The Increase Of Cashback Marketing In The Digital Age

Antony James

Each individual with a mobile phone carries more technology in their hand than took us to the moon. As well as revolutionizing the way that we live our lives, digital devices are also drastically changing the way that we’re marketing to new customers. With the ability to track and reach individuals through entirely new markets and new channels, we’re having to completely review the rule book, though there are many similarities and core marketing theories that still apply.

Cashback marketing works like affiliate marketing. Customers are given cash back on or money off specific purchases. Cashback solutions like these are a clever way for companies to attract new customers and to retain those they have already cultivated.

Companies like Maple Syrup Media, which owns Quidco, use straightforward cashback marketing, or you could say they use a “revenue share” model. With over 5,000 merchants in its database, Quidco receives a commission for each sale made through it and pays a commission back to the customer. Companies choose to partner with publishers like Quidco rather than have their own cashback programs. Other sites, like Lyoness for example, incorporate cash back with shopping points, where customers can redeem their points for discounts.

While sites like Groupon and Wowcher offer occasional cashback offers, their model is more focused on sending customers eye-catching daily discounts. This benefits the merchants because they get a new pool of customers, and it obviously benefits the customer because of the discounted deal they receive. Groupon often offers discount deals with cash back on top, and its new “Groupon to Go” takeaway app (piloting in the United States) will offer cash back on takeaways without customers having to go through another website.

From a digital standpoint, technology and marketing are merging, and traditional marketing methods are no longer adequate in this digital era. Companies need to adapt their methods to reach audiences on all of the different channels, for example, focusing on mobile, video, social, and search. That said, traditional marketing theories can still be applied to cashback marketing to explain how it can be implemented as a credible marketing method.

  • The Boston Consulting Group matrix focuses on product lifecycle. It looks at the different stages of a product’s life from when it enters a market to when it is removed. While it might not seem as relevant to cashback marketing as other traditional marketing theories, cashback marketing can actually help extend a product lifecycle – which is ultimately the aim. Various marketing techniques, like price reduction or adding value, can extend a product’s lifecycle, and cashback marketing can do the same by adding perceived value and the idea that the product is actually “cheaper” due to the money given back.
  • A SWOT (strengths, weaknesses, opportunities, and threats) analysis provides some strong theoretical reasoning behind cashback marketing. Companies know they already have a strong customer base. They have products that are performing well, well-crafted distribution channels, and can utilize economies of scale. This comes with very distinct threats though, such as loss of customer base or products declining in popularity or awareness in the marketplace. The potential for the customer base to decline is a worry for most businesses. To challenge the threats, cashback marketing allows a company to further encourage brand loyalty, and through both daily deals and direct targeting, reach an audience eager for a good deal.
  • Porter’s Five Forces tool is about understanding power and potential by analyzing competition to determine the profitability of a marketplace. There’s no doubt that you can get cash back on pretty much everything these days, meaning it’s a competitive marketplace. The threat of substitution (one of Porter’s Five Forces) is lowered when a retailer joins a cashback marketplace, and it increases for those who don’t, because participating products will be instantly perceived as cheaper or a better value because of the cashback advantage.

You could say that digital marketing is disrupting traditional marketing theories. However, these tools still work in highlighting how cashback marketing can increase revenue and customers. In this digitally crowded world, finding our customers and keeping them has never been more important.

For more on how customer expectations are changing retailing, see Customer Experience: OmniChannel. OmniNow. OmniWow.