Do cash back sites produce incremental sales?
The most common question I get asked tends to be around cash back sites, do they add incremental volume or not? Unfortunately, there is not a right or wrong answer as it completely depends on who you are. Amazon for example do not work with cash back / loyalty sites (with the exception of Nectar). They state that the reason for this is that they feel that Amazon is a strong enough brand that customers will shop there regardless of reward and customers are loyal to them. I think this is logical. Just taking myself for example, I am an avid cash back user, however I purchase regularly from Amazon as I know they are price competitive, I will receive the goods within a few days and it is a simple and easy process. I am an advocate of the Amazon brand and to date I have not been persuaded away by better cash back offers with competitors.
Amazon however are an exception in the online world, most brands do not have this loyalty or presence in the market. This week I purchased some flowers, this product has little differentiation in the market, prices do not differ greatly, most online merchants use local flower sellers so between brands there isn’t really much to differentiate. I chose to purchase my flowers from Interflora because they were offering 10% cash back and free delivery which looked like a reasonably good deal. Brand did play a part to some extent as I have purchased from Interflora before and trust that they would deliver good quality flowers to my mum on the day of her birthday. However, I would have the same view of other brands such as Tesco, M&S etc. So the cash back site in question played a key part in my decision to buy from Interflora, without that option I would have purchased elsewhere so this would be considered an incremental sale.
There is no blanket answer to whether cash back sites deliver incremental value or not, it depends on your brand and the competitiveness of the market. If you have a product that is exclusive and can not be purchased in many other places then you should consider whether the customer would have bought from you regardless of reward but if you have many competitors then I believe the incremental value is significant.