Cashback websites are well established now and with Microsoft deciding last month to start rewarding people for using their products it seems that incentivizing people to use a service is an effective means of honing behaviour. But could it be done better?
The whole notion rests on that of reciprocity. Game theory went to great lengths to investigate just how people react in such circumstances and by and large found that a tit-for-tat approach is taken. In a gift exchange game, where two persons in turn determine how large gifts to give to one another, a large gift by the first mover is reimbursed by the second mover.
In incentive schemes however the onus is very much on the user to complete an action, and for them then to be rewarded for so doing by the website.
Whilst this clearly works to an extent, could it work that much better?
Another theory that appears to support the giving by the website in return for action by the user is Endowment theory. The endowment effect suggests that the value assigned to an item rises once a person has ownership of it. So in other words, we value things more once they’re ours than when they are not.
So in this context the user would be rewarded outright and would then have to earn the right to keep their reward.
Incentivized websites are big businesses at the moment, with the cashback sector drifting wholesale towards a 100% cashback model. Is there room for something a little bit different in the market?
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Hey Adi,
Interesting observations. I don’t fully buy into endowment theory (eg when I overpay for rubbish products, eg Dell laptops, 3 UK phones) but get your thinking.
In a way, some of the gaming companies already do the ‘earn the right to keep the reward’ by ‘matching your first bet up to £100’ but not releasing the money until you play X poker hands, or place bets on X events, or spend X amount of time with the site, or payout once you refill your account.
I can’t see how the cashback sites will be around long term.They’re not really adding any kind of value, and I suspect the average consumer who participates is highly price sensitive… exactly the kind of consumer many companies should be avoiding, in the current market climate (expensive to acquire, impossible to retain, and ultimately unprofitable).
Roll out a lead gen firm or affiliate network that focuses purely on quality, rather than quantity, and we have a winner.
Cheers.
c.
I agree that cashback sites have become commodities and are solely competing on price. I think perhaps value could be addd by merging price comparison with cashback. After all, things like cashback, price comparison and voucher shopping are popular at the moment, but no site offers all three in the same place.
As you say, quality is key and aiding consumers in their shopping has to be the priority. The sites that can provide information, in terms of both the best price and what other consumers think of the product will do best in the affiliate marketplace.
I’m not well versed on the theories, but I do feel that MSN could be doing much better. I can’t help thinking that the traffic they’re attracting is traffic of a certain type – kiddies who want to get themselves a free mousemat (or whatever). The best way to incentivise IMO is to offer an exceptional product in the first place – just look at Google.