Cashback & Voucher Code Affiliates: Are they Stealing My Margin?

by Chloë Thomas

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Voucher code and cashback affiliates attract traffic to their sites by offering users cashback for making a purchase with one of the advertisers on their site, or by offering voucher codes for use on advertiser’s site. To encourage loyalty these sites tend to make their visitors sign up to their website. This ensures they must be logged in to receive access to offers, which means they can be tracked.

There has been an increase in interest and use of these sites – with the mainstream press advocating the use of such sites to the savvy consumer. The market for cashback and voucher code sites is massive.  As Neil Durrant of Submission Technology states (in an interview with e-consultancy) “If you aggregate all of the key players in the cashback space, you will probably get up to around 2m to 2.5m UK consumers. I guess the activity rates of those consumers will be around the 35% to 40% mark.”

As discussed in my previous blog post there are a number of advantages to the merchant of using cashback and voucher code affiliates. These advantages centre around the increase in audience exposure to your product/brand and potential for increase in sales.

However, the downside with these types of affiliates is the margin you give away. If you are giving a commission to these sites in exchange for a stream of new customers who may not have purchased from you, it is likely to be beneficial, but if these customers would have made a purchase from you anyway, you are diminishing your margin. However it is better to attract a customer and lose out on some margin than not have that customer in the first place

When considering working with cashback and voucher affiliates, I recommend you use the following points to start your analysis:

  • PRODUCT & BRAND
    – Brand image. Is your brand perceived as being a luxury good? You risk weakening the status of your brand if you are appearing on discount sites. However, a brand which is perceived as being value-for-money could find great success with these affiliate sites.
    – Product type. Some sectors do not have the same need to entice customers into making a purchase as others. Some products and brands become so important to the person that they are preferred to purchase without a discount. These are more the ‘lifestyle brands’ such as Apple, Nike, Sony etc. The financial sector very much favours acquiring customers through cashback sites as consumers do not see it as an interesting buy – certainly not one which accentuates their personality – so for most, the key decider in making a purchase is the cost.
  • CUSTOMERS
    – Loyalty of customers. It depends on your brand and product type (as above) as to the extent to which your customers are loyal. If you have a close relationships with loyal customers you  shouldn’t need cashback / voucher code sites to increase your sales. You could increase your sales by building up your relationships with existing customers, and these customers will return to you without the need for a discount. There may be the potential to acquire new customers via cashback and voucher code sites, but these type of consumers are likely to be fickle and buy from whichever competitor is offering a discount for the next purchase.
    – Customer profile – Are your customers bargain hunters? Are they loyal to you? Again, this depends on your product and its brand image and you will need to bear these in mind when deciding on your affiliate strategy.

  • COMPETITION
    – Do your close competitors have an affiliate programme? Are they successful?- Does the industry and sector you are in work well with cashback and voucher code sites?- Are your competitors working with cashback / voucher code affiliates, and which ones.
  • FINANCIAL
    – What is your average order value? This will make an impact on what discount you can offer and if it is worth working with cashback / voucher code affiliates.- What Margin do you make on sales – can you afford to give it away. If you are only making a small margin on the sales you make, do you have the capacity to offer an additional 10%off for these using voucher code sites?

In Conclusion…

There are great advantages to using cashback and voucher code affiliates in your programme. If you decide to work with them, I recommend that you:

– Know exactly what you are offering (and what your competitors are offering) affiliates in terms of commissions, and be sure you can afford it even if the customer only makes one purchase from you.

– Monitor your costs, sales and margins carefully.

– Act quickly if things aren’t going according to plan. Don’t be afraid to discontinue working with these affiliates if you feel it is damaging your brand identity or sales.

– Keep in touch with your customers. Talking to them will not only help continue to build relationships with them but can also provide a useful insight into their shopping habits.

– Start a dialogue with your best performing affiliates and offer them bespoke content to further increase their traffic/conversion on your site.