Posted 6. April 2009, 08:50 by Emma Langan
Category : Home   Industry developments

Quidco is a UK based cash-back operating site. It works on the principle of earning commission from users purchasing goods from certain online retailers and then passes this commission back onto consumers through a rebate process. The site itself makes money from the £5 fee it charges customers every year enabling the site to remain financially viable. Unlike other operating cash-back sites Quidco doesn’t take any commission and passes 100% of the cash-back to consumers. This helps to build a trusting and reliable relationship with the consumer which is reflected by Quidco being Britain’s most popular cash-back site. It’s almost three times as popular as its next competitor in terms of site traffic (LINK). Quidco’s popularity is primarily down to its offerings of “higher rates per shop” in comparison to other similar sites according to Lewis of moneysavingexpert.com (Prosser, 2006) making it a hit with consumers in search of bargain deals.

Quidco celebrated its third birthday last year carrying out a record breaking 360,000 transactions in April 2007 which is an increase of 109% from the same month the previous year. Recent research has found that a Quidco transaction was completed every seven seconds during April 2007 generating £10.7 million for the 1,200 retailers featuring on the site that month (Shaw, 2008 & Tobin, 2008).

The site is driven by the concept of turning traditional advertising on its head. The founders of Quidco wanted to address the issue of satisfying savvy consumers in search of deals by rewarding them with commissions for their informed shopping decisions. Encouraging merchants/advertisers to stop wasting money on other spam marketing and giving incentives direct to consumers for visiting/purchasing on their site. They wished to reverse the roles of the advertiser and the consumer putting the consumer in control (Quidco, 2008).

The co-founder of the site, Paul Nikkel (who is also strongly involved with HotUKDeals also) describes Quidco as a site that can “reach out to a large audience of enthusiastic, savvy shoppers and enables consumers to join an active community of like-minded shoppers – and make large savings on online purchases’ (Shaw, 2008). The site stresses that it is all about the consumer and trying to help them find the best possible deals.

Sites such as Quidco have come under attack by a number of people such as David Kuo, head of money website Fool.co.uk. He states that ‘cash-back sites are merely internet billboards that hook in customers, grab their details and direct them to preferred partners’ sitesâ€?. He believes that consumers should not become fully reliant on these sites as there are still alternative deals out there that won’t necessarily require you to pay anything out to a third party.

The site has also tried to remain in consumers good book by not introducing as many other similar sites have referral incentives to encourage current members to sign up new people as they do not want to appear to be encouraging spam and dishonest users to increase their earnings through these methods. This is one ethical problem that is faced by affiliate sites as they can be negatively perceived due to this characteristic.

The site has received phenomenal press coverage being quoted by the Guardian as “the choice for cash-back Kings� as well as featuring within many articles surrounding money saving in quality press such as The Independent, The Times and featured on prominent sites including BBC, Reuters and Moneysavingexpert.com all of whom praise the site for its money saving abilities for consumers especially during this period of time of uncertainty.

The site itself however never highlights who the owners are or their experience creating a sense of ambiguity but unlike many other cash back sites it does explain to consumers exactly how it operates. Other cash back sites work under a hidden agenda not fully explaining to consumers how they run not explaining that they take a cut of the commission earned from consumer purchases.

The original site has been revamped with the addition of blogging facilities known as; Quidblog (link) and forums similar to those that HotUKDeals have in place. To further emphasise the community feel members are referred to as Quidclans. We can observe from looking at the blog posts on this site that the site has evolved from just discussing incentives to becoming a forum of debate on various topics such as ‘raising money for a world challenge fundraiser’. A virtual community has developed around the concept of product consumption but has evolved to encompass various other miscellaneous areas also such as interests, hobbies as well as products all typical features of virtual communities. “When devoted, loyal users [of a product] gain Internet access, they tend to join or form virtual communities of consumption. In addition, the community itself may propagate the development of loyalty and heavy usage by culturally and socially reinforcing consumption�, Kozinets (1999, p255). This e-commerce tribalised marketing that has developed through the introduction of forums provides consumers will all the information that they require. It is possible to see those that fit into Kozinet ‘devotees’ and ‘insiders’ references on this site. These are the members of the community that are perceived to be the most influential. They partake in a high amount of consumption activity shown by the number of posts they blog and are often thought to be the ones that carry the most influence. “Once a consumer connects and interacts with others online, it is likely that they will become a recurrent member of one or more of these gatherings and increasingly turn to them as a source of information and social interaction�. Kozinets (1999, p253). As a result they tend to have strong social ties to the community and with this comes power of word of mouth that from these people have been found to be trusted and acted upon by other members. Being a part of the Quidco community creates a sense of belonging and according to Maslow’s Hierarchy of Needs this sense of belonging to a group leads to fulfilling the level of self-actualization without the actual need for consumption of products. Blogging has been found to have beneficial effects on people’s well-being and makes those taking part feel good about themselves being surrounded by like minded people (Baker et al, 2008). Although it can be argued that consumption to an extent is still required to fulfill this level for example to be part of the Apple forum you still need to own the goods in order to have an understanding/knowledge of the goods to participate fully.

Quidco is also a very relevant example of reintermediation, meaning that it is a new intermediary in the value chain. Unlike many online sites that have resorted to disintermediation which is removing third parties such as affiliate websites like Quidco in order to sell direct to consumers as Dell does through its online store only. Many retailers are now appearing on Quidco in the hope of attracting more consumers to their offerings due to the amount of site traffic that these sites create highlighting their popularity with consumers. And as more flock to Quidco retailers are recognising the importance for them to have a presence on these sites or risk losing out to competitors that are using them therefore reintermediation takes place.

Quidco is an example of a high quality affiliate unlike other existing affiliates. Quidco aims to add value to consumers by fulfilling the needs that retailers have failed to address. It does this by providing the service that consumers are primarily after, cheaper offerings and the ability to compare. Consumers are able to browse the options on offer on Quidco and also refer to the online blogs as a frame of reference to make informed purchase decisions based on the prices as well as recommendations from others that have experience with the brand/product. Consumers feel that they are able to trust these members of the community and consider these opinions unbiased unlike advertising. Companies are now responding to the demands by adding comparison elements to their sites for example Tesco Compare and Norwich Union (Aviva). Norwich Union offers comparison capabilities when consumers are looking for insurance quotes in response to affiliates offering this service as it has put pressure on them to do so. Quidco’s good affiliate status is illustrated further through its forum capabilities. Quidco’s forums helps to aid the presence of a community. Consumers don’t want to log onto Tesco forums to moan about their bad service or product issues as they won’t be listened to and their posts are likely to be heavily monitored by the company if not manipulated. Instead affiliate sites offer consumers the opportunity to voice their own opinions amongst those with similar interests to seek advice form them and be listened to. The power of word of mouth is significant in these situations, people’s views from within these groups are trusted and this only adds to the community feel as they feel important and listened to. If enough people become involved in the discussion they can also force change and be a powerful tool against large corporations making them very important to keep happy as negative WOM can be detrimental.

The next matter is the sustainability issue that comes from companies enlisting on affiliate sites such as Quidco. As discussed many businesses now feel that they have to join these sites in order to counteract their competitors and also boost their revenue streams. However, the issue that arises for these companies is that consumers will be expecting these discounts repeatedly. For example a company pays £100 cash-back to a consumer for taking out house insurance through an affiliate. The company feels assured that they have made a worth while deal as they expect consumers to just renew their policy year after year and so the one time pay out will be justified in the end when spread out over several years. This used to be the case as many consumers couldn’t be bothered to spend hours comparing prices and policies etc. However, now consumers have been educated in affiliate sites and know about how easy it is to compare they will now use these sites every year to search for the best deal with little time and effort required. Therefore they will not be passive and renew every year as companies anticipate they will. These sites fuel disloyalty to brands as consumers will happily switch between companies depending on the offers. Companies in turn will lose out heavily as the cash-back they gave won’t be spread out over a long period and may result in them outlaying more money than they reap and so can be said to be a waste of time. This is a similar situation to that of the contract mobile phone industry whereby after a contract reaches its end companies are forced to throw in a new handset in order to retain customers. This is both expensive and wasteful but customers now expect this ‘bribery’ as a way to keep them. These incentives continue to escalate with companies now being forced to throw in more extras such as Laptops, X-boxes in order to keep up with competitor’s efforts and customer expectations. Is the future for merchants on affiliate marketing sites as well?

The disadvantage to smaller businesses with affiliates taking such a dominant role online is that they cannot afford to become part of sites such as Quidco and so they will lose out to the bigger competitors who can. Potentially affiliates could be driving smaller businesses customers away from them and fuelling large conglomerates in the process helping stimulate a monopoly culture in market segments as Tesco is often referred to as having; an unfair advantage many would argue.