July 23, 2010, 4:49 PM

Merchants promote cashback in the final weeks of the Bing program

Consumers receive double-digit cashback rewards as incentive scheme ends.

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As the Bing cashback program winds down, merchants are running last-minute promotions that, in some cases, offer consumers significantly larger incentives for shopping through the Microsoft Corp. search engine. Merchants not only want to gain sales but exhaust funds they have deposited with Bing to pay for the consumer rewards.

Microsoft will end its Bing cashback program on July 30 at 9 p.m. Pacific time.  The program offers consumers a percentage of the product price as cash back from participating retailers; typical rewards were between 8% and 10%, according to observers, though individual retailers set the refund amount.  The funds come from retailers via fees they paid to Microsoft after consumers complete a purchase through Bing; retailers that took part in the cashback program paid Microsoft when a customer who came to the retailer via Bing made a purchase. The fee was a percentage of the item’s retail price.  After the transaction, a portion of that fee was returned by Microsoft to the customer as a cashback reward.

Microsoft declined to comment about how much might be left in what is commonly called merchant piggybanks for the program, nor about how retailers have launched cashback promotions in the incentive scheme’s final weeks. However, the program’s final weeks have brought double-digit rewards from such online retailers as Overstock.com Inc., No. 28 in the Internet Retailer Top 500 Guide, which reportedly offered 30% cashback, and Sears Holding Corp., No. 8, which offered 15%. Neither company provided comment.

Mobile phone online retailer Simplexity, which operates the Wirefly.com comparison shopping site, also increased its cashback incentive in recent weeks. Responding to the announcement of the program’s end, the company on July 3 and July 4 offered $80 cash back on mobile phones, netbooks and laptop cards for consumers who visited Wirefly via sponsored links on Bing.

Wirefly offered the Independence Day rewards to promote a new Sprint handset and to boost sales during the slow holiday weekend, says Scott Ableman, Simplexity’s chief marketing officer. However, the retailer also wanted to draw down the funds in its cashback piggybank, he adds. “Doing it at the beginning of July gave us time to recover in case the sale put us in the red with Microsoft,” he says. Were a retailer to spend more on the rewards than exists in the piggybank, that retailer would owe money to Microsoft.

In fact, some retailers have worried about being too aggressive with cashback rewards for fear of owing Microsoft, says Jason James, product manager, paid search, for online marketing service provider ChannelAdvisor Corp. He says retailers will not be able to recover funds left in their accounts after Aug. 1.

Generally, James says merchants found value in the program. “They did see more clicks in some cases, and I think it got a lot of merchants to pay more attention to Bing,” he says.

Microsoft, too, may have benefited from the program. Web measurement firm comScore Inc. says that Microsoft sites accounted for 11.7% of U.S. searches in March, up from 11.5% in February and 10.7% at the end of 2009. Google still leads in search, though, accounting for about 65% of U.S. searches. “It will be interesting to see if the market share grows after cashback ends,” says James.

Wirefly will miss the rewards program, Ableman says. “Timing our Bing cashback sales with major product launches from Sprint, Verizon and AT&T generated a lot of buzz out there, and brought us new customers who otherwise were not Wirefly.com shoppers,” says Ableman. “We thought that Bing cashback was innovative, and Wirefly customers are definitely sad to see it go.  We invested our own resources into the program and would love to see it return as a limited-time promotion.”

Microsoft plans to create new programs to fill the void left by cashback, according to the July 2 blog posting announcing the scheme’s end. But company officials have not given details of what’s next.

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