The Comeback of Cashback: Why Cashback Loyalty Programs are Making a Resurgence

Cashback rewards programs have been an effective way to incentivize customer loyalty and drive repeat purchases. And its resurgence revolves around giving your customers what they want.

It’s well-known in business that it costs far less to retain an existing customer than it does to acquire a new one. On average, your chances of selling to brand new customers are between 5% and 20%, whereas that number skyrockets to 60% or 70% for those who have previously purchased from your brand.

Attracting and retaining loyal customers isn’t a new trend, yet it continues to be a focal point for successful businesses — and this is even more important in today’s eCommerce landscape with seemingly endless online competitions. That’s why loyalty programs have long been a staple in the marketing playbook for brands of all sizes.

It’s hard to find a major online store that doesn’t invest in some sort of loyalty program. This could take the form of traditional reward points, brand tokens, or cashback incentives — the latter of which is something that’s undergone a resurgence as of late.

Cashback rewards is a type of loyalty program that’s been around for a long time with legacy financial companies and credit cards, but many eCommerce brands are now finding success incorporating it into their retention mix. Let’s explore what’s behind the resurgence of cashback loyalty programs and what this says about where customer loyalty is heading overall.

What’s a Cashback Loyalty Program?

In most loyalty programs, your customers gain points or brand tokens for different activities that are valuable to your business. This might include purchasing items (obviously!), signing up for newsletters, referring their friends, or leaving product reviews. On the other hand, cashback loyalty programs are built around rewarding one simple action: buying.

As the name suggests, a cashback reward is one that enables your customers to “earn” a small amount of money back with each purchase. This is generally a small percentage between 1% and 5% of their spending that they receive immediately.

Cashback loyalty programs are effective because they’re easy to understand and deliver instant gratification, supporting the customer’s decision to shop with your business. Even if it’s only a small amount (many brands offer a standard 1% cashback on every purchase), the reward mechanism encourages routine purchases and gives customers a reason to come back to your store over competitors. They’re a straightforward, yet addicting and incentivizing way to encourage customer retention.

How Do Cashback Loyalty Programs Work?

When customers shop with your brand online, they’re spending money. In return, your cashback incentive gives them a small percentage of the paid money back as a reward for shopping in your store. How can they get that money? By shopping from you again and again.

Let’s say that you have a customer who spent $100 on a purchase and their cashback reward is designed to be 5%. The $100 spent by your customer translates into $5 cashback that’s immediately added to their wallet. When the customer has reached a certain threshold, they’ll have the option to either spend their cashback on a future purchase or receive it directly via bank transfer, credit card, or PayPal.

With a provider like Cultos, your brand can also reward customers with 100 traditional points or brand tokens for the same $100 spent, which translates to $5 in value that they can choose to spend whichever way they want. That could include exchanging the earned tokens for the traditional loyalty rewards in your brand ecosystem, such as product discounts, limited-edition collections and brand merchandise — or simply a cashback option sent directly to them.

In addition to the cashback incentive, offering a variety of reward options and off-ramps leaves your customers satisfied with something to look forward to for their next shopping experience. As a result, they may even refer your brand to their friends and family — one of the most powerful growth drivers for any business.

The Power of Customization

There’s no one-size-fits all solution when it comes to loyalty programs. Customization is important because it allows you to set the parameters of your cashback loyalty program so that it makes sense for both your business and your customers — and a mutually beneficial relationship is the first step in building lasting customer loyalty.

For starters, your brand can determine how much of your customers’ spend will translate into cashback rewards (or dollar value in your store’s brand tokens) for a standard purchase. This percentage might fluctuate over time based on your marketing strategy, but it will allow your customers to accumulate cashback rewards in a way that maximizes your retention efforts.

With Cultos, you also have the opportunity to gain first-party data insights and use them to enhance your marketing efforts. In addition to retaining existing customers and incentivizing routine purchases, the power of customization enables you to tailor your cashback loyalty program to support your brand’s exact marketing needs at all times.

Let’s say that, in previous years, online traffic and sales tend to stall in the days after Halloween and leading up to Black Friday. Using these insights, you can run a promotional campaign with a higher cashback rate during this period. Or maybe you’re introducing a new product line and want to bolster sales as a way to encourage customers to try it out. You might see results by bumping the cashback reward from 1% to 3% for this product line for a limited time.

Give Your Customers What They Want

The bottom line is that giving customers what they want will result in keeping them as customers for the long-term. There’s value in flexibility and choice — and a cashback loyalty program is one of many powerful tools at your disposal that you can use to incentivize repeat business and routine purchases among your customers.

When you add in the ability to customize your rewards loyalty program to suit your marketing needs with a partner like Cultos, you have a powerful tactic to increase loyalty and retention rates for a long time.

When your loyalty programs are personalized to meet your customers’ unique preferences, they’re far more likely to be successful. Customers feel valued and special as they can earn money while also spending their rewards in their preferred way.

Get in touch with our team at Cultos to bring your brand rewards to the next level.