The Ultimate Guide to Cashback Loyalty Programs for Businesses
A cashback loyalty program is a reward system wherein businesses return a percentage of the amount that customers spend back to them. You can offer a fixed statistic to keep your customers engaged.
What if you could change every customer buy into a cause to return for additional purchases? Cashback is more than a nice feature in a suite of loyalty solutions. It is the combination of saving and spending that keeps your brand in the forefront of customers' minds. And, for pure mechanics, it is the appropriate and proper way to boost brand loyalty.
This guide will take you through all the information you need about cashback loyalty programs and show you best betting sites with cash back bonuses. You will learn everything from how they work to how you can set one up for your business. It will give you actionable tips, real-world examples, and expert insights so that you can create a program that truly delivers.
Let us plunge forward!
Understanding A Cashback Loyalty Program
A cashback loyalty program is a reward system that returns to customers a portion of the amount they spend. In most cases, this comes back in the form of cash, store credit, or equivalent rewards. Businesses offer this kind of loyalty program as an incentive to encourage spending and to enrich the customer experience.
This type of program is typically seen through the following:
- Many credit card companies offer 1% to 5% cashback on everyday purchases, encouraging cardholders to use their cards more frequently.
- A supermarket offers accumulated cash on each purchase, about 2-4% of the total bill amount, which customers can use for future spending.
- Most hotel booking platforms offer a 4% to 6% cashback policy on reservations, allowing guests to earn credits for future stays.
Cashback programs are exceptionally well-liked among buyers since, honestly, who doesn’t enjoy receiving cash back? A few investigations have hinted that:
- 53% of consumers in the US named cashback rewards as one of their favorite options.
- A significant majority of shoppers, 66%, stated that cashback offers considerably impact their choice of where to make purchases.
So, how do cashback loyalty programs work?
Customer makes a purchase. Customer provides program identification (if required). Business calculates cash back amount according to the program rules. Business provides cash back to customer. This can be done several ways, including giving the customer cash, sending a check to the customer, or using some electronic means to get the cash back to the customer (for example, putting it onto a prepaid debit card or sending it to the customer's PayPal account).
- Purchase: A customer makes a purchase in-store or at your online store
- Cashback is Earned: The customer earns a percentage of their purchase amount back as cashback. This percentage can vary depending on the program, the specific products purchased, or the customer’s loyalty tier.
- Cashback is Tracked: The earned cashback is tracked in the customer’s loyalty account, which can be accessed through a loyalty card, a mobile app, or an online account.
- Cashback is Redeemed: Once the customer has accumulated a certain amount of cashback, they can redeem it for rewards or use it as a discount on future purchases.
How Cashback Rewards Are Calculated
Calculating cashback rewards to maintain customer satisfaction and engagement can be approached in a few different ways.
Fixed percentage
This is the most straightforward and frequent method. Customers receive a steady percentage of cashback on every qualified buy.
As an instance, you could extend a 2 percent cash back on all orders that come in. What this would mean, in a practical sense, is that for every hundred dollars of orders placed, the company would be returning two dollars to the customer.
Tiered rewards
Do you want to motivate those big spenders? With tiered cashback, customers can earn even more cash back the more they spend. That nice little incentive there is with the tiered cashback incentive.
For instance
- Spend up to $50: Earn 2% cashback.
- Spend $51-$100: Earn 5% cashback.
- Spend over $100: Earn 10% cashback.
Fix rate
You can provide a set dollar amount back for each purchase, or for each customer that meets a certain spending threshold. This is an approach that works well for businesses with several products that all have a similar price point. When you take this route, you might decide to offer a smaller amount back than what's typically offered with a cash back percentage. For instance, instead of saying you'll give back 5% on all purchases, you might say that for every $100 spent, we'll give you back $4.09.
For example, you could receive a straight $5 cashback for every single transaction where the amount exceeds $50, irrespective of whether the transaction amount is $51 or $500.
Types of Cashback Loyalty Programs Redemption Options
Your offerings in redemption can greatly influence the attractiveness of your loyalty program. Popular options include:
Loyalty points
Some cashback plans enable customers to transform their cashback earnings into loyalty points. These points can then be saved and traded for a wider array of rewards, like discounts, free products, or even exclusive experiences. It adds flexibility and excitement!
Starbucks rewards lets customers earn Stars for every purchase made. What are Stars, you ask? They are the building blocks of the Starbucks Rewards program. For every dollar you spend, you earn 2.5 Stars. When you accumulate Stars, the next big question is: What can you do with them?
Bank transfer
Some programs allow customers to redeem their cashback rewards as direct deposits into their bank accounts, enabling them to use the money however they see fit.
PayPal Cashback Mastercard rewards its users for spending with it, offering between 1.5% and 3% cashback on all purchases. Once the rewards are earned, they can be transferred directly to the user's PayPal account or bank account.
Store credit
This is a preferred arrangement, particularly for retailers. Cashback is turned into store credit, which is applied to subsequent purchases at your store. It’s a clever way to insure that repeat business happens!
Gift card
Another option for redemptions is converting rewards in the form of cashback into gift cards. Customers can choose to get gift cards either for the issuing store or for other retail locations, enabling them to spend their rewards wherever they'd like (within the bounds of the targeted spending conditions for the rewards!).
Cashback vs Points-Based Loyalty Programs
Cashback and points-based loyalty programs are frequently misunderstood loyalty tools. While they both target the fostering of brand loyalty, they are structurally different and provide two distinct methods of redemption.
Bottom Line
Here it is! Your all-encompassing guide to cashback loyalty schemes. Keep in mind, though, that a successful scheme is about more than just refunding money. It’s about molding enduring partnerships with your customers, prodding them to make encore purchases, and in the final analysis, beefing up your bottom line.
By meticulously arranging each detail, selecting worthwhile technology (like the Joy Loyalty app!), and centering on customer value, you can assemble a cashback program that serves as a prop for both you and your shoppers. Now, try it out at your store and see what happens!