With businesses keen to keep their customers loyal, we explain why cashback offers are good for business and how you can get in on the action. Cashback is a hot topic at the moment here at Swipii with many of our participating local businesses now creating awesome cashback offers, which you can find on the app. Businesses like Oaka Supercity, Joanna Goodbite and Taco Mazama are all offering cashback rewards to their customers to give people more universally rewarding offers. Not only is it a great move for their local consumers and to get more customers, it can also bring huge benefits for the businesses themselves.
It would help if we explained a bit about cashback in general first! Cashback is a reward given to a consumer for making a purchase and spending money at a specific business. The reward is usually a percentage of the amount they spent on that purchase. The amount of cashback offered by businesses varies, and in some cases, you can get different offers at different times. For example, with Swipii, customers get small cashback incentives on every purchase to keep them coming back. Then, businesses can set days and times to offer extra cashback offers, which is a higher percentage to get more new customers coming through the door at tactical times. Each business gets to choose the percentages to offer themselves, and we do all the hard work, getting the money to the customers and marketing the business to local shoppers.
So, we understand what cashback is, and how consumers get it. We still haven’t covered why a business should choose to offer it! Let’s take a look at some of the top benefits to businesses of offering cashback as an incentive.
The theory of reciprocity has been around for some time, the notion that human beings will want to offer something back when they receive something is a foundation for marketing. We’ve been enthusiastic about loyalty at Swipii for years now, and cashback is just another form of rewarding customers for being loyal and returning again and again. Whether they’re getting cashback on every purchase or extra cashback when they visit their local businesses at certain times, knowing they’ll be rewarded for making a spend is definitely an incentive to visit (and often spend more). If customers are looking for somewhere to make a big purchase, or are looking for a new coffee shop to frequent, having a cashback incentive could help get them over the line and increase your customer acquisition.
With the notion of giving and receiving, there are many approaches to offering rewards, and considering this as a business is more important than ever. Existing customers are 31% more likely to spend more with businesses so it's important you let them know they're important to you. But how do you know the right approach to take?
With regular loyalty programs, you are often giving out something in return for your customers spending a certain amount or visiting a certain number of times. This could be a free coffee, a free meal or a free blow-dry. Totally depends on your industry obviously!
Offering a reward like this can often end up costing more than a cashback reward might. Many cashback sites offer a standard 1% cashback on every purchase, which on a £5 purchase would mean giving £0.05 back to the customer. Here are two examples and what it could cost a coffee shop:
Spend £20, get a free coffee and cake
Visit 1: Spends £5
Visit 2: Spends £5
Visit 3: Spends £5
Visit 4: Spends £5
Visit 5: Spends £0, gets a free coffee and cake
1% Cashback on every purchase
Visit 1: Spends £5, gets £0.05
Visit 2: Spends £5, gets £0.05
Visit 3: Spends £5, gets £0.05
Visit 4: Spends £5, gets £0.05
Visit 5: Spends £5, gets £0.05
In the first case, they would have spent £5 if they hadn’t been given the free items. Although this was definitely an incentive to keep coming, it means the business loses that spend.
In the second case, the customer earned £0.25 cashback over the 5 visits. It would go up to £0.50 if you offered 2% cashback. Still cheaper than offering the free item. On top of this, you could have boosted days where customers get 20% back. A week with a model like this might look something like this:
1% Cashback on every purchase
Visit 1: Spends £5, gets £0.05
Visit 2: Spends £5, gets £0.05
Visit 3 (Boosted 20% Cashback): Spends £5, gets £1
Visit 4: Spends £5, gets £0.05
Visit 5: Spends £5, gets £0.05
Now, the customer has earned £1.20. Still, less than the free items would have costed the business! But now it’s a more tangible incentive for the customer. £1.20 back in their pocket to spend as they please. This is completely hypothetical, but you can begin to see how cashback offers could work out better for small businesses.
An evergreen idea for businesses has always been to discount products in order to bring new customers to the businesses and get them returning again and again. In competitive markets, businesses have been known to discount products to the point where they’re not even making money on them anymore. With cashback offers, you don’t need to discount at all. The cashback is the incentive. Instead of offering 20% off of your stock, offer 10% cashback. People will often be more swayed by cashback because they are ‘getting’ something, rather than just parting with a little bit less.
Plus, by offering the cashback instead of the discount, you get the full amount in the bank immediately upon purchase. Then on a monthly (or weekly or quarterly in some cases) basis, you send the cashback off the customers. This can vastly improve your cash flow by allowing you to pay out the cashback once all of the revenue is in, rather than just getting less revenue in the first place.
Check out Swipii for Business! We can get you set up with your own cashback program on the app with no sign up cost. Book a 15 minute demo with one of our sales consultants below, and they'll explain all the benefits.
