May 5, 2015
As U.S. eCommerce sales keep making a steady climb as a percentage of overall retail sales, stores of every size are looking for new ways to attract more customers to their websites — especially lucrative, higher-spending customers. The competition for online shoppers is only going to escalate in the coming years, so maintaining and building on your core audience will be critical to your store’s ongoing survival and success.
Free shipping, of course, remains a reliable online deal closer. A growing number of stores are beginning to recognize the benefits that can accrue from customer-friendly return policies. Recently, though, another crowd-pleasing offer has emerged to provide retailers with an additional avenue for increasing both traffic to and revenue on their sites: Cash-back deals.
Cash-back deals generally fall into two categories: pre-defined amounts, which take the form of offers such as “Get $5 cash back on your first purchase at MySite.com;” and percentage offers, i.e., deals along the lines of “Get five percent cash back on your entire purchase.” Pre-defined deals are usually one-time offers designed to spur initial purchases or to move a specific product or product line.
Percentage-off deals, on the other hand, are more likely to be available on multiple purchases. They’re often found via cash-back sites and/or programs, which create cash back by passing along some or all of every retailer commission they receive to the customers making the purchases. These deals are becoming increasingly popular among retailers (and shoppers) because they can:
- Increase site traffic;
- Raise average order sizes; and
- Close more sales.
Nevertheless, some retailers are wary or unsure of the merits of cash-back offers — and of the programs that facilitate them. Let’s, therefore, take a closer look at exactly what these deals and programs can do for your store.
Increase Site Traffic
One of the attractions of online shopping is how easy and convenient it is to hunt for bargains on practically anything you want. Unless you’re searching for a very specific item that’s only available at a single retail outlet, there’s a very good chance that you’re going to try to compare prices and find the best overall deal you possibly can.
Cash-back shoppers are no different — although they may be savvier. While half of today’s consumers want to get cash back whenever they buy something, only about four in 10 currently use cash-back sites to make all of their online purchases. Offering percentage-off deals will help put you on the radar of cash-back fans, allowing you to employ your marketing expertise on a large, diverse group of active shoppers.
For example, when a fashion retailer wanted to promote its summer line, it doubled its commission to a popular cash-back site and bought ad space on it. A beauty store took a similar approach, increasing its site commission and buying banner placements on it. Both retailers saw significant growth in traffic:
- Visits to the fashion retail site went up by more than 250 percent.
- The beauty site’s traffic increased by more than 470 percent.
Your results will vary, of course, depending on your campaign goals, strategy, and budget, but cash-back sites and offers can certainly drive more shoppers to your site. Once there, they’ll be exposed to your offerings and messages, and when they make purchases, you’re assured of additional points of contact through which you can continue to promote your store.
Raise Average Order Sizes
Offering percentage-off cash back on purchases can appeal to consumers on several levels. It’s a savings offer, obviously, so they know it will stretch their budgets. The gratification is delayed, which means they can’t (or, at least presumably, won’t) spend it all immediately. Instead, it gives them something to look forward to, i.e., a future reward for shopping well now. Plus, depending on how much they’re willing to spend, the savings potential can feel virtually limitless — even though they know it isn’t.
The cumulative result is that percentage-off deals often drive bigger cart sizes. In a study of a large retail network, cash-back sites achieved much higher AOV than other sites in the network. The AOV of one of the top cash-back sites was 83 percent higher than non-cash-back sites. Overall, cash-back sites’ AOV were 36 percent higher than the rest.
Cash-back offers can also drive bigger purchases across wide demographics. For instance, the study found that the AOV for menswear cash-back sites exceeded those of other menswear sites by 14 percent. Similarly, the AOV for women’s fashion sites that offered cash-back was 21 percent higher than the AOV for competitors’ sites that didn’t offer cash back. If you want attract high-value shoppers, a cash-back offer.
Close More Sales
A common concern among retailers is that the sales they receive via cash-back sites and programs might generate multiple commission claims because those customers typically interact with a variety of affiliate networks before making their purchases. The study cited above, though, looked at the click paths of various transactions and discovered that 95 percent of retail sales, 96 percent of ticketing sales, and 95 percent of travel sales in the network were single-interaction purchases. In fact, the research showed that, on average, loyalty, reward, and cash-back sites generated the fewest interactions among all of the various affiliate types.
In fact, the evidence shows that a reliable, high-value cash-back offer can increase sales and AOV. In the fashion and beauty store examples discussed earlier, the fashion site saw its sales double, and sales at the beauty site grew by 168 percent. Furthermore, when FreeShipping.com enhanced its ongoing cash-back offer in July 2014 , doubling the subscriber payout to 10 percent, the move benefited program retailers and subscribers alike. Within three months:
- Subscribers who visited retailers through the program site completed orders with those retailers 45 percent more often than they did at the five percent cash-back level;
- The average number of daily purchases made through the site increased 65 percent; and
- The subscribers’ AOV increased 11 percent.
Done right, a cash-back offer can clearly pay dividends for online retailers of any size. It can expand your audience and send desirable, knowledgeable, active consumers to your site; increase the average order size among your customers; and help you close more sales. In your quest for a growing share of the online retail market, those are the sorts of advantages that can make a significant difference.
Tom Caporaso is the CEO of Clarus Marketing Group, which builds and customizes subscription programs, including FreeShipping.com, Return Saver, Travel Plus and others. Tom has more than two decades of direct marketing experience, specializing in continuity, subscription and custom loyalty programs. He’s held senior management roles in e-commerce, subscription programs, site optimization, SEM and SEO, product, marketing, sales, and client services.