Cashback Promotions: How Do They Work?

Table of Contents

• What is a Cashback Promotion?
• Why Are Cashback Campaigns a Hit with Consumers?
• How Do Cashback Promotions Work in Practice?
• Exploring the Benefits of Cashback Promotions for Brands
• Examples Of Successful Cashback Promotions
• Considerations When Creating a Cashback Promotion

 

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In today’s competitive market, businesses must find creative ways to attract potential customers and boost loyalty with existing ones to increase their sales and market share overall – enter cashback promotions. This form of incentive-based marketing has become increasingly popular among savvy consumers as research has shown that 82% prioritise special offers when making purchasing decisions over other factors such as price alone – with 48% opting out of brands without deals altogether! Thus, understanding the benefits that cashback promotions have to offer both businesses and consumers is essential in building an effective marketing campaign strategy that will lead to improved brand image, heightened customer loyalty levels, increased revenue streams and more.

What is a cashback promotion?

It’s pretty simple – when customers purchase a product on promotion, they can claim back a predetermined amount of the purchase price.

Why are cashback campaigns a hit with consumers?

Well, apart from being financially motivating, it is also an uncomplicated concept that is easy for marketers to communicate – a key factor in crafting an effective offer. Plus, cashback offers are usually more generous (due to lower overall cost implications) than point-of-sale discounts, making them stand out and appeal more to shoppers.

Exploring the Benefits of Cashback Promotions for Brands

For businesses looking to drive customer loyalty levels through incentive-based marketing strategies such as cashback promotions, there are many advantages beyond just increasing sales volume!

Open the Door for New Customers

Tap into new customer groups and broaden your reach by using cashback promotions to pique the interest of those who may be unfamiliar with your brand. Financial incentives are an affordable means for creating initial purchases that can lead to long-term relationships.

Entice Consumers to Switch Brands

Cashback promotions are a great way to give your brand a competitive edge and win over new customers. Think about it, who doesn’t love a little extra value? It’s the perfect temptation for those who may be considering switching from a brand they’re familiar with. In fact, your cashback offer could be the deciding factor for a customer choosing between your brand and another. And here’s the cherry on top – if they have a positive experience with your brand beyond the promotion, you’ve set the stage for repeat business. So, in a nutshell, cashback promotions = more customers and more sales. Sounds like a winner to us!

Power Up Your Customer Insights

Cashback promotions are not just about the cash, they’re about the data too! Sure, customers have to provide some basic information as standard when redeeming their cashback value, like proof of purchase and payment details. But, here’s the thing, by asking a few extra questions during the claim process, you can gain valuable insight into your customer’s experience with your brand.

Think of it like a mini customer research survey, but better because they’re already engaged with your brand and have a vested interest in completing the form. The data you collect can help you fine-tune your customer profiles, figure out where their loyalty lies, identify important trends that can improve your proposition, and even design more effective campaigns in the future. Plus, you can use the information to segment and remarket.

Boost Brand Visibility with Bigger, Bolder Offers

Unlike a standard discount, cashback promotions allow brands to get a little more creative with their incentives, thanks to the lower redemption rates. Compared to 100% redemption at the point of sale, cashback promotions only see 30-40% redemption rates. This means less strain on the marketing budget to offer even more attractive rewards and really stand out to customers.

But why don’t customers always claim their cashback? Well, it could be a case of forgotten offers or missed deadlines. But here’s the thing, even if customers don’t claim their cashback, the promotion still played a role in motivating the purchase.

(Note: It is important to balance the attractiveness of your offer and expected redemptions and consider this in your budget (or consider insuring your promotion if you are especially worried your promotion could over redeem). A good promotions partner can help you with this 😉.)

Maximise Your Marketing Investment

Maximising your marketing budget and return on investment from your promotional activity is always going to be high priority. Cashback promotions are a great option for achieving these goals because they are typically cheaper to deliver overall  than blanket point of sale discounts. This is because the customer pays the full retail price as normal, and then actively must claim the cashback amount back from you – our data suggests only 30-40% do this. So, with cashback promotions, there’s the potential for comparatively very low-cost outlays with high returns.

Don’t Sacrifice Perceived Quality

While price discount promotions are also effective in boosting brand visibility, they can also cheapen the brand’s image, giving the impression that a product may be being sold off quickly, or not worth the original RRP. Cashback promotions offer a solution to this, they can achieve the same boost to brand visibility but instead by adding value to the customer’s experience without sacrificing the brand identity and perception of product quality.

Improve Customer Loyalty and Retention

Customer loyalty and retention is key to any successful business, and cashback promotions are a great way to reward customers for their purchases. Not only do they incentivise repeat business, but they can also be especially effective when used as part of a wider customer loyalty program. By offering rewards for repeat customers, you can solidify their loyalty to your brand and encourage them to continue buying from you.

 

Examples Of Successful Cashback Promotions

Cashback and Trade-In Promotions to Boost Market Share

With a savvy promo in 7 countries across Europe, Denon effectively enticed customers to switch from their current sound system of rival brands and upgrade to theirs. Using generous cashback incentives plus trade-in options for qualifying competing products, they motivated consumers to trade in their competitor systems and make the leap toward upgrading with Denon!

Cashback and Sweepstakes Promotions to Increase Brand Awareness

Fellowes launched a cashback promotion across Europe with a sweepstakes twist. By making a purchase of any qualifying product, customers had the chance to win an exclusive trip to the Windy City. This clever initiative generated plenty of interest – upping sales while raising awareness about Fellowes products.

Cashback and Trade-In Promotions for New Product Launch

Canon delivered a winning promotion for the launch of their new EOS and XC10 cameras. By encouraging customers to trade-in their older models when purchasing the new ones, Canon was able not only draw in higher sales numbers but also increase customer retention and strengthen customer loyalty.

 

Considerations When Creating a Cashback Promotion

There are many factors that come into play when creating your own campaign strategy using this form of incentive-based marketing. We’ve covered some important ones here – but it’s not an exhaustive list!

Setting Clear Objectives for Your Cashback Promotion

Are you trying to reward loyal customers or attract new ones? Different tactics will be needed for different objectives. For example, if you’re trying to incentivise repeat business, you may want to offer a higher cashback rate for repeat purchases. If you’re trying to attract new customers, you may want to offer a lower cashback rate but with a wider range of products or services eligible.

Who Are You Targeting with Your Cashback Offer?

Who are you trying to reach? Is it a specific demographic, such as millennial or Gen Z consumers? Or perhaps you’re aiming to target specific geographic areas? If this involves multi-country targeting you may also have additional considerations around promotion localisation in terms of additional regulations, languages, and currencies.

Creating an Engaging Hook and Offer

Firstly, make sure the promotion is easy to understand and communicate. If it’s too complex, it may not be as effective. And secondly, think about how generous the cashback offer will be. It should be attractive enough to entice customers to take part, but also be financially viable for your business.

Timing is Key

You want to make sure that the promotion is running at a time when it will have the most impact, such as during a slow period for your business or during a key shopping season. It’s also important to have a clear start and end date for the promotion, so customers know when they need to take advantage of it. Additionally, while one-off promotions can absolutely be effective, it is often better to consider how your promotion fits in with wider plans.

Communicating Your Cashback Promotion

Promotional success is heavily reliant on the communication of your offer and messaging. Therefore, it’s important to think carefully about how you will promote your cashback incentive across different channels such as email, social media, print advertising or even through your reseller channels. And as mentioned above, how this can feed into your wider marketing activity.

Measuring the Success of Your Campaign

Finally, it’s essential to have a plan in place for measuring the success of your cashback promotion. This will allow you to track key metrics such as the number of customers who took part in the promotion, the overall cost of the promotion, the claim rate, and the return on investment. This information will be invaluable for future campaigns and will allow you to make any necessary adjustments to improve their effectiveness.

 

Final thoughts

Final thoughts, cashback promotions are an effective way to boost your ROI, so long as you make sure to keep your objectives clear, create a generous offer, and target the right audience. With a well-executed campaign, businesses can achieve great results, both in terms of increased revenue and better customer relationships. This form of promotion is here to stay, and with the right approach, it can be a valuable addition to any business’s marketing strategy.