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May 1 · 9 min read

Cashback 101

The concept of cashback is a growing trend amongst Australian consumers, with over a million of us utilising cashback services. Now is a great time to deep-dive into this influential affiliate type and find out how cashback can work for your business.

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Cashback landscape

Incentivised cashback affiliates have seen tremendous growth in the past few years. We’ve seen sales revenue growth from this channel of affiliate increase by over 200% between 2018 - 2019. Similarly, the first retail quarter of 2020 (Q1: January - March) saw an average sales uplift of over 150% from this group of affiliates compared to how they performed in Q1 2019.

Additionally, advertisers highly value cashback and reward affiliates. According to the latest IAB Australia Industry survey, cashback and loyalty programs ranked second out of the nine affiliate models reviewed:

Screen Shot 2020-04-29 at 1.15.02 pmSource: IAB Affiliate Marketing Australian Industry Review Jan 2020

Getting Started

We have summarised the answers to the most common questions asked by advertisers when evaluating cashback partnerships:

What is cashback?

A cashback website rewards its members by paying them a percentage of the commission paid to that cashback affiliate when the customer purchases goods and services via their website or app. Cashback rewards are also sometimes utilised directly by brands to incentivise their customers to purchase, so they may offer cashback directly from the total amount paid by the consumer. The example below, Canon was running a cashback offer with a retail partner. The consumer pays the full price for the items eligible and then later claims the cashback directly with Canon. These types of campaigns have helped to make the concept more mainstream amongst consumers.

Canoncashback

Like most affiliates, the payment model for cashback affiliates is Cost per Action (CPA). The only difference between the cashback partner and other types of affiliates, like content or coupon sites, is that they pass on part of their commission they earn to the consumer.

cashback user journey

How can retailers work with cashback affiliates?

Brands can easily optimise with a wide range of cashback sites via their Affiliate program. The brand would need to accept the cashback partner to their program and once approved, the cashback partner will integrate the brand onto their site. No additional tracking requirements or integration fees are required to partner with the majority of cashback sites in Australia when working with them via the affiliate channel.

Once integrated, the brand will permanently remain active on the cashback site for shoppers and large member bases to engage with at all times. They will be categorised depending on their product or service offering (i.e., fashion, travel, telecommunications) so users can quickly and efficiently search for what they are looking for. Brands also can optimise with the cashback partner by negotiating a commission increase for an agreed time frame. The commission increase would need to be negotiated and agreed upon by both the Advertiser and Affiliate, and when locked in will grant the brand increased coverage and presence on the affiliate’s traffic sources - whether this comes in the form of a homepage placement, email (EDM) placement, social placement or others. In many cases, the extra commission offered means that the customer can be eligible for more cashback; so brands need to keep in mind that in this case, the more commission there is to offer, the more attractive the brand looks to the consumer on the cashback site.

What are the benefits of cashback affiliates

This model benefits all sorts of retailers; from fashion, groceries, electronics, travel, department stores, liquor, food delivery services – the list goes on. But due to cashback being such a unique and somewhat obscure business proposition, many brands do encounter various challenges and hold many questions on just how much the concept can benefit their overall business development and growth. Such questions and challenges include protecting brand equity and image at all times, new customer acquisition, targeting new consumer segments and the overall incremental value that these sites can provide to a brand. 

The below table outlines the key benefits that brands receive when partnering and working closely with Cashback sites:

kpisandbenefitsofcashback

What are the challenges?

Below is a list of frequently asked questions, with answers:

Q: Will cashback sites deliver new customers?
A: Cashback sites boast large and diverse membership groups, which brands can utilise to target different audiences to their own existing customer base. in addition, appearing in newsletters, homepage coverage or category sponsorships can put a brand in front of customers who were not necessarily looking for that brand.

Cashback site users are loyal to the concept of cashback. If a brand isn’t found on the cashback website it may result in that consumer ending up on competitor sites who are present.

Q: Will cashback sites cheapen my brand?
A: Offering cashback can be enough of an incentive for cashback site users to shop with a brand; therefore it is not necessary to provide additional discounts when working with a cashback site. This can assist with protecting margins but at the same time remain competitive and compelling to a range of different customers.

This is why many high end brands have chosen to work with cashback sites as they are able to incentivise customers without providing additional discounts.

It is a common misconception that cashback shoppers do not spend much and are just looking for the cheapest price and product. The average cashback user is tech savvy and part of a higher income demographic, which means they have more money to spend.

Q: How can I control how much commission and cashback is being passed back?
A: Brands are able to control the amount of commission they pay their affiliates. Custom commission rates can be scaled right down to product margins and even a specific product level. For example; a department store can assign 2% commission to electronics, 10% commission to children's toys and 8% commission to all fashion and apparel all at the same time.

The cashback affiliate decides what portion of the commission is passed to the user.

Q: How do I know the sales are incremental and I would not have gotten that sale anyway?
A: This is dependent on how an individual advertiser views incremental sales. This could be % new customer sales, higher AOV, increased conversion rates. The answer here is to a.) ensure your program is set up to optimally track and report all the most important incremental KPIs, b.) test and review. One way to do this would be to look at performance metrics before a cashback partner or partners has started promoting your brand and then measure performance against a like for like period of time after they are live.

What are the cashback strategies retailers can explore?

When it comes to working closer and building a stronger relationship with cashback sites; the below list outlines the primary ways that a brand can optimise via cashback:

cashbackstrategies

 

Can you work offline with cashback affiliates?

A recent development in the world of cashback within the Australian market is the ability to implement this reward via bricks and mortar stores. Brands with store fronts are able to utilise card linked technology to incentivise members to shop in store. In most cases, the cashback member connects their credit card or bank account to their cashback account to be eligible for in store cashback. Once their purchase has been approved, the cashback amount will be transferred into their cashback account.

This phenomenon has opened up much discussion in regards to omni-channel optimisation and being able to use online marketing channels to increase in-store performance and change consumer behaviour in the bricks and mortar environment. Retailers are now also able to unite their online and offline strategies.

Summary 

Working with cashback sites is simple and effective with no barrier to entry for the advertiser. All you need is an active affiliate program and to accept these affiliates to your program. As more consumers are catching on to this method of shopping, it makes sense to trial this vertical if not already.

With online retailing becoming more competitive, having that competitive advantage and staying relevant amongst shoppers is more vital in 2020 than ever before. 

Key Takeaways

  • Consumers acceptance of cashback is growing in Australia
  • Cashback sites provide the opportunity for brands to reach new audiences 
  • Cashback is an effective way to incentivise consumers
  • Cashback is now possible in both online and offline stores

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