Affiliate Marketing: Cashback and coupon sites decoded

Bestmediainfo.com delves deep into the rising trend of affiliate marketing and decodes the functioning of these sites. It's a win-win for all partners and the customer

Sarmistha Neogy | Mumbai | November 10, 2014

Being a price sensitive nation, India has a huge fascination with discounts and takes immense pride in the power of bargaining. Keeping this trait in mind, cashback and coupon sites are trying to gain a foothold in the country, and the trend of affiliate marketing is gradually gaining popularity. The modus operandi for these models may be different, but the core value remains the same – which is to help the consumer save maximum money and provide them with a great shopping experience. These sites also work to generate sales and pull traffic for the multiple online retail partners they tie up with.

BestMediaInfo.com spoke to Founders of cashback/coupon sites and also with their online retailer partners to understand how affiliate marketing works.

How it works

Swati Bhargava

Swati Bhargava, Co-founder, CashKaro.com, says that the cashback system works purely on commission basis. She explains the process: “We have more than 500 retailers with whom we have partnered. If you buy a book from Amazon which costs Rs 100 and there is a 20% discount given by the retailer, the book will cost you Rs 80, which you will get even if you purchase it from the Amazon site directly. A cashback site like ours will give you cashback offers in the form of hard cash, which can be transferred to your bank account, whenever you want. So, the book which costs Rs 80 after the discount will also have, say, a 10% cashback offer, which means Rs 10 will directly go to your cashback account.”

This cashback offer depends on the commission a retailer pays to the website. So, instead of keeping the entire commission to itself, it decides to share it with the customers. Some of the highest commission payers are Amazon, Flipkart, Snapdeal, Jabong, Myntra, ShopClues and Paytm.

Ravitej Yadalam

Ravitej Yadalam, CEO and Founder, Pennyful, says, “Through cashbacks, we intend to build an online transacting community so that a customer returns to our site to shop. That is the reason we share a bigger portion of our commission with them to help them save more and provide them with a satisfying shopping experience.”

Both CashKaro and Pennyful, before venturing in India, tested the module in the Western markets. Talking about the differences in both the markets, Bhargava says, “The Western market is more evolved and retailers, therefore, are more generous in giving discounts. It is not the same in India because of low awareness. Therefore, we at CashKaro, through our different programmes and referral initiatives, intend to spread the message that it is indeed a great way to save money through cashbacks.”

CashKaro intends to indulge in aggressive marketing and also launch a unique feature on the site, which will enable the customer to compare the same product from different retailers. On the other hand, Pennyful is working on a browser extension which is compatible with Firefox and Chrome browsers. This browser extension needs to be downloaded and appears as a small icon on the website. If a customer is making an online purchase and is not logged in to his Pennyful account, the browser extension reminds him to do so.

Crowd-puller

Bhargava discloses that people have lakhs of rupees accumulated in their cashback accounts because, today, on an average, a customer does 4,000 transactions in a year. As a result, the company has recorded Rs 100 crore worth of sales in the last 15 months. “Our target group is mainly students and young professionals and, therefore, 35% of the products sold on our website are electronics, followed by fashion which comprises 30%, mobile constitutes 10% of sales and travel comprises 7%,” she says.

Ravi Kumar

Ravi Kumar, CEO, Freekaamaal.com, adds, “This affiliate model works pretty well for small e-commerce stores who don't have big budgets to run display ads; they can easily tie up with cashback and coupon sites and start promoting their products without any investment.”

In terms of the traffic generated, he says that for big e-commerce players, affiliate sites are driving close to 20% of their monthly sales, whereas for small merchants this number could be up to 60%. “As per the industry estimate, sites like Flipkart are driving close to Rs 100 crore (approx) worth of sales through their affiliate channel partners, on a monthly basis. In fact, during any sale or festive season, traffic at Freekaamaal.com peaks as high as 150%,” he states.

Below is an estimate provided by Kumar of the traffic flow on Freekaamaal.com, during festive and discount days:

For coupon websites, the popularity stems from the fact that it provides an opportunity for consumers to avail additional discounts over and above the discounts already available in the online space.

Alok Goel

Explaining the mechanism behind its functioning, Alok Goel, CEO, FreeCharge, says, “FreeCharge is a platform where a customer can recharge prepaid phone / pay post paid bills or recharge DTH connections. But, it is not a regular recharge portal; here, every time a consumer recharges, he/she is rewarded with coupons of equal value, thus making recharge practically free. So, a user can recharge for Rs 200 and get rewarded with a free burger and a free coffee coupon from McDonalds and Costa Coffee. The Indian market is very responsive to our initiatives and the company has been growing 700%, year-on-year. FreeCharge has over 13 million users and more than six million mobile app downloads.”

FreeCharge makes money from telecom operators by way of commission. It also earns money from retailers who want to disburse coupons through FreeCharge platform. The company aims to reach 1 million transactions per day, by March 2015.

Sameer Parwani

According to Sameer Parwani, CEO & Founder, CouponDunia, today, coupon websites form about 10% of the entire percentage of online transactions in the country, which is less than 2% of the overall transactions. “We have a long way to go. Although online shopping has gained popularity in the recent years, it is yet to overtake the shopping space completely,” he observes.

“Even though big players like Flipkart and Amazon received flak during their respective sale period, they did booming business. All said and done, with or without glitches, people did shop online and took full advantage of all the possible discounts that were available to them. We also helped consumers find the best deals, saved their money and drove traffic to our merchants. In all, it was a win-win situation for everyone,” he added.

Being in the online space, both coupons and cashback sites usually involve lots of digital marketing which includes Search Engine Optimisation, Google Adwords, video ads, display ads, search ads, social media, mobile app, print advertising and mailers, among others.

The Other Side

The flipside of the cashback model is that the customer doesn't get cash transferred to his account immediately after the completion of online shopping. Yadalam of Pennyful, says, “We have no minimum amount for cash withdrawal; you can even withdraw as low as Rs 10 from your cashback account. But, your account won't be activated until the return period of the purchased product is over, which usually varies from retailer to retailer and is normally within 30-90 days.”

For CashKaro customers, within 72 hours, the cashback amount is added to their account. But, it remains 'Pending' till the retailer has paid CashKaro. It then takes 30-90 days to change the status to 'Confirmed'. Only once the customer has collected Rs 250 or more confirmed cash, the customer can request payment and then the cashback site can transfer the amount to the bank account for free.

Vivek Varughese, Analyst, Affiliate Marketing, Fabfurnish.com, points out that cashback and coupon websites help increase conversion rate. “The average conversion rate for most e-commerce websites is around 1%, the conversion rate of the traffic coming through these websites is around 3%. Out of the entire affiliate marketing segment, cashback and coupon websites pull up to 40% of the traffic,” he says.

Praveen Sinha

Praveen Sinha, Co-founder and Managing Director, Jabong.com, believes that in terms of the design aspect, it is a win-win situation for both the site and the tie-up partners. But, he clarifies, “The discount which is offered to a first-time customer will not be the same for repeat customers. Therefore, it is a great tool for customer acquisition, but not for customer retention. We have cashback tie-ups with CashKaro, Savepaisa, ApnaCashBack, CashItback and Payback, also with banks, but that is event based.”

New e-commerce portals too are reaping the benefits from this model. Avinash Chandra, General Manager,(Sales & Marketing), HealthKart.com, says, “The idea of giving discounts is not that appealing to a retailer because it eats into the margin. But, in reality, discounts actually make people buy more and the retailers end up selling 20% more. Health is one area where a person makes no compromises. We had our own hesitations that cashback and coupon websites are sharing our traffic. But then we understood that for a newbie like us, this model is actually helping us to acquire new customer and also gain traffic at the same time.”

At the end of the day, every customer loves a freebie or a cashback. Given the mutually beneficial nature of the affiliate marketing model and its surging popularity, it certainly is here to stay.

Info@BestMediaInfo.com

Info@BestMediaInfo.com