Now I know what you are thinking: "same old articles." And you know what? You are sort of correct. This isn't a new topic but things are changing and there are some observations and examples in here that may surprise you, so please read on.
Diversification in the affiliate channel has been a point of conversation for the majority of my eleven years in affiliate marketing. My time network side in particular exposed me fully to the reliance that there is across the industry as a whole in a small number of key publishers and publisher types and in particular this includes cashback.
The IAB study on performance marketing at the start of the 2013 highlighted cashback sites as being responsible for approximately 30% of the online performance marketing industry spend. The truth is that a lot of established affiliate programs actually have major cashback publishers account for even more than this 30%, a scary position to be in.
Danger highlighted by policy changes
This is not limited to just cashback, but any channel that has a supplier or supplier type which makes up a third of its sales is, in my opinion, too much exposure. Potential danger has been highlighted recently with the change in policies relating to energy companies and cashback incentives being restricted. There are always outside policies and practices which can affect us in online marketing. The best examples being Penguins, Pandas and Hummingbirds!
Some programmes however do go against the grain. Here at R.O.EYE we are responsible for the smooth running of the eBay partner network across the UK and Europe and this is one such client. Last year, eBay made a strategic decision in the UK to remove cashback and loyalty sites from their affiliate program and focus on one partner in the loyalty realm in the guise of Nectar.
They have, after much hard work, made a success of this and now have no pure play cashback publishers on their partner network in the UK. The focus for eBay has instead has been on growing the long tail with alternative, non-traditional publishers whilst utilising Nectar to reinforce their brand equity and build big data on their customer and user-base.
Moving away from cashback may not be appropriate for all businesses and in many cases, one of the main problems with diversification away from cashback is the opportunity loss. As a compromise to this, I believe that a merchant needs to run a number of different commission streams on their affiliate program and then work with different approaches to optimise each and every publisher type.
Optimising the supply chain
Make no mistake, cashback is an excellent performance marketing channel and there are all manner of ways to optimise the supply chain. Examples can include; reducing costs on tracking cashback sales through using direct tracking solutions as this gives the merchant more money to play with as an overall cost of sale; Increased commission levels for new customer acquisition versus a lower amount for repeat customers or even only offering cashback to new customers and relying on your own CRM and incentives or promotions to retain a repeat customer.
With all this in mind, we should identify that cashback sites offer an excellent proposition to the consumer and, where managed correctly, excellent incremental value to the merchant. We know that cashback can close a deal or sway a shopper in the decision making process and that leads to new customers and more sales. What is key however is to ensure that your proposition is strong enough to appeal without the cashback as being a main reason for purchase. Anecdotal evidence suggests that the majority of consumers weigh up a number of factors when purchasing via a cashback or reward website and if the actual product, price or offering is not strong enough, no amount of cashback will swing that decision.
To summarise, there is no quick win in diversification of an affiliate program and it takes focused resource and time to increase the overall number of publishers contributing to a program to reduce the percentage that cashback or any other channel contributes overall. The best solution all round is to optimise your cashback channel and build over channels alongside it with tailored approaches for each publisher type. This will increase the overall value of your performance marketing proposition and reduce any reliance you may have built up on cashback or other channels.