Not only is the new technology of e-commerce revolutionising people’s lifestyle, but it is also creating a huge shift in consumer-merchant relations. Gone are the days when discounts, print ads and digital promotions were the only means of acquiring new customers in the market. But these strategies bring in sales only in the short term and discounts devalue the brand and the product. New strategies have been developed to increase customer loyalty, brand value and long-term sales. Currently, when it comes to commercial business promotion, cashback programs and rewards work extremely effectively as customer marketing strategies.
Which Is Better for The Business, Cashback Promotion or Rewards?
This is a highly debatable topic in the marketing world today as both have their fair share of benefits. Before, only clients who were creditworthy and had high income were provided with the benefits of rewards and cashback. However, today these are provided to a wide range of customers including potential, new and loyal customers. One of the important reasons people opt for a credit card is the cash redemption option. Therefore, it is natural to wonder which promotional strategy would work best for one’s business. To decide that it is important to know how these strategies work.
Cashback Promotions: How Do They Work?
Cashback promotions work similarly to reward and loyalty schemes as they provide cash incentives to customers who purchase their brand’s product. The customers receive a percentage of the amount which they paid for every purchase made from a company. They would then be encouraged to use the cashback credit money to buy more products from the same company or the portal, increasing the company’s sales. The company can choose which products they would like to provide a flat rate or variable rate for cashback. They can also provide the option for the customers to check the credit statement of their cashback to plan for future purchases. Companies can ensure that the customers are not selective about purchasing the products by not disclosing the categories that are eligible for flat rate or variable rate.
Understanding Reward Programs
Rewards also provide incentives to the customers upon purchasing with their card, but they offer points instead of cash. There is a standard value assigned to a reward point by the company or the issuer, for example, 1 point is worth $1. This value can vary for different customers based on their type of credit card, credit values, memberships, loyalty, etc. This program runs on a concept called gamification as it encourages the customers to involve in point collecting mechanics to keep them engaged with the brand. The customers would be able to redeem the points upon collecting a certain amount as predefined by the company. They would be allowed to redeem it for cash, vouchers, gift cards, miles or any rewards that the issuer offers and trade the points for the benefit.
Why opt for Cashback Programs?
One of the primary benefits of offering cashback over other promotions is that the company holds less cash on-premises making it less vulnerable to online hackers and thieves. It also ensures that the customers are provided with valuable service with easily operable incentives, increasing their loyalty to the brand. Customers are more likely to return to the store or the website if they have expendable cash or know they can avail cashback upon purchase. Cashback programs also eliminate the need for customers to wait to redeem their rewards and browse through the limited catalogue, which saves time and effort for both parties.