If you look at how many businesses used to plan and spend their budgets, you’ll find that they were heavily focused on attracting new customers but not so much on retaining existing ones. While there are undeniable benefits to expanding your customer base, keeping hold of current clients will multiply your profits.
But in recent years, almost all businesses have become aware of this fact and have tried different methods to increase their customer retention rate. That’s how loyalty programs have emerged and made cashback rewards a hot topic.
Of course, you may be wondering how cashback can help you boost your customers’ loyalty. That’s exactly what we’re going to find out in this article. But first, let’s see what cashback is and how it can benefit your business.
What Is Cashback?
Before turning to the benefits of cashback, let’s first explain it in general terms. Cashback is the reward you give every time customers purchase and spend money. Most typically, you reward them by re-paying to them a percentage of the money they spend.
The exact rate varies with each business, and some may even provide additional offers. Plus, you may set specific days and times of day to offer extra cashback, meaning that your customers will get a higher percentage of cashback if they make a purchase during those periods. This is not just for people who visit brick-and-mortar stores. This may easily apply to online purchases as well. You may see real-life examples of both in this earlier blog post of ours.
Many businesses sign up for APIs like Loyalize offers to can cover thousands of online stores. The API will handle the rest and even provide reports on every customer’s shopping activity.
Three Benefits of Cashback
Now you know what cashback is and how customers can get it. But, you still don’t know why you should offer cashback and how it can help you build a loyal customer base. Here’s why.
1. Cashback Is Cheaper Than OTHER Rewards
Businesses can use a wide range of programs and plans to offer rewards. For them, this is a critical factor because they know that an increase of 5% in customer retention increases profits by 25% to 95%.
A typical loyalty program will see your business give something away when customers spend a specific amount of money or even make a certain number of visits. What is that something? Often, it’s a non-monetary reward like a free meal, free haircut, or a free oil change. It ultimately depends on your industry.
But, offering these non-monetary rewards can usually cost you more than a straight cashback reward. For example, if you offer 5% cashback on every purchase, which is very generous, it would mean 25 cents on a $5 purchase. Also, if on top of that, you offer cashback on purchases placed elsewhere (i.e. with other/non-competing merchants), it becomes even more interesting to the user.
2. Cashback Can Replace Discounts
Offering discounts is undoubtedly one of the most effective strategies to bring in new customers and keep them long-term. But, the problem with discounts is that they eat away at your profit margin to the point that you’re no longer making any real money.
With cashback, you no longer need to give discounts. Instead of 30% discounts on your products and services, you can offer 15% cashback.
Discounts only make customers lose a little less money, while cashback makes them gain money on their purchases. Clients will pay you in full, and in return, you will send monthly cashback (or semi-monthly in the case of Loyalize). That will significantly increase your cash flow and create incentives for customers to keep coming back.
3. Cashback Can Create Loyalty
We human beings inherently love to receive things, and we also love to give something in return. This act of reciprocity is a foundation of modern marketing strategies.
That’s why people never forget about a business that rewards them with cash for a purchase or even a visit to its store at certain times of the year. Anticipating a monetary reward will keep them coming back and spending even more to get a bigger prize.
But beyond that, why can cashback foster loyalty more than other forms of incentives? When you hear loyalty programs, you may immediately think of point systems, such as frequent flyer miles in airlines or special clubs. The issue with such programs is that you don’t know when you will receive the reward.
On the other hand, money is instant gratification; it’s easy, practical, and everyone loves it. That is a powerful attraction that most shoppers find hard to resist.
How Cashback REWARDS Foster Loyalty?
Not everyone responds to rewards in the same way. Additionally, people’s reaction largely depends on various factors such as context, emotions, habit, and many others. A shopping experience can influence people’s emotions in a way that either keeps them loyal or loses them forever.
It’s a well-known fact that customers feel uncomfortable when spending money on goods and services. In many cases, people don’t want to part ways with their hard-earned money based on a matter of impulse.
Gaining value is the ultimate reason that drives people to buy. But, today, the value goes beyond receiving a product or service in exchange for your money. With the occurrence of several financial crises and the pandemic over the last decade, businesses have started to define value from a different perspective.
For instance, the current pandemic crisis and its impact on people’s livelihood have significantly shifted people’s needs so much that the real value for businesses is now helping customers protect their money.
It’s almost certain that people will feel stressed about financial matters long after the pandemic is over. That’s why taking away their financial stress, offering more convenience, and giving them some of their money back can be a real value. In these times, nothing more than cashback can create a satisfying end to the shopping experience.
Plus, cashback is one of the few rewards that don’t require shoppers to jump through hoops to get it.
Cashback REWARDS: A Significant Value
With customers concerned about budgeting, cold hard cash is the most helpful vehicle to create delightful shopping experiences. Businesses today are leveraging neobanks, financial institutions, and APIs to incorporate cashback rewards into the shopping experience to stay at the top of wallets.
The impact of monetary incentives such as cashback on increasing sales through rewards (36%) is considerably bigger than offering discounts (28%). Even better, you don’t have to do much yourself. All you need to do is sign up with a reliable API like Loyalize and attract loyal customers by offering rewards in thousands of online stores.
Delayed gratification, complex loyalty programs, and score systems are some factors that have given cashback such a strong boost. People more than ever gravitate towards businesses that help with their budgets. So, there’s no doubt about the effectiveness of cashback. But what if you, as a business, expanded beyond cashback on your own products or services, and fueled your loyalty initiatives with an ability to accumulate cashback on myriads of other purchases they routinely make? Undoubtedly, this would make your customers even happier.
You need a reliable provider that (after a smooth setup) can provide accurate, insightful user reports, and extend your cashback piece to thousands of stores.
To our knowledge, there is no other API-driven solution that can make the above possible but our own.
You really don’t have to look very far because Loyalize meets all of the above criteria. So, contact us now to learn more about our technology and how we can be the cashback solution for your business.