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Report: Consumers Use Affiliates to Stack Discounts

A new report from Molander & Associates Inc. claims affiliates are inadvertently sharing traffic with other affiliates, confirming behavior speculated for a long time in retail and direct marketing circles.

Thirty percent of affiliates out of the 213 profiled in Molander’s Affiliate List report are sharing visitors, meaning that some consumers are carrying coupons from coupon sites to incentive shopping and rewards affiliates. This way they earn both coupon discounts and cash back on the purchase at the retail site.

“The implication is that retailers may not know this [occurs] on a mass scale, and this obviously impacts gross margin,” said Jeff Molander, formerly at Performics and now CEO of his self-named online marketing consultancy in Evanston, IL.

Molander’s Affiliate List further claims that 30 percent of the affiliates profiled rely on consumers using brand-related terms on search engines. Put simply, a majority of the top 20 search terms used by consumers to visit an affiliate site are brand- or trademark-focused words or phrases.

The report also found that 10 percent of affiliates use brand names or trademarks in their index page meta tags when building Web pages. This helps them become better ranked for brand or trademark keywords by search engines.

Molander’s report covered sites like fatwallet.com, coolsavings, couponmountain.com, schoolpop.com, Upromise and flamingoworld.com. Rewards programs like those of Northwestern Airlines and United Airlines are also profiled in the 650-page report sold on www.theaffiliatelist.com.

Consumers stacking discounts is an issue that is slowly but steadily alarming retailers and direct marketers. Consider this hypothetical example of how it happens.

Let’s say a consumer starts shopping on “nativeflowers.com,” finds what she’s looking for and places the bouquet in the site’s shopping basket. She then proceeds to Google, types in nativeflowers.com to find a discount coupon. The search will yield a number of coupon sites where she picks up the relevant coupon applicable on nativeflowers.com.

So that settles the coupon part. Then this consumer proceeds to get some cash back for her nativeflowers.com transaction. She visits a site like schoolpop.com for some cash back toward her child’s schooling. She clicks through the nativeflowers.com link on schoolpop.com to complete that process.

Through these maneuvers, the consumer earns not just the cash back but also enters the coupon code on nativeflowers.com and gains an extra leg-up on the same transaction.

The questions for many retailers are how frequently does this abuse of the system occur and – if they don’t know – how to control gross margins on e-commerce sales. As Molander learned in his research, many direct marketers want to know.

“Catalogers are definitely driving this,” he said. “They want to know the lifetime value of customers. They want to know the actual customer acquisition cost. And even bigger than that is the actual retention cost being added in this type of scenario. Retailers seem to care less, while direct marketers are fanatical about date and controlling costs. So what we see evidence here of is what everybody has theorized and we can quantify.”

How can retailers and direct marketers combat this discount-stacking trend as it gains traction?

“What a smart retailer should know about this is they should adjust their commissions on an individual affiliate basis, which can be challenging,” Molander said. “Right now, most affiliate programs have various commission levels, but at the end of the day, they don’t perform an analysis based on the shopping behavior of the consumer.”

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