March 02, 2021
Why have many high-profile rewards programs moved from reward points to instant cash back? Ask yourself, would you prefer to earn points, that you may or may not get around to redeeming, or get cash back? I know in my case, and in the case of many consumers, the resounding answer is “give me the cash!”.
In recent years, many of the major credit cards have moved to cash back rewards because of the offer’s ability to draw and retain new customers. Some programs, such as those aligned with hotel brands and travel, are sticking with points for now. This is likely to be due to the strong affinity their holders have with these brands and their ability to offer tiered and recognition benefits. Personally, I enjoy the loyalty and recognition perks I get from the points I earn from my Bonvoy credit card. I’m not sure that most retailer stores can generate this affinity or are they able to offer the compelling tiered benefits.
A loyalty/rewards program should motivate consumers to spend more with a particular brand each time they shop, and it should encourage them to increase their frequency of shopping. For a broader discussion please read this recent post “What Makes A Successful Restaurant Rewards and Loyalty Program”. For most retail shoppers, the best way to encourage this is by giving them instant cash back. This has especially been the case during the Pandemic. The Merkle Loyalty Barometer Report: 2020 Refresh, highlights what consumers want in a loyalty or rewards program. Consistently, the top two responses are “Chance to win large prizes” and “Instant win”. During this Pandemic, and peoples’ general concern for their financial well-being, the desire for the “Instant Win” feature has increased significantly.
Cash back offers consumers flexibility and ease of redemption. Consumers don’t have to go through mental gymnastics to calculate how much they need to spend and on what to earn an appealing reward. Cash back can also offer much needed budget relief. At spindy, we get comments from our members often thanking us for putting money back in their pockets – if they are eating at spindy locations a couple of times per week, the aggregated spindy deposit into their bank account can be very significant.
Cash back also has the benefit of immediacy. You make a purchase and you are immediately aware of how much you have earned. In the case of spindy, the excitement of the post-purchase spin and the immediacy of the cash back, helps create a positive shopping experience without the retailer having to decrease the value of their product/service offering. Actually, our users spend 60 to 100% more than non-spindy users in our participating retailers and we think it’s due to the expectation of immediate cash back. Gamification adds another level of excitement and enables you to leverage your rewards for higher perceived value – read this recent spindy blog post for a discussion of gamification.
So, if you are looking to introduce a rewards program or reviewing your existing program, we ask you to look closely at cash back. A cash back reward program, such as that offered by spindy, allows you to delight your customers with an immediate reward without you having to participate in the dreaded discounting death spiral. A cash back reward will help you achieve your ultimate aim of encouraging consumers to spend more and spend more often.
Please don’t hesitate to send feedback or ask questions.