Choosing a loyalty program: cashback

KiearaJuly 14, 2021

475 5 minutes read

What is cashback

The term “cashback” means the return of part of the purchase price to the client’s card. Later, this part can be used to get a discount and it is applied not before the purchase (i.e. does not reduce the original price), but after the purchase. Cashback is expressed as a percentage of the amount spent by the client.

The term came to Russia from Great Britain and the USA and translated into Russian means “money back”.

Loyalty programs do not stand still, and in addition to replacing plastic cards with virtual ones, cashback has also turned into a return of bonuses to a virtual card instead of money to a bank card. Cashback percentages can vary – some companies offer higher return rates than others. With these bonuses, the client can pay up to 100% of the cost of the product or service (depending on the conditions of the company

Most businesses today recognize cashback as the best loyalty program option. With cashback, you do not need to initially indicate the brewdog discount code for the products or services of the business, and at the same time, you encourage customers to make a repeat purchase.

Simply put, a loyalty program with cashback is a great opportunity to increase sales and reward customers, thereby motivating them to come back and make purchases from you again.

How it works

The client installs a virtual card of your business into the smartphone. After making a purchase, a percentage is returned to the card in the form of bonuses from the cost of the last purchase. The client learns about this using a push notification, which is displayed on the lock screen of his smartphone.

The idea is that the more money a customer spends on your products, the more bonuses they will return to their virtual loyalty card. Cashback is an effective way for customers to get a discount on a purchased product or service.

For example, with a cashback rate of 10%, a client can get back 300 bonuses for a purchase worth 3,000 rubles. This gives customers an incentive to buy a product and helps the business sell more.

Bonuses can be accrued at the time of payment at the checkout upon presentation of a virtual card or after a certain amount of time after making a purchase. At the same time, you can impose restrictions on the accrual of bonuses when paying for certain goods and services or for clients with different statuses.

As a rule, 1 bonus = 1 ruble. As a motivation for new customers to come to you again, you can use the “welcome bonus” – an increased cashback from the amount spent on the first purchase. Be sure to notify the client about this by sending him a push notification.

When returning goods or demanding a refund, bonuses can also be debited from the client’s account, and if there are not enough bonuses on the card, then a negative balance is formed on the client’s account. All this is displayed on his virtual map.

Cashback in the form of bonuses can be accrued only for goods or services paid for in cash.

What does the salon get

Due to competition among businesses and virtually identical terms and conditions of loyalty programs. It becomes more difficult to attract a large number of new customers. Also important is the task of retaining existing customers, therefore it is useful to encourage them. The loyalty program with cashback was created for this very purpose.

But in addition to rewarding customers, there are a number of positive aspects for business:

customers come back for purchases more often, because with accumulated points, each next purchase becomes more profitable;
to get more bonuses, customers spend more money, and this has a positive effect on the growth of sales and. Accordingly, on an increase in profits;
due to the transparency of the terms of the program. Customers trust you more (the terms of the program should be as simple and understandable as possible for customers, the accrual system should be extremely clear. You can write down the conditions directly on the virtual card);
for business, cashback is much more effective than advertising in the media.

What does the card user get

A program member can use the accrued bonuses to get a discount when paying for goods. This helps to significantly save money. Participation in the program is attractive due to:

accrual of bonuses after each purchase;
the ability to pay for the purchase with points in part or in full (depends on the conditions);
a reminder of the availability of unspent points at each visit (the client will receive a reminder via geo-notification, even if the administrator forgets about it);
transparency of conditions – due to the fact that all conditions are written on the map itself, there is no need to look at them on the website or check with the administrator;
a convenient way to always have your loyalty card at hand (even if the phone is turned off – bonuses are accrued automatically).

The current status of the bonus balance and the size of the cashback are always available on the face of the virtual card.

What size of cashback to set

How to set the size of the cashback so that the client remains involved. And the business does not suffer from the introduced system? The best option would be detailed analytics of indicators and the choice of a suitable system. However, there are several universal solutions that suit any business:

Fixed cashback is a permanent cashback, which is set, as a rule, in the amount of 5% to 10%. But in some cases it can be even more. For any amount spent, the client receives bonuses back. The higher the cashback size, the more attractive it is for the client to make a purchase from you again.

This kind of system works well when you have a lot of regular customers. By implementing the system, you thereby reduce the likelihood that customers will go to competitors. In this case, the size of the cashback should be determined based on the average price segment for your services and loyalty programs that may be used by competitors.

Cumulative cashback – several levels are used here. The size of the installed cashback depends on the amount spent by your client. For example, an amount up to 5,000 rubles – 5%, up to 20,000 rubles – 10%, etc. You can limit yourself to either two levels or several. This system will allow not only to attract new customers. But also those who have already come several times, but are not permanent. And for regular customers it will be a pleasant gift that fully reveals loyalty.