Today’s consumers are savvier, better informed, and more empowered than ever before. They have more options for where and how they shop and employ a variety of tactics to save money while shopping. The savviest consumers thoroughly research products, compare pricing, wait for sales, and join loyalty and rewards programs – to name just a few.
Investing in a cash back strategy is a great way for marketers to win the wallets of shoppers who are getting smarter and savvier across the board. Consumers view cash back as a “smart” buying strategy that empowers them to use rewards to purchase more things they love.
With the rise of savvy shopping, smart brands will implement a cash back strategy. Here’s five reasons why:
1. Shoppers are prioritizing deals and discounts.
62% of shoppers primarily delay clothing purchases until they can secure them at a discount. Shoppers are approximately 2x more likely to purchase a product with a 20% discount over a product at average cost. This likelihood rises dramatically to 99% when the discount offered is 50% as opposed to 20%.
The opportunity: Rather than discounting, marketers should offer value-based rewards and promotions. Shoppers are looking for the best deals, but that doesn’t mean you have to implement frequent sales and discounts. More brands see increased revenue via rewards (36%) compared to discounts (28%). Frequent sales and discounts can also be harmful as they eat into profit margins, lower the perceived value of your brand, and train customers to expect lower prices. Brands should look into providing rewards and promotions to give incentivization while also maintaining brand value and perception.
2. Cash Back is the preferred money-saving tactic amongst consumers right now.
45% of shoppers prefer Cash Back rewards the most and 74% of shoppers say they are more interested than ever in earing Cash Back rewards due to inflation and the uncertain economy, according to a recent report.
The opportunity: Inflationary and recessionary concerns have driven consumer preference for receiving cashback rewards. In this environment, consumers are evaluating their choices and making tradeoffs as to where and how they spend. Cash Back is a great way to give your brand a competitive edge and win over new customers. It’s a strong incentivization for shoppers who are considering switching brands and could even be the deciding factor for someone choosing between your brand and another. And if the experience is positive, you’ve increased the likeliness of repeat business.
3. Gen Z are proponents of Cash Back rewards.
Almost half (46%) of Generation Z likes to earn Cash Back. 74% of Gen Z a will spend more money online if they know they will receive 5% Cash Back, according to Dosh.
The opportunity: According to a recent Bloomberg report, Gen Z now commands $360 billion in disposable income. As the young students and professionals age and their incomes grow, their spending power is only set to increase. To reach and engage this high-value audience, brands and retailers need to appeal to their specific preferences. This means changing where you show up, how you speak to this audience, and what you offer them. However, the financial opportunity for retailers that win them over is significant.
4. Price & Promotion hold the highest importance in decision-making.
In comparison to the factor of Uniqueness, Price & Promotion is 31 percentage points more crucial to shoppers.
The opportunity: Shoppers are price-conscious right now. Higher prices on groceries and everyday household items have made shoppers savvier their purchasing decisions. Brands and retailers can strategically use Cash Back as a lever to drive full price and sales efficiently for the business. Marketers can also drive performance by offering elevated Cash Back for retail events. This is especially effective because it creates a sense of urgency to help attract customers and boost sales, without undermining profit margins.
5. Cash Back drives customer retention and loyalty.
Over 80% of the consumers say they’d be more likely to shop at a store where they could earn a cashback reward on their purchase, and 79% are more likely to complete a purchase when they can earn a reward.
The opportunity: Consumers want to know that brands value their business. Giving rewards for their loyalty is a perfect tool for doing this. A Cash Back offer bundled with an exclusive deal that other consumers can’t access is a perfect element for a loyalty campaign that will make a loyal customer feel special. Cash Back can also be part of a reward structure that encourages customers to stay in long-term relationships. One example could be a Cash Back loyalty program where customers receive an extra 10% Cash Back on their 10th purchase. This can create a sense of exclusivity and community that keeps loyal consumers coming back.
Get more rewarding performance with a dynamic Cash Back strategy
Taking advantage of the pride that shoppers feel when they find an amazing deal can be a powerful force for winning market share and loyalty. Consumers want rewarding experiences and Cash Back incentives are a great way to deliver them.
Though not all cash back programs are created equal. Our data shows Cash Back is significantly more performant when it’s data-driven and elastic. On Rakuten, we see that strategically fluctuating cash back rates on average drives 10% more shopping trips and increases conversion by 34%, versus running a stagnant cash back rate. We look at internal and external factors such as industry, brand value, seasonality, competitive and shopper behavior to determine the most effective and efficient rates to activate and retain shoppers across their journey.
Reach out to a rep for more information on Rakuten’s Cash Back program.