July 24, 2014, 11:08 AM

Do cash-back sites really drive incremental sales?

Yes, suggest data from Affiliate Window, an affiliate marketing network. And consumers spend more when they expect to get part of the purchase price refunded.

With advertisers increasing their spend on performance marketing campaigns, it is no surprise to see the channel coming under greater scrutiny. One of the key considerations when assessing the value of the channel is how incremental the sales generated are. When questions around incrementality arise, the promotional type that comes under some of the greatest scrutiny is cash-back.

Cash-back offers work in the following way: Retailers pay a commission to each web site publisher for every sale they generate. Cash-back sites will pass this back to the consumer (either the full amount or a percentage) to encourage consumers to purchase. With these sites offering an incentive to transact, some argue that cash-back sites merely convert consumers that would have purchased from the advertiser even without the involvement of the cash-back sites. Our research demonstrates that’s often not the case.

How do we judge incremental?

To be able to determine incremental value, it is important to ascertain what actually constitutes incrementality. In its most basic form it can be interpreted as sales the advertiser would not have made had it not been for the promotional activity of the publisher driving it. This is far too simplistic when considering incrementality. Other metrics need to come in to consideration—it could be argued that increasing average order values, repeat purchases and lifetime value also demonstrate elements of incremental value for advertisers. Additionally, in the age of the savvy online consumer that is increasingly price-conscious and prone to switching, it could be argued that cash-back partners facilitate customer retention, which in itself could be seen as demonstrating incremental value.

Click path data

Customer journeys are complex and can vary from sector to sector. Affiliate Window has carried out extensive research into a number of advertisers across the network, spanning various sectors. This research includes looking at the number of affiliate touchpoints involved within the path to conversion as well as the crossover between the various promotional types. Additionally, it is possible to drill down to see the individual affiliates involved and the customer interaction across these.

There is a common misconception that each transaction will involve a number of affiliate interactions. This is extremely wide of the mark with typically 90%+ of transactions only having a single referrer, that is, the customer only visits one publisher site before making a purchase and therefore only one affiliate can claim a commission. Although this can vary from sector to sector, recent research has shown this to be case across a number of sectors:

Retail - 94.83% of sales are single interaction

Ticketing – 96% of sales are single interaction

Travel – 95% of sales are single interaction.

In addition to this, the highest number of interactions involved in any sale through the channel is around four or five. Interestingly, loyalty, reward and cash-back sites typically have the fewest interactions of any affiliate type.

Another common misconception is that cash-back sites overwrite content publishers. Overwriting occurs when there is more than one publisher involved in a customer journey. For example if a customer clicked through from a content site to browse products, and then later clicked through a cash-back site to purchase (and earn cash back), the content cookie would have been “overwritten.” In this instance the cash-back site will be rewarded for generating the sale and paid a commission.

Across various sectors the network has reported that it isn’t necessarily the case that cash-back sites overwrite content publishers. As mentioned, the vast majority of sales show the cash-back publisher to be the sole interaction within the path to conversion, and where overwriting does occur it is typically another cash-back site involved. This is indicative that consumers are aware of the concept of cash-back and are comparing offers across the various sites before completing the purchase.

Increasing basket values

The data has also shown that customers shopping through cash-back sites have impressive basket values. Cash-back provides a lever for advertisers to pull in orders to drive up basket values. By encouraging customers to spend more with each transaction, it could be argued that this in itself is displaying incremental value.

The following charts give an indication of how cash-back (loyalty and reward) sites are generating higher average order values than other promotional types.

For an advertiser in the fashion sector, cash-back sites had the highest average order values of all of the promotional types. For gifts and ticketing they also demonstrated impressive figures when compared to other promotional types.

The chart below also shows that cashback sites were driving high basket values for the travel sector too – with only content sites generating higher order values.

Savvy advertisers have been able to work closely with cash-back publishers to drive increased basket value.

By understanding the high-margin items, cash-back publishers can focus their efforts on driving value by concentrating specifically on these products. Additionally, by putting a minimal spend against purchases to qualify for cashback, basket values can be significantly improved.

Strategic use to encourage repeat purchase

With an engaged user base that is typically loyal to the concept of cash-back rather than the brands themselves, cash-back sites can act strategically to drive repeat purchase. For example, promotions have been run where customers are encouraged to transact more than once within a month. For the second purchase, a higher rate of cash-back is paid (as long as a minimum order threshold is met in both instances). This allows advertisers to generate an increased order frequency and retain customers who may have otherwise purchased elsewhere.

In summary, cash-back sites are able to be used strategically to drive not only impressive volumes of customers, but also valuable ones. The click path data for cash-back sites as well as their average order values has demonstrated their ability to drive incremental value.

To really be able to understand incrementality however, it is important for customer journey data to be taken to the next level – across all digital channels. While data from an affiliate network can indicate what happens across the channel, it is only when you incorporate additional channels you can understand the true picture.

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