Why offering cashback could be good for business

Cashback is a hot topic at the moment here at Swipii with many of our awesome local businesses in Glasgow transitioning over to a cashback-only loyalty program which treats you to cash rewards. 

Why are they making the change?

Businesses like Oaka Supercity, Joanna Goodbite and Taco Mazama are all offering cashback rewards to their customers in a push to give people more universally rewarding offers. Not only is it a great move for their local consumers, it can also bring huge benefits for the businesses themselves.

Giving cash back to your customers might seem a bit alien. But it works!

Here’s the lowdown on why offering cashback could be good for business…

 

What is cashback?

It would help if we explained a bit about cashback in general first! 

Cashback is a reward given to a consumer for making a purchase at a specific business. The reward is usually a percentage of the amount they spent on that purchase. The amount of cashback offered by businesses varies wildly, and in some cases, you can get different offers at different times. For example, with Swipii, customers get small cashback incentives on every purchase to keep them coming back. Then, businesses can set days and times to offer ‘boosted’ cashback: A higher percentage to get more new customers coming through the door. 

Each business gets to choose the percentages to offer themselves, and we do all the hard work, getting the money to the customers and marketing the business to local shoppers.  

 

What are the benefits of offering cashback (as a small business)?

So, we understand what cashback is, and how consumers get it. We still haven’t covered why a business should choose to offer it! 

Let’s take a look at some of the top benefits to businesses of offering cashback as an incentive. 

 

Incentivises regular purchases and loyalty 

We’ve been enthusiastic about loyalty at Swipii for years now, and cashback is just another form of rewarding customers for being loyal and returning again and again. Whether they’re getting cashback on every purchase or boosted cashback when they visit their local businesses at certain times, knowing they’ll be rewarded for making a spend is definitely an incentive to visit (and often spend more). 

If customers are looking for somewhere to make a big purchase, or are looking for a new coffee shop to frequent, having a cashback incentive could help get them over the line.

 

Can be cheaper than offering rewards

With regular loyalty programs, you are often giving out something in return for your customers spending a certain amount or visiting a certain number of times. This could be a free coffee, a free meal or a free blow-dry. Totally depends on your industry obviously!

Offering a reward like this can often end up costing more than a cashback reward might. 

Many cashback sites offer a standard 1% cashback on every purchase, which on a £5 purchase would mean giving £0.05 back to the customer. 

 

Here are two examples and what it could cost a coffee shop:

Spend £20, get a free coffee and cake

Visit 1: Spends £5

Visit 2: Spends £5

Visit 3: Spends £5

Visit 4: Spends £5

Visit 5: Spends £0, gets a free coffee and cake

1% Cashback on every purchase

Visit 1: Spends £5, gets £0.05

Visit 2: Spends £5, gets £0.05

Visit 3: Spends £5, gets £0.05

Visit 4: Spends £5, gets £0.05

Visit 5: Spends £5, gets £0.05 


In the first case, they would have spent £5 if they hadn’t been given the free items. Although this was definitely an incentive to keep coming, it means the business loses that spend.

In the second case, the customer earned £0.25 cashback over the 5 visits. It would go up to £0.50 if you offered 2% cashback. Still cheaper than offering the free item. On top of this, you could have boosted days where customers get 20% back. A week with a model like this might look something like this:

 

1% Cashback on every purchase

Visit 1: Spends £5, gets £0.05

Visit 2: Spends £5, gets £0.05

Visit 3 (Boosted 20% Cashback): Spends £5, gets £1

Visit 4: Spends £5, gets £0.05

Visit 5: Spends £5, gets £0.05 

 

Now, the customer has earned £1.20. Still, less than the free items would have costed the business! But now it’s a more tangible incentive for the customer. £1.20 back in their pocket to spend as they please. 

This is completely hypothetical, but you can begin to see how cashback could work out better for small businesses. 

 

Little to no staff training or involvement needed

One of the reasons we introduced cashback rewards at Swipii, was because many of our customers weren’t big on having to ask for free stuff from staff at the counter. For some of our businesses on the app, they had seasonal and student-based staff coming and going, which meant regular training was needed to stay on top of the previous points and rewards system. 

We wanted to create a system which would continue to build a loyal customer base for businesses, but one which didn’t involve having to teach staff how to use it, and removed any need for customers to ‘do something’ in order to get rewarded at the till point. 

Of course, we still love having a wee chat with the barista in the local coffee shop! Now, we just no longer need to show our phones and ask for a freebie. We just pop in, get the coffee and chat about the weather, then customers can head out and get their cashback via their phones in the comfort of their home or office. 

This could be huge for businesses big and small who are currently using a stamp card loyalty system or even a “Check-In” system. No faff at the till with cashback, and customers have a completely seamless, easy reward redemption!

 

You don’t have to discount your products

An evergreen idea for businesses has always been to discount products in order to bring new customers to the businesses and get them returning again and again. In competitive markets, businesses have been known to discount products to the point where they’re not even making money on them anymore. 

With cashback, you don’t need to discount at all. The cashback is the incentive. 

Instead of offering 20% off of your stock, offer 10% cashback. People will often be more swayed by cashback because they are ‘getting’ something, rather than just parting with a little bit less.

Plus, by offering the cashback instead of the discount, you get the full amount in the bank immediately upon purchase. Then on a monthly (or weekly or quarterly in some cases) basis, you send the cashback off the customers. This can vastly improve your cash flow by allowing you to pay out the cashback once all of the revenue is in, rather than just getting less revenue in the first place. 

 

How do I start offering cashback?

Talk to me! 

Or at least, you can get in touch with a member of the Swipii team. 

We’re beginning to set businesses up with their brand new cashback programs on the app, and we’d love to hear from you if this is something you’d be interested in. 

Just drop us an email to [email protected] to set up a call with one of our dedicated Account Managers. We can’t wait to hear your thoughts!

Swipii

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