Cashback is the new Loyalty Program!

I’ve been repeating this phrase almost like a mantra around here and I’m going straight to the point: cashback has the potential to meet all the KPIs of CRM and customer loyalty programs! Recency, frequency and value are highly impacted by cashback as a commercial activation tool. In addition to these, I have studied countless other data related to customer retention and I am increasingly convinced that cashback is the future of promotion.

Known worldwide as the “father of marketing”, North American professor Philip Kotler states that the investment required for a company to acquire a new customer is five to seven times greater than that of existing consumers. It is precisely with a view to taking advantage of this lower cost that companies are increasingly improving and intensifying their efforts in building strategies that generate customer loyalty.

To give you an idea, a global survey carried out by Markets and Markets reveals that the loyalty management market is currently worth around US$ 10.2 billion, with a forecast of reaching US$ 22.8 billion by 2028. Thinking about the context In Brazil, a survey by the Brazilian Association of Companies in the Loyalty Market (ABEMF) shows that the country totaled, in the first half of 2023, 306.3 million registrations in loyalty programs, which represents an increase of 9.5% in compared to the same period of the previous year.

Given this scenario, one of the methods that has proven to be most effective is cashback, which can be translated from English as “money back”. Therefore, the premise of this type of loyalty mechanism is simple, and involves ensuring the return of part of the investment made by the buyer in the form of credit or discount for future new acquisitions.

We can therefore say that this model is a means of contribution that benefits the entire chain. On the retailer’s side, the solution creates a huge attraction for customers to continue purchasing continuously through their sales channels. On the Industry side, assertive and targeted incentives for the correct target generate preference and brand loyalty, the incessant search of any marketing and sales professional. The consumer, on the other hand, feels prestigious for receiving part of his money back and ends up being influenced to continue purchasing to take advantage of the benefit, thus entering a cycle of constant consumption.

It is no surprise, therefore, that the strategy has been seen as a proposal to remodel the way consumers relate to brands. To give you an idea, a study by the Loyalty Panorama in Brazil points to cashback as the second commercial lever best evaluated by consumers when making purchases, surpassing already consolidated tactics, such as the distribution of discounts, gifts or rewards.

In other words, we can say that the mechanism of ensuring the return of part of the expense offers the customer a more transparent and spontaneous loyalty opportunity. This is because its main attraction is not the discount itself, but the decision-making power that is given to you, as you will have the opportunity to follow your preferences when using the benefit.

Still in this sense, one of the principles that help to value the cashback itself even more is clarity. This is because the strategy involves the assumption that the buyer makes an acquisition and knows that there will be a reward for it. This is very different, for example, from what happens in points and rewards programs, in which the consumer is rarely able to see what the real return on their investment is and what can be done with the points they have earned.

Thus, the brand creates a feeling of loyalty among shoppers, who feel valued for the rewards they receive in those experiences. It is a feeling that not only builds public loyalty, but also causes those who have already tried it to share the advantage they obtained with other people, recommending the company, generating, as a consequence, an expansive effect on its customer base.

In this way, more and more companies see the benefits of cashback as a way to increase sales and provide greater interaction between brands and their consumers. In an increasingly competitive market, finding ways to keep customers close through positive experiences is invaluable, even if it requires rewarding them for it. Because everything that goes around comes around eventually.

*Rodrigo MatheusCMO and Director of the IZIO&Co Media BU, the most complete communication and efficiency solution for the retail chain in Brazil.