Cashback: a winning marketing strategy

News IT @it

12:03 pm

18 May 2018

According to the 2015 Cashback Industry Report, there are 235 cashback companies currently operating around the world. Fifty-one of these are based in the USA, where the industry is worth $84 billion, with a further 48 in the UK and 135 elsewhere in Europe. But what really is cashback? Essentially, it allows customers to earn while they spend – cashback websites simply notify users of participating online stores and the cashback percentage on offer. In order to make a purchase, the user goes through the portal and then receives a cashback amount in the form of a cheque, bank transfer or account credit as soon as they reach the minimum accumulation limit. Cashback websites enter into commercial agreements with a range of e-commerce businesses, from whom they earn commission on every purchase made thanks to them. Part of this commission then goes back to the end user. According to the creditback system, meanwhile, the sum gets loaded back onto a pre-purchased payment card.

 

Cashback: past and present

Cashback is form of online savings system launched ten years ago in the USA, where – as in the UK – the industry is experiencing exponential growth. USA company Ebates , for example, generates billions of dollars in revenue every year. British platform Quidco  boasts five million users and five thousand partners and is seeing 90,000 registrations per month. In fact, the industry has surpassed even the discount code market in the UK.

Cashback percentage sometimes exceed 10% – and the more you spend on a particular site, the bigger the cashback percentage you are entitled to. The cash gets credited straight back onto our online accounts, as we spend sure in the conviction that we are earning as we do so. Amazon has launched its own cashback credit card, in collaboration with JP Morgan Chase and Visa, for its US Prime customers, who receive 5% cashback on products purchased on Amazon and 2% on purchases made at participating restaurants and petrol stations.

Cashback marketing works in much the same way as affiliation marketing. Clients either receive cash or earn of specific purchases. These kinds of cashback solutions are a clever way for companies to attract new clients and hold onto the ones they already have.

Companies such as Maple Syrup Media, who own Quidco, use a “revenue share” model. With over 5000 partners on their books, Quicdo receives commission on every purchase made through their platform and in turn pays commission to the client. Companies choose to team up with players like Quidco rather than setting up their own cashback programmes. Other sites, such as Lyoness , for example, incorporate cashback principles in their physical stores. From a digital perspective, technology and marketing are becoming more and more intrinsically linked – traditional marketing methods are no longer sufficient in this digital age. Companies are having to adapt their methods to reach the public across the various different channels, concentrating more on mobile, video and social media.

In the UK, the cashback site TopCashback has an average cashback percentage of 7%, meaning that whenever a user spends £100 on a partner website, they will receive at least £7.07 in cashback. TopCashback has revealed that members earn on average £325 per year on their purchases, while Quidco has put their figure at £280 per year. Staying in the UK, sites like Quidco offer bigger rewards based on categories. For instance, users can get 15% cashback on gym memberships, or 18% when they write their will.

 

Cashback credit cards

The cashback credit card industry is growing fast in the USA. It is seen as one of the most effective loyalty schemes around, because card holders know exactly how much they are going to earn off each particular purchase, without the need to figure out the value of points. Some cashback cards offer a set cashback amount on every purchase, while others have bonuses based on where and how users make purchases. Even before Amazon and all the rest, there were plenty of other credit institutes offering this type of service.

The benchmark used to be a 1% discount on all purchases, but there are several providers now offering 1.5% or even 2% in discounts. For example, US company Alliant offers an incredible 3% cashback for one year, followed by a rate of 2.5% for successive years. Furthermore, there are also bonus category cashback cards which offer bigger percentages or better rewards on qualifying purchases. For instance, one card offers a 3% discount on food purchases, but 1% on everything else.

 

The Italian cashback market

In Italy, the cashback industry is still in its embryonic stages. The most popular website, Bestshopping.com, has around 200,000 users. The site was set up in 2008 by two former Yahoo! Italia employees, who introduced a price comparison function to allow users to analyse the costs of the products they want to buy, taking discounts and cashback into account. The site has around 1000 partners, including some of the leading e-commerce platforms such as Amazon, Zalando, eBay and Yoox. According to Netcomm, the Italian Electronic Commerce Consortium, only 2.4% of the 21 million Italians who shop online use cashback platforms. There are also international players operating on the Italian market, where Lyoness is focusing heavily on offline services. Spanish company Beruby, meanwhile, has 450 partner brands in Italy, while Cashbackdeals – owned by Dutch company Orange Buddies Media – monitors over 100 cashback sites in Europe and Australia.

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