Monday, December 08, 2008
Microsoft CashBack - What's The Deal! Update!
In this week economic environment, everybody is looking to save a buck. Microsoft CashBack search is one way folks are doing that. You just go to CashBack.com and search on a product you are looking for and then you get a list of discount offers for that item.
In eBay's case you can search on Live.com and click on an eBay sponsored link which will take you to eBay. [the % discount shows on the eBay link (on Live search) and at the top of the eBay nav bar until the cookie ends, so if you have a PayPal account you will get the discount]
Is buying the customer such a good idea? Doesn't it just encourage the same behavior next time. Look at what happened to Google Checkout. Everyone used it when they got $10 or $20 off but once Google stopped paying so did the usage of Google checkout.
I figure, I really didn't know enough about this type of program to write about it in-depth so I reach out to Brian Lawe, CEO of MyStoreRewards for his take.
Q. As you look at MS Cashback Live – what’s your take?
Let’s start from the perspective that operating a great buyer reward programs is very difficult. The Internet is littered with failed attempts. eBay has its own history of failures, notably eBay Anything Points.
A great buyer reward program requires the perfect balance between a seller’s cost versus the buyer’s benefit – sprinkled with a healthy dose of simplicity and fairness for everyone involved. Amazon Prime is a great example which strikes the right balance. It works really well to drive repeat sales at an acceptable cost.
My advice to the Cash-back Live team is to first improve the buyer registration process since is too complex today. Second, they should decrease the lag-time between purchase and reward (they are working on that). Third, they should create seller incentives for participation. Finally, they should create a really unique buyer engagement mechanism – something that will draw buyers back after the amazing 20-30% cash-back rewards go away. 20-30% cash-back is simply not sustainable – 2-3% yes, but not 20-30%. It is seductively easy to throw money at buying market share. The real challenge is finding mechanisms to get buyers back again and again --- without bankrupting the company! Amazon’s mechanism is around shipping benefits.
Q. You’ve studied cash-back search reward programs – how would you do it differently?
We have experimented with a search reward site in the past but we have no plans to launch a search-reward site today. However, we did file a patent for the method we think works best (http://tinyurl.com/6z4cgv) and my guess is Microsoft looked at that during their development. They adopted some, but not all, our strategies. In our patent, we balanced both seller and buyer interests. The seller gets preferred placement in search results based on the seller offering better buyer rewards. In turn, buyers get their cash-back rewards fast and paid directly to their PayPal-type account. One of our built-in mechanisms to drive repeat sales is to encourage a direct seller-buyer email relationship so the seller gets the opportunity to cross-market other items over time (which drives repeat sales). Finally, when the buyer returns for a new search – any previous rewarding seller gets priority for matching items. These kinds of mechanisms create a win-win for both the buyer and seller.
Q. What would you suggest individual sellers should do to take advantage of MS Live Cashback?
I’ve heard some sellers are inserting text promoting Cashback Live as a way to save more on the product price. That might help, but its more likely just free advertising for Microsoft Live Search, which also opens the door to competition when the buyer starts a new search on Live. Risky move.
Q. What would you suggest to eBay about the MS Live Cashback program?
MS has its own goal of driving search traffic. eBay needs to blaze its own path on buyer loyalty. It can do so in a uniquely eBay-way. Consider a seller selling on Amazon and on eBay. On Amazon, there is absolutely NO question about who owns the buyer. Amazon owns the buyer. The seller is treated like an outside fulfillment house. That means the seller has no vested interest in the buyer. Amazon funds its own buyer loyalty through Prime and it can swap out sellers quickly. On the other hand, a sale on eBay creates a shared eBay/seller relationship with the buyer. If a sale goes bad on eBay, the buyer blames eBay and the seller. If a good seller disappears from eBay, a part of eBay goes with her. eBay should build on this unique shared buyer ownership. eBay can’t do it alone. It needs to encourage sellers to grow repeat sales by giving the seller new technologies and new incentives to grow repeat sales. And eBay needs to act quickly. In the past year many eBay sellers, like Buy.com, now see eBay as only a channel to “acquire” new buyers. Like Amazon, they see the buyer as “theirs.” Once acquired, they aggressively promote their off-eBay store (e.g. Buy.com) for future/repeat purchases. If large sellers continue to do this, every eBay buyer will be drained away from the site. The eBay seller base should be engaged to join the fight for, and share in the rewards of, driving buyer loyalty on eBay.
Lots of good information about rewards programs. They can work, but it looks like Microsoft needs to keep working on theirs. As for eBay, Brian's suggestion should be taken to heart. I'm pretty much tired of making suggestions to eBay.
Additional information on CashBack; Hillary over at the WhineSeller blog has a great explanation on how the program works.
Just my 15%