bubble waiting to burst, and no offence to any of the people reading this with sites of this nature. First of all, there is a huge fraud attack on cashback sites at the moment. Unless they are able to deal with it, there will be so many people having to pay money out of their pockets for transactions they will never get the commission for in a few months. So, I don't see that many surviving.
The point system is far better, as it's not actually costing anything to the owner, and the customer is more familiar with this scheme from offline and therefore more inclined to go for it. However, as more people become conscious of data protection and how their details are being handled, they will be more wary in giving so much information about themselves upon registration and about their shopping habits upon usage. There are so many dubious points sites out there, exchanging databases, using data without consent that I believe customers will become very cautious who they sign up with.

In other words, I believe that there will be a "clearance", a sorting of the reward sites and the -handful- good schemes will prevail.

[pricethat]

I can't agree with a merchants problems with never owning the customer, at the end of the day if that is the bargain then there should be more money paid for the value of the customer to the merchant as opposed to the value of the sale. 95% of all affiliate schemes are renumerated on the profit of a single sale with no account or regard for the ongoing value of that customer, for example:

1000 Electrical customers probably have an average two year account lifetime value of 2 pounds each. Where is this 2 pounds? Certainly not in affiliate accounts.

If the customer dictates no cahsback or reward sites on this basis then a rethink is in order! I personally think any site that generates their own user base has a right to that user base and if merchants want sales from them then they have to accept that they are not theirs in the first place. Whether or not you have to give away stuff to get a sale is another subject.

[Sandis]

1) Are cashback sites bad for the future of affiliate marketing?

2) Should we, as affiliates, give preference to those merchants that prohibit cashback and incentive sites?

1) they are bad but not all merchants will be dealing with them;

2) it's quite up to you - kind of you should look at your bottom line; if you can make nice profit out of that then why not; if it hurts then make decision that’s best for you;

3) think outside of box - why not to offer incentives as well - some PDF report or something thats free to reproduce once created;

[TD Nick]

Hi all,

Affiliate sites which succeed long term are those who continually strive to add value to the user, diversify their offering, develop new features and differentiate their proposition from the competition through technology, services and their overall market position.

If you are concerned, is your site doing everything it can to add value to the user? The acid test is would you actually use your site yourself to shop online? If not, you have work to do.

Loyalty is a channel which has seen phenomenal growth in the last 12-18 months, both in revenue and the number of competitors, but it's only another channel in the mix which has "grown up" - much the same that Search and Price Comparison did.

From our perspective loyalty is not a threat to other affiliate models - if anything its arrival in the mainstream is going to act as a catalyst for other the models to invest, adapt and enhance their offering.

People announced price comparison would be "the death of all shopping sites and portals"....but how wrong they were...all that happened is price comparison developed and fought for the potential of the market share that was already there - those same people who predicted price comparison would cannibalise the space are still very much alive and kicking today with their same, more developed, model

I would like to reiterate what Shane said, not everyone is going to invest the time signing up with a loyalty site because different models and offerings appeal to different demographics - there is plenty of traffic for everyone's audience.

Many thanks,

Nick

[angelabx]

Well it's only my opinion but I can see the day when it's not worth putting affiliate links on your site because most shoppers will belong to a cashback/incentive scheme and will alway buy through them.

If in 2-3 years time 50% of online shoppers belong to a cashback club then normal affiliates will be doing just as much work for 50% of the return.

If 70% then 30% etc etc ...

I always judge things on the way I would act and if it weren't for the fact that I was an affiliate myself I'd always buy through a cashback site even if I'd located the product through a fantastic comparison site like kelkoo or found it on a content rich information packed site.

Only time will tell .....

[Itchy]

And remember: most people can't carry out a basic search in Google, nevermind have the ability to sign up to and use a cashback site.

Erm if this the case .. then how do they fill out their cc details etc

Intersting idea from price that ...that cashback sites should/could get a lower commision rate after all most if not all cashback sites just have links to merchants and not the goods so personally if i was looking for a deal i wouldnt want to be faced with a page full of links where i had to search each shop for whatever i was looking for ...... so their users imoa would be using other sites to search for a deal and go back to the cb site and press the link .... but thats life i guess but no matter how big your net is ...fishies always get through