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%

12 comments:

Snarky said...

"Unfortunately you won't know if you are eligible for a discount until after you purchase the product."

This is incorrect. The discount is displayed at the top of the eBay search, and again at the top of the item page.

Other than that, good blog-thingy or whatever

tula said...

Buyer reward programs are a great way to introduce buyers to a company they might not find otherwise. As a buyer, I've been using Ebates since 2001 and have found many new e-tailers I may not have encountered had they not been listed.

I'm not sure how much benefit the sellers get from cash back sites, but places like Macy's, Wal-Mart, Sears, etc.... have been listed on Ebates for as long as I've been using them, so they must be bringing some value to those companies (unless all of them are run by morons :-). I'm not sure how successful Microsoft will be with their huge cash back percentages, since people may move away from them once they bring those down to sustainable levels.

Meanwhile, as a buyer, I like getting a percentage back on stuff I would buy anyway. In this tough economy, every little bit helps.

ms.pat said...

This is fine for as long as it lasts...but what about when it ends? This is more like feeding a man a fish instead of teaching the man to fish. If Ebay LOWERED (heaven forbid) its fees so that sellers could again offer real bargains to buyers all the time - I feel that would be far better then temporary give aways. Just my humble opinion. Another thing Ebay can do is offer sellers with perfect feedback some incentive...instead of simply offering it to powersellers. A little goes a long way and would help build up perhaps some of the trust lost between ebay and sellers this past year.

Randy Smythe said...

Hi All, I also found out that the CashBack discount can be used on the Daily Deal (at least for now) so you can a % back on a really good deal.

permacrisis said...

Ms Pat I would like to see the other side of the coin: I would like to see ebay charge more-- but then GIVE more for the money. Either more marketing or more seller protection but either way more EXPOSURE.

The upstarts have set the stage for a situation where ebay could be the Steakhouse commerce site, and the alts just the little McBurger Kings.

The only alternative for ebay is slow languishing demise.

Typically, you want to "Qualify The Customer" and coupon customers are typically "B" grade customers. I do not think that holds quite so true in the present doldrums, though.

ms.pat said...

@permacrisis - you get what you pay for. I know from personal experience that on my website when I lower my prices too much I get buyers who are just looking for a bargain. My regular customers come back again and again and pay top price on my website and that leaves me in a position to be able to send them gifts and give them deals on what they buy - they don't even have to ask. So, I know what you mean. BUT with Ebay we are paying - we are buried in the listings and kicked around and these "deals" are bringing in bargain hunters who are even more difficult to work with. We're getting very little for very high FVF's.

Randy Smythe said...

Snarky,

Welcome back. I've missed your comments :) I was told otherwise but thanks for the clarification. The link on Live says the % but it is not on the listing.

I'll amend that sentence.

permacrisis said...

Holy smokes RK, Ina beat you to it!!!

http://www.auctionbytes.com/cab/abn/y08/m12/i09/s01

Sorry buddy. You got scooped

have fun in 'mapland'!

Randy Smythe said...

permacris,

Yeah, Ina got me on that one, but this isn't a competition. I'll just link to her post. :)

Anonymous said...

Wonder if...
ebay is going to change so much that you will only be able to find product if you search through google or this cashback thing.

Would this make them less likely to be liable for problems? More "we are just a venue"?

David said...

The idea of giving 20-30% off isn't a bad idea. The problem is people are going there, *only* to get 20-30% off and they aren't coming back unless the discount stays in that 15-30% off range.

People forget that the way Paypal became the giant that it did, and destroyed eBay's billpoint is because they gave $10 to anybody who signed up for Paypal and they also gave $10 to anybody who got a friend to sign up for Paypal.

They burned through millions of dollars doing this but in the long run they more than made it back.

It worked because a seller would sell an item for $20 and would email the buyer saying "We take checks, money orders, or paypal. Sign up for a Paypal account and get $10 off this purchase". The seller would then get a $10 referal fee and the buyer would get $10. This was huge in helping build Paypal and eBay couldn't compete.

The difference is that once buyers already had a Paypal account, they found that there was a reason to continue to use Paypal as it allowed buyers to bypass the hassle of getting a money order, and it allowed sellers be paid instantly.

I don't really understand what live.com can do that any of the other search engines can't besides the cashback program.

The danger of doing 20-30% is that you spoil people. People see 30% cashback and they get spoiled and get pissed when it goes to 8% and don't go back. I know at other message boards (non ecommerce) people are waiting for the discount to get back to 25-30% off.

IMO if people are only using it to get 25-30% off, this thing is dead. Buy it now auctions are more expensive than auctions, so 8% off isn't a big deal

btw: by the time I signed up for Paypal they had cut it down to $5. Considering I paid over $2,000 in paypal fees in November alone, I'd say they did pretty well

cashback shopping said...

im a lover of cashback sites i will take a look at this cheers.