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Consumer Marketing Strategies: Cashback Promotions or Rewards?

Posted by Roger Bretau on 23-Apr-2018 07:50:00
Roger Bretau
Cashback promotions or rewards

Both cashback promotions and rewards are effective consumer marketing strategies. But, which one is right for your business. To help you decide, we are going to discuss cashback promotions and rewards in detail.

Cashback vs rewards: which one to choose

Cashback or rewards: this can be a tricky question to answer, but you’ve come to the right place. Cashback vs rewards is a hot topic in the business and marketing world today and we are going to discuss each option in detail to help you choose the right one for your business.

In the past, cashback and rewards cards were reserved for creditworthy clients with high income. However, things have changed over the past few years and today these promotions are offered to a wide range of customers.

When customers apply for a new credit card, they are given two redemption options—cashback and rewards.

Redemption options are an important consideration for people to choose a credit card and as such, it makes sense for you to think about which redemption option you want to use for your business.

Following is a detailed look at each of the above redemption options. Though they are explained from a consumer’s perspective, it will help you understand which redemption option is more viable for your business. So, let’s get started.

Understanding Cashback

Cashback is exactly what the name implies. Customers earn a percentage of every purchase they make using the cashback credit card. This provides customers with incentive to buy from you, which in turn helps you to increase sales.

Often, customers receive cashback monthly and they need to request their cashback as either a check or statement credit. Often, there is a minimum cash requirement for cashback requests.

How Cashback Works

In a way, cashbacks promotions are like loyalty and reward schemes. Customers are rewarded for making purchases using their cards. Issues offer different options, and there are programs offering a flat rate on all purchases.

Some issuers also offer extra cashback on certain categories. In any case, the amount to be paid back is calculated based on spending level.

Once they reach a certain level, customers can order a check or request statement credit. However, some issuers may not disclose which purchases earn at a flat rate and which categories earn at variable rate.

This ensures that customers are not selective about the purchase they make using their cashback credit card. For any business using cashback promotions, this is nothing but good news.

In fact, there are many reasons for choosing cashback promotions over discounts in your consumer marketing strategies.

The Benefit of Using Cashback Promotions

One of the biggest reasons of using cashback promotion is that it lowers the cash amount you hold on premises, making you less vulnerable to potential thieves.

However, the biggest benefit is in offering customers a valuable service, which helps to increase customer loyalty. Your customers are more likely to return to your store if they if they know they’ll be able to ask for cashback when they buy something from you.

Checklist download:  Successful promotions implementation from A to Z

 

Understanding Rewards

So , you know how cashback works and how it can benefit your business but what about rewards? Are they a good option for your business and how can they benefit you?

Rewards are like cashback in the sense that customers get rewarded for making a purchase with their card, but unlike cashback cards, reward cards do not offer any cash on purchases rather they offer reward points for making the purchase.

The standard is one reward point per pound spend but it can vary depending on the issuer and type of customer.

This has a lot to do with a concept called gamification. Generally speaking, you apply gaming concepts and mechanics to non-game contexts, in order to encourage active participation.

Customers can redeem those points for any rewards the card issuer offer, or they can transfer points to any transfer partner of the issuer, which can include your business. Often, rewards options include products and gift cards but many cardholders use reward points for travel rewards such as flights and hotel accommodation.

The Benefit of Using Rewards Promotions

Generally, issuers offer reward schemes to their premier clients. The purpose of this is to deselect risky and unprofitable clients and move existing clients up-segment. To encourage spending, issuers offer these high-end customers added incentives and benefits such as complimentary lounge access, access to sporting, concert, and exclusive events, upgrades at resorts and luxury hotels, and a lot more.

Additionally, these customers benefit from priority boarding, discounts on in-flight refreshments and snacks, and flight upgrades. This motivates them to spend more and more using their rewards credit card (they can generally afford to do that), which can help any business including yours to increase sales and revenue.

Cashback vs. Rewards

Cashback or rewards: this can be a difficult choice to make. However, there are advantages and disadvantages to each. For example, cashback eliminates the need for customers to sort through reward redemption options to determine how best to use their points. This save them time and effort, which they use to make more cashback purchases. This ultimately benefits your business.

On the contrary, cashback is less versatile than rewards and cash on purchase is the only way customers are rewarded, which may not be incentive enough for customers to make purchases in the long term. On the other hand, Rewards are more versatile, have better returns and include bonus offers, which may encourage more purchases from customers.

However, since they include a wide range of redemption options, rewards can be ‘too’ complex for customers and they may delay their next purchase with the card, which can hurt the sales and revenue of your business.

Finally, they both are a good choice to support POS marketing efforts.

So, both cashback promotions are and rewards are effective consumer marketing strategies. Using the above information, you can decide which one among them is the best option for your business or you can simply get in touch with us and we’ll help you make a decision.

 

Topics: Promos, digital promotions, online promotions, cashback promotions, online advertising

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We think and write about inbound marketing, digital revenue, digital customer promotions, digital sales & marketing planning. 

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