Go past transactional relationships

Published: August 30, 2016 5:58 AM

Indian e-commerce has grown significantly in the last five years, and the growth is attributable to many enablers including cashback and coupon-based affiliate partners.

startups layoffs, startups job cuts, Zomato job cuts, Zomato latest news, TaxiForSure layoffsThis affiliate relationship works with a basic assumption that the e-commerce player is willing to fund a commission and cashback/coupon cost similar to the cost of acquiring a customer.

Indian e-commerce has grown significantly in the last five years, and the growth is attributable to many enablers including cashback and coupon-based affiliate partners.

This affiliate relationship works with a basic assumption that the e-commerce player is willing to fund a commission and cashback/coupon cost similar to the cost of acquiring a customer.

Most e-commerce players have published their affiliate marketing commission slabs for various categories, usually ranging from 2-5% for electronics to 15% for fashion and other categories.

Further, the affiliate margin varies for new/ existing customers and the medium of sale (website or app). Today, the affiliate marketing driven business is upwards of 10% of the overall transactions in this space.

Some players are focussed on getting upfront purchases of vouchers by customers and providing a cashback on the same.

A point to note is that in most cases, these are existing customers of the e-tailers, but using this new route where the benefit’s value is locked in cashbacks adds to the trigger based purchase.

With the ecosystem evolving from a customer acquisition to a customer retention focus, cashback could be used as a catalyst to stabilise the user base for the e-commerce player.

With the e-commerce market set to grow further in India, we will see the growth and evolution of cashbacks and coupon-based affiliates.

The dependence on them is set to continue considering the price-sensitive nature of the Indian consumer market. Up until now, the coupon/cashback affiliate marketing model has been used to gain traction and increase the traffic.

However, in the current stage where three or more big players have emerged in the market for each category, the focus would shift from gaining traffic to retaining users.

E-tailers would start evaluating the traffic being redirected through affiliates and ensure that the investment is paying off throughout the customer lifecycle as opposed to transactional customer relationships.

This will largely be driven by utilisation of customer data for innovative and contextualised cashbacks and coupons being offered to the customers. Unit economics at a customer level will be a key measure of the return on investment.

Recently, there has been an increased focus on content-based alliance marketing through comparison sites, aggregators, bloggers and review websites.

However, they play the role of market influencers for brands rather than traffic generators for e-commerce. Further, the target market for cashback/coupon affiliate marketers is price sensitive, which may not be the case for the target market for content-based affiliate marketers.

However, this isn’t to say that affiliate marketing will take a backseat, as India is still in the growth stage for e-commerce and there is a large, untapped price sensitive market potential in tier II and tier III cities.

Written by:- Sreedhar Prasad

The author is partner, e-commerce, KPMG India

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