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The affiliate industry is growing rapidly today, but this is not just due to the general increase in consumers’ shifting their purchasing habits to e-commerce. Affiliate marketing has long been a key element in the marketing mix of most online retailers, and it is estimated that affiliate marketing currently accounts for 16% of all online purchases in the US and Canada. It’s growing about 10% more each year, according to Statista, and is expected to reach $8.2 billion by 2022.
Now, loyalty and cashback rewards programs that build on the existing “infrastructure” of the affiliate industry are driving new growth in the affiliate channel.
How affiliate marketing laid the foundation for cashback and loyalty rewards
In the affiliate marketing advertising model, online retailers pay fees for referrals from “publisher” websites, mostly in the form of commissions as a percentage of sales. This is also commonly known as revenue sharing or “handover”.
Publishers come in many shapes and sizes, including on-topic content sites, deals sites, blogs in niche verticals, social media influencers, and more. These publishers provide links to retailer sites in their content in hopes of directing their viewers to these retailers and earning sales commissions from the traffic they refer.
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Affiliate marketing networks like CJ, Impact, ShareASale, and others provide retailers with technology platforms that track referrals from publishers to attribute purchases resulting from these referrals to the appropriate publisher and pass revenue share payments from vendors to publishers.
In fact, affiliate networks serve as marketplaces that connect publishers to online retailers and enable them to form marketing relationships with each other. Publishers join the network to gain access to online retailers willing to pay them for sales driven by their audience. Online retailers join the network to cost-effectively acquire customers and drive increased sales.
How do cashback and loyalty programs work in affiliate networks?
It provides an incredibly efficient infrastructure to power existing affiliate network monitoring platforms, rewards and loyalty programs. The rewards platform and solution providers are now publishers that participate in affiliate programs with revenue share commissions paid by online retailers on sales. However, unlike traditional affiliate publishers who hold commissions, rewards and loyalty programs offer some or all of the commissions earned to consumers (e.g. viewers) in the form of shopping rewards such as cashback.
Backed by existing affiliate infrastructure, such cashback rewards programs have grown in popularity over the past few years. Examples of these programs include PayPal’s Honey, Capital One Shopping, Microsoft Rewards and Acorns Earn and others.
Related: 3 Hidden Reasons Your Brand Needs a Rewards Program
Why should brands consider adding cashback and rewards programs to their affiliate marketing channels?
Affiliate-sponsored coupon and rewards programs benefit reward providers and consumers in two ways:
Rewards program providers experience stronger brand loyalty, better customer retention, lower user acquisition costs and increased revenue.
Online retailers also benefit directly in a number of ways.
Increase conversion rate and reduce cart abandonment
Enabling cashback rewards during an online purchase increases the likelihood of a customer completing that purchase. When a customer activates a cashback incentive at the start of a shopping journey, it acts as a magnet that draws the customer into a converted sale from the first click.
Globally, the average ecommerce conversion rate is 3.29% (the percentage of ecommerce website visitors who complete a purchase). But according to data from Wildfire Systems, when consumers activate cashback rewards during their online shopping trip, more than 15% complete the transaction – that’s a 6-10x increase.
Increasing the average order value
Typical order value for retailers in the Wildfire merchant network has historically been in the $60 to $70 range when consumers shop after visiting the retailer’s site via social media platforms such as Pinterest and Facebook. However, in Wildfire’s experience, the average order value rises to $130 when customers enable cashback during an online shopping experience. This is where the psychology of “bargaining” comes into play.
Based on data from CJ, a leading affiliate network, publishers in the loyalty and rewards vertical have a significantly larger transaction size with a 25% higher average order value compared to other publishers on the CJ network based on data from the past two years.
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Improve return on advertising spend (ROAS) by changing budgets
Cost-per-click (CPC) and cost-per-1000 impressions (CPM) ads continue to rise in price. In fact, according to Tinuiti, a performance marketing agency, pricing on these channels is at an all-time high, and targeting social and digital advertising is becoming increasingly difficult given the evolving legislation regarding privacy and third-party cookies. Also, advertiser reliance on CPC advertising continues to decline due to the prevalence of click fraud and bots. Cybersecurity firm CHEQ estimates that bots and rogue users now make up 40% of all online traffic, directly damaging ROAS for CPC and CPM-based advertising.
The combination of these factors is pushing online retailers to shift the budget to the affiliate channel, due to the performance-based model of paying publishers. real e-commerce sales were created. Affiliate marketing offers one of the highest ROAS and lowest risk components of an advertiser’s marketing mix by shifting spending down the purchase funnel. In fact, CJ also noted that in 2021, loyalty and rewards affiliate publishers on its network earned 34% higher ROAS than other publishers.
Rewards programs have become mainstream, and consumers are not just getting used to these benefits, they are increasingly expecting more. It’s a win-win situation for everyone in the ecosystem: Consumers benefit from rewards and discounts, retailers benefit from higher sales conversion and lower ROAS, and services that offer rewards programs benefit from retention, user acquisition, and new revenue streams. As these programs move from differentiating to table bets, you can expect rewards and loyalty programs in the form of online shopping companions to proliferate.