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Affiliate marketing explained

Is There a Future for Energy Affiliate Marketing?

Affiliate marketing explained

Image courtesy of [Stuart Miles] / FreeDigitalPhotos.net

It has recently been reported that Ofgem has rejected an appeal from a group of affiliates and networks, who joined forces back in June when a report was published that detailed plans to ban cashback in the energy sector. Following the failed appeal, the ban will go ahead in March 2014, changing the landscape of the affiliate channel in the energy sector permanently.

Affiliate marketing is a form of online, performance-based marketing whereby publishers (affiliates) send traffic to a merchant’s site, and are rewarded commission when clicks convert to sales. Cashback affiliates are those that offer this commission back to the consumer as an incentive to buy. So, if npower (for example) is willing to pay affiliates £40 for every sale they refer, the affiliates will offer the customer £40 to choose npower. This gets interesting when energy suppliers provide short term cashback increases on a tactical basis, striving to beat the competition and attract new business. At any given time, a consumer can find a wide spectrum of cashback offers from each of the ‘Big 6’ energy suppliers, as well as the smaller players like First Utility.

The Retail Market Review Report called for a ban on cashback in the energy sector, citing that it is confusing for the consumer, with cashback offers blurring the lines of the ‘best’ deal. The appeal group, led by the Internet Advertising Bureau, put forward a compelling case that argues that cashback actually encourages competition, forcing the suppliers to work harder at customer retention, thereby providing a better service, but the appeal was overturned by Ofgem and the ban will go ahead as planned.

Interestingly, the press indicates that the ban will not currently extend to aggregator sites like uSwitch and Money Supermarket. Apparently consumers who navigate to one of the comparators via a cashback site will still be eligible to receive a cash incentive. It has also been suggested that it is likely to extend to these sites in due course, but in the meantime it could be that those who are loyal to incentive sites begin to use aggregator sites more and more. Isn’t it equally confusing for the user to find that they are still incentivised to use the aggregators? And aggregator sales are expensive for the suppliers – so it could be argued that the long term impact could be price rises. Admittedly this could be a long way off, and it may be that the cashback ban extends to comparators long before it has any real impact on the suppliers, but it is worth a thought in the meantime.

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