Loyalty and Cashback sites get a horrible wrap because of the heavy use of adware with some of the largest and some of the smaller ones, fraudulent orders and a lack of perceived value from them. The reality is that with loyalty and cashback sites there is a definite possibility that you will end up with numerous partners that will not add value to your company, but by not working with them you are also missing out on some great opportunities to generate and drive legit sales. I’m going to go over the negative potential issues that cashback and loyalty Affiliates can have on your business and then go over some of the positive aspects of working with non adware loyalty sites.
The risks with Loyalty, Cashback and Incentive sites.
What you may end up finding out after working with loyalty or cashback sites is that they utilize broswer extensions, loyaltyware, reminderware, etc… This is never good for your business, in my opinion, and what you’ll also not realize is that these sales look like ordinary and regular sales. The reality is that some of them are not sales that the loyalty site earned, instead their adware activates when the end user gets to your site and sets the cookie or entices the user to click on the ad or coupon over your site, even though you brought the customer to your site through PPC, SEO, Email newsletters, etc… The sale will look normal and you will never know that it was actually theft unless you are an adware expert. The only way to know if the site is using adware is to learn about loyaltyware, reminderware, couponware, etc… or to hire someone like myself or Kellie Stevens to do a program audit of your Affiliate partners.
Audit your sales.
You have to do 30 day, 60 day and 120 day return audits. If your program pays out on a 30 day cycle, you may end up paying out after 30 days on sales that get returned, canceled, etc… 60 days after they occur. If you aren’t doing return and bad order audits on loyalty and cash back sales, you may find out that you are paying out commissions when the sale wasn’t real and the end user of the loyalty site was just taking you for a ride.
No customer acquisition.
This is one thing that is actually misunderstood about Loyalty, Incentive and Cashback Affiliates. Their goal is not to bring you new loyal shoppers and new loyal customers. Their goal is to drive sales to you and keep their user base their own. They want to ensure that their user base always uses them which is how they stay in business. If the shopper goes to you and bypasses them, they don’t make as much off of each sale since their commissions disappear. That is why some use “loyaltyware” and other dirty tricks to steal from you. With that said, you need to include loyalty sites in your terms of service if you only plan on paying out on the first time a customer shops with you but not paying out on any other sales. If you reverse sales because their users buy from you a second time, you not only make it so the shopper doesn’t get their cash back and give them a bad experience, you’ll also create a bad user experience for the loyalty site. Since the loyalty site has their own shopper base, they can promote the same products through your competition and remove you completely which would definitely hurt you. The legit ones like Sunshine Rewards have the option to pick and choose and can add tons of value, you just have to remember to treat them with the same care that you would your own company. You also need to remember to create a plan that works for your bottom line when it comes to loyalty, cashback and incentive sites.
You should keep track of each sale that comes through loyalty Affiliates. I highly recommend spot checking 1 out of every 5 sales for the first couple hundred that come through with customer phone calls, credit card checks and other ways to catch fraud. You should ask the customers how they found your site without mentioning the loyalty site name (they’ll tell you the url or site that referred them if they are an actual member. It could have also been the adware on the members computer that activated the cookie and commission if they don’t say the site name which means the commission could be a stolen one as well.) and make it sounds like a regular customer service and just checking on you call. This is a great way to find out the quality of the cash back or loyalty site. You’ll also want to keep track of how many are legit and the products bought to measure the margin eaten away with the commissions, coupons, network fees, no customer acquisition, etc… so you can see if you are profitable with the actual sales knowing that you are probably not building a relationship with a customer who will shop without you having to pay out commissions and eat at your margins with coupons, network fees, etc…
Like I mentioned above. You are not building a direct customer base with loyalty Affiliates. Instead you are getting pushes and promotions from them for additional sales. You have to keep track of the items purchased, the margins available for the purchase and then subtract out all fees associated with Affiliate sales including commissions, network fees, manager or OPM salaries, coupons, annual renewal fees, etc… You may find out that even though it is a sale, it isn’t profitable for you because of all of the fees associated with it.
Sending customer referrals to the loyalty site.
This is something I never understood a Merchant doing, but many do. Merchants may offer cash back through a loyalty site. Not only are they taking their own customers and now paying out on every sale that they would have never had to have paid on, but they are sending their other Affiliates’ traffic to another Affiliate and hurting their other Affiliates’ businesses. Sending your own customers to a cash back site is plain stupid! You can easily create your own customer loyalty program and for free if you use the right tools. Not only does this keep a fair playing field for all of your Affiliates, but it also keeps your bottom line making more money since you are not having to pay out on your own current customer base, not to mention you are exposing them to all of your competitors on the loyalty site. Don’t get suckered into that scam if one of them approaches you.
SEO for your name.
Showing up for your domain or trademark + coupons for a coupon site is one thing, for a loyalty site it is another. If your current customer base finds a loyalty site where they get cash back for shopping from you, especially because they already knew who you are, you may lose your customer to the loyalty site and now have to pay commissions, etc… every time your current customers shop from you and you are now less profitable. The other risk with this is that if you anger them, they can easily say to not shop from you and give your customers to your competitors and offer them cashback for their stores creating a larger loss for you. Since they have the user base and the shoppers are not your loyal customers anymore, you run the risk of building your competitors’ businesses for them since the users are there for cash back and products, not store loyalty.
The good about working with Loyalty, Cashback and Incentive sites.
Moving old inventory.
Even if you aren’t profitable on a sale, having excess and outdated stock can be less profitable for you than losing out on a sale. Incentive sites can help to move inventory for you to make room for newer models, better products and decrease overhead quickly and easily. I love running specials to move excess inventory and outdated product with incentive sites because they are experts at moving clearance items.
If you aren’t a well known brand, this is great exposure.
Loyalty sites can have hundreds and thousands of legit users and shoppers. By partnering with them and working out agreements like email drops and special offers on high margin items, you can get instant sales from their community. Just remember that it is their community that will remain loyal to them, not you. Make sure you are profitable on the sales and only commission the products you are pushing and make the deal clear to the Affiliate before you make the mistake since you’ll have to pay out on repeat sales as well. Or you can make it clear in your terms and conditions so that the Affiliate knows and there are no hard feelings or negative reactions towards you or your customers and brand.
Generating new customers.
When I said that having a loyalty site as an Affiliate won’t build you a new customer base, that doesn’t mean you can’t build a base from partnering with them. You just have to go around the Affiliate networks and go direct with a media buy. Many cashback and loyalty sites offer these types of media buys instead of Affiliate relationships. What you can do is pay for adspace, newsletter drops, etc… They won’t get paid on repeat visitors but you’ll gain exposure to their audience and make sales. You will probably have to offer a coupon or discount and might lose on the first sale, but if you keep track of who comes through and the repeat sales without commissions, etc… you can easily become profitable in the long run. One other thing that you’ll probably have to do that is different than a normal media buy is offer a commission and keep extra room to pay cash back to the shoppers in addition to the cost of the media buy. You’ll probably lose money on the first round of sales, but if you can build a customer base you will be profitable in the long run, but you’ll have to create a reach back campaign to generate the repeat sales without the cashback, loyalty or incentive site.
There are a ton of great ways to partner with Loyalty sites, you just have to make sure you plan ahead and have a way to properly measure your profitability. They can be a great way to reduce your excess inventory and reduce overhead as well as build a new customer base. You can also use them to help move your clearance section. Just plan ahead and know how they work and how the adware that some of them utilize works. Loyalty sites can be your best friend, as long as you know who to work with and who to avoid.
4 thoughts on “Is Your Affiliate Program Adding Value – Part 5 – Cashback & Loyalty Sites”
Thanks for writing this article! I think that loyal sites are definitely misunderstood by a lot of merchants. I will be the first person to admit that there are pros and cons about working with us. Hopefully the pros outweigh the cons with most of us. 🙂 One thing that always surprises me is that a lot of merchants do not realize that the loyalty site splits its affiliate commission with the customer. Merchants tell me all the time that they cannot afford to give me a commission AND pay the customer cash back. I have to explain how the revenue sharing works. The more education that we can get out there about it, the better.
No problem Tricia. Loyalty sites and cash back can be great. I know I have been working with you for years and you have always been a 100% value add for my clients. I think its mainly because of the extra care and attention you take with your members, fraud controls, etc… Thank you for the comment and I hope everyone reading understands that there are good Loyalty sites like yours and that they shouldn’t be afraid to work with the legit, non adware ones.
Great job Adam!
After following this topic on thousands of posts on thousands of thread over many years – I finally have ONE concise page to bookmark!
This topic actually came up today… and I gave a terse one-line response. I’ll send that would-be merchant here!
Keep up the good work,
Thanks Billy! =0)