Retailers' cash for sharing scheme is innovative, but could backfire

Amazon, Argos and Tesco are gearing up to reward people with cash incentives when they recommend products to others via a new white label scheme called Shopa.

Lucy Handley

People can recommend a product to a friend via a personalised URL and if the other person buys the product, they both get a cash discount of 8 to 10 per cent.

The shoppers can then withdraw cash from their Shopa account – and they don’t have to wait until it reaches a certain threshold to do so.

Shopa claims that each recommendation will generate 21 new sales leads and that for every $1 spent rewarding people, the retailer will get $4 back in new sales.

It also says that five times more customers recommend products when they use the scheme – understandable if people know they can get a cash kickback.

But will people’s recommendations be genuine? In a similar vein, how loyal do they feel when they take part in ‘loyalty’ schemes? Some will say they are happy customers of a shop and that the benefits of having a card are a bonus. Others will only use the vouchers they get from the scheme on those specific products and go elsewhere to do their main supermarket shop, for example.

As one person commented on this Marketing Week article on word of mouth: “As soon as I know my friend is being incentivised to sell to me, all trust is lost.”

People might simply suggest to others that they buy products as many times as is allowed to get the cash back. And they may eventually realise that they are spending more on their weekly grocery shop than they were before and not making the savings back (hence the $4 to $1 ratio).

Ali Ahmed, founder of photo-sharing app Lutebox warned last year that people might abuse this type of scheme. “There is a flaw in incentivising consumers with rewards and commission to get the word out there. You may drive sales but at the same time it pushes users to spam their friends,” he said.

However, Shopa claims that more than 5,600 ecommerce companies are signed up and will introduce it to their sites in the coming months. And Adam Black, owner of furniture retailer Feather and Black says that being able to reward customers financially for helping to make sales is the future of retail.

Retailer Oasis is also trialling the scheme, to add to the other innovative things it does, such as 90-minute deliveries for online orders and virtual fitting rooms that let people upload a photograph and their measurements to see how they will look in a dress.

Yet whether this is the future or just a gimmick will depend, as ever, on how consumers react.

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