Alternative to Discounts — Cashback Loyalty Program
Discounts and special offers are booming. During the last decades and especially after the 2008 financial crisis, loyalty cards and never-ending discounts brought up an army of „discount hunters” who are loyal to lower price but not to a particular business or product. However, discounts are not the only way to increase earnings and attract loyal clients.
Cash-back programs used by more and more businesses all over the world have proven to be a healthy alternative to discounts. The distinctive feature of the cash-back programs is that they allow to personalize offers for individual clients and shape their consumption habits.
What exactly is a cash-back program?
Cash-back loyalty programs reward clients by giving them back part of the amount they spent on the purchase. Clients usually receive the cash-back in virtual points or virtual currency, which they can later pend to pay for goods or services.
A frequent-flyer program is a good example of cash-back programs. These programs, that have been around for a few decades, allow airline customers to earn so-called miles. The customers do not receive cash in their account, but they are rewarded with miles instead. These miles can later be used to cover part of a flight price, to bring the customer to the higher loyalty level with more advantages or to pay for additional services.
The cash-back practice as we understand it today dates back to 1990s when banks came up with the idea to encourage people to use credit cards by giving away part of their commission fee to their clients. When people started using their credit cards for daily purchases more often, businesses noticed that loyalty programs based on cash-back principle can be very effective for sales promotion.
According to Nasdaq data, clients are now more than ever satisfied with their credit cards, the main reason for that being the reward points or cash-back they receive.
Why are cash-back programs more beneficial for businesses than discounts?
Major benefits of cash-back programs are increased sales, client loyalty and possibility to measure the effectiveness of every action.
1. Increased sales. Cash-back is a great option for the companies that do not wish to offer never-ending discounts. Accumulative bonuses such as “make 5 purchases and get back 10% of the total amount paid” effectively encourage clients to return and enable businesses to achieve their goals.
Another point worth noting is that by offering a discount, businesses simply take less money from the client while offering cash-back they offer an opportunity to save. Upon every purchase, a client sets aside part of the money spent and puts it into the virtual wallet.
According to Dealoyal data, accumulative bonuses can increase the amount one client spends up to 3.5 times, and 60% of the accumulated points or money is spent where it was collected.
2. Encouraging loyalty. Cash-back program encourages clients to return more often, the main reasons for that being both accumulative bonuses and the opportunity to receive real financial benefit. Instead of generic discounts, designed to promote sales, clients receive personalized added value every time they make a purchase.
Furthermore, in the light of the increasing popularity of innovative payment methods through mobile devices, youngsters are no longer the only ones looking for the new ways to make their shopping more convenient and enjoyable. Naturally, plastic loyalty cards are becoming less and less popular and clients are opting for more user-friendly alternatives such a mobile.
3. Measurable result. Smart cash-back programs allow collecting valuable information on clients, their consumption habits, the motivation behind their choices and response to different offers. Online shops successfully collect information about their clients‘ habits and based on it applies appropriate marketing and sales strategies. Cash-back programs make collecting such data possible not only online but also in the physical shops.
World’s most famous brands such as Sephora, Banana Republic and Hilton have picked up on cash-back loyalty programs because they have proven to be effective. And now, with all the convenient tools available on the loyalty market, there is no reason for smaller businesses not to use the same tactics.
Dealoyal offers cash-back solution accessible for any business regardless of its size and turnover. Integrated Dealoyal solution encourages customer loyalty by offering simple and convenient cash-back collection and redemption. On the other hand, it enables collecting and analyzing valuable information about client consumption habits.
