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Today’s affiliate industry is growing rapidly, but it’s not just because the overall growth of consumers is shifting their buying habits to e-commerce. Affiliate marketing has long been a staple of most online retailers’ marketing mixes, and it’s estimated that affiliate marketing now accounts for 16% of all online purchases in the U.S. and Canada. According to Statista, it is growing by about 10% every year and is expected to reach $8.2 billion by 2022.
Now, loyalty and cash-back rewards programs built on the existing “infrastructure” of the affiliate industry are spurring new growth in the affiliate channel.
How Affiliate Marketing Lays the Groundwork for Cash Back and Loyalty Rewards
In the affiliate advertising model, the online retailer pays a fee in the form of a commission, usually a percentage of sales, for referrals to “publisher” sites. This is also commonly referred to as revenue sharing or “rev share”.
Publishers come in many shapes and sizes, including topic-specific content sites, transactional search sites, bloggers in niche verticals, social media influencers, and more. These publishers promote links to retailers’ websites in their content, hoping to drive their audience to those retailers and earn a commission on sales from the traffic they bring.
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Affiliate networks such as CJ, Impact, ShareASale provide retailers with a technology platform to track referrals from publishers, to attribute purchases resulting from those referrals to the appropriate publisher, and to pass the merchant’s revenue share payment to the publisher .
In effect, affiliate networks act as marketplaces that connect publishers with online retailers, enabling them to develop marketing relationships with each other. Publishers join the network so they can access online retailers willing to pay for audience-driven sales. Online retailers join the network so they can cost-effectively acquire customers and drive sales growth.
How Cashback and Loyalty Programs Work on Affiliate Networks
Existing affiliate web tracking platforms provide an extremely efficient infrastructure to support rewards and loyalty programs. Rewards platforms and solution providers are now participating publishers in affiliate programs, and their online retailers receive a rev-share commission on sales. However, unlike traditional affiliate publishers that retain commissions, rewards and loyalty programs return some or all of the commissions earned to consumers (such as their viewers) in the form of shopping rewards (such as cash back).
These types of cash-back rewards programs are powered by existing membership infrastructure and have exploded in popularity over the past few years. Examples of these programs include PayPal’s Honey, Capital One Shopping, Microsoft Rewards, and Acorns Earn, among others.
Related: 3 Secret Reasons Your Brand Needs a Rewards Program
Why should brands consider adding cashback and rewards programs to their affiliate marketing channels?
Member-supported coupons and rewards programs benefit rewards providers and consumers in two ways:
Rewards program providers saw stronger brand loyalty, better customer retention, lower user acquisition costs and increased revenue.
Online retailers can also directly benefit in a number of ways.
Increase conversion rates and reduce cart abandonment
Activating cash back rewards during online purchases increases the likelihood that customers will complete their purchases. When a shopper activates a cashback incentive at the beginning of their shopping journey, it acts like a magnet that drives customers from the first click to a converted sale.
Globally, the average e-commerce conversion rate (the percentage of e-commerce site visitors who complete a purchase) is 3.29%. However, according to Wildfire Systems, when consumers activate cashback rewards while shopping online, more than 15% complete the transaction – a 6-10x increase.
Increase average order value
A typical order value for a retailer in the Wildfire Merchant Network has historically been between $60 and $70 when consumers visit the retailer’s website through social media platforms such as Pinterest and Facebook to make a purchase. However, in Wildfire’s experience, when customers activate cash back during their online shopping experience, the average order value climbs to $130. The mentality of “bargaining” comes into play here.
According to leading affiliate network CJ, publishers in the loyalty and rewards vertical drive larger deal sizes, with average order values 25% higher than other publishers in the CJ network, based on data from the past two years %.
Related: Here Are the Best Value Hotel Rewards Programs of 2022
Increase return on ad spend (ROAS) by adjusting your budget
Cost-per-click (CPC) and cost-per-thousand-impression (CPM) ad prices continue to rise. In fact, according to performance marketing agency Tinuiti, pricing on these channels is at an all-time high, and targeting social and digital ads is becoming increasingly difficult given evolving legislation related to privacy and third-party cookies. Additionally, advertisers’ trust in cost-per-click advertising continues to decline due to the prevalence of click fraud and bots. The cybersecurity firm CHEQ estimates that bots and fake users now account for 40% of all online traffic, which is directly detrimental to the ROAS of CPC and CPM-based advertising.
Pays publishers a percentage due to its performance-based model actual E-commerce sales are generated. By shifting spend further into the buying channel, affiliate marketing is one of the highest ROAS and lowest risk components of an advertiser’s marketing mix. In fact, CJ also noted that in 2021, the ROAS for loyalty and rewards affiliates in its network is 34% higher than other publishers.
Rewards programs have gone mainstream, and consumers are not only becoming more accustomed to, but increasingly expecting, these benefits. This is a win-win for everyone in the ecosystem: consumers benefit from rewards and discounts, retailers benefit from higher sales conversion rates and lower ROAS, and services offering rewards programs benefit from retention, User acquisition and new revenue streams. As rewards and loyalty programs in the form of online shopping associates evolve from differentiation to staking, you can expect to see plenty of rewards and loyalty programs.