Cash may be losing its luster as a payment tender, but it's a 'must have' when it comes to rewards program benefits and will be for the foreseeable future.
Cash as a payment tender may no longer be king, especially with the rapid shift toward online shopping and digital wallets. Nevertheless, today's consumers clearly prefer cashback rewards as their loyalty program currency. At the same time, cashback and coupon rewards programs are becoming more critical to consumers: when times are good, saving money is a nice-to-have, but with an uncertain economy and high inflation, cashback rewards and discounts are essential for most consumers.
Rewards for shopping are now expected on everything from groceries to financial services and travel. At the same time, customers seek expediency and frictionless shopping while immersed in their online experience.
However, not all reward programs are created equal or meet consumers' preferences. For one, they want simple, user-friendly experiences. They also want rewards embedded seamlessly within their shopping experience, and discounts automatically applied at checkout.
What they don't want is to detour from their shopping experience or search through a directory of brands to "turn on" an offer.
Long story short: the easier it is to obtain rewards from a loyalty program, the better. Retailers and payment enablers (financial institutions and card issuers) who make their rewards programs naturally accessible and seamless within the shopping journey will achieve the most success in inviting — and sustaining — prized consumer relationships.
The growth of loyalty and rewards programs
Loyalty programs are a win-win for both retailers and consumers. Brands offering rewards programs usually see stronger brand loyalty, better customer retention, lower user acquisition cost, and increased revenue. Consumers, in turn, benefit from lower prices and ease of use, including earning cashback on purchases and using coupons as they check out.
In industry surveys, roughly 83% of consumers say that they are more likely to do repeat business where a rewards program is present than a comparable business without a rewards program, TidalCommerce reported. Almost 2/3 of internet users believe that earning rewards and loyalty points is one of the most valued aspects of the shopping experience.
Consumer expectations for rewards programs, and their online shopping behavior, have evolved to the point they now help drive retail loyalty. While consumers will always find ways to shop, many in the current economic climate now seek more ways to stretch their budgets by participating in loyalty and shopping rewards programs to earn discounts and cashback rewards. In a recent survey commissioned by Wildfire, 90% of consumers say that, because of rising prices, they are more interested in getting discounts, using coupons and earning cashback rewards when they shop.
In effect, shoppers consider rewards to be a key part of their shopping experience, whether directly through a retailer's program, credit card company or even through a third-party program. Third-party programs, including online shopping companions such as PayPal's Honey, Capital One Shopping, the Acorns Earn program and even built-in discount alerts offered by the Microsoft Edge browser and Bing search engine, have gained in popularity. These help direct consumers to coupons, discounts and cashback rewards right as they shop.
What makes using these programs even more appealing to consumers is that they are embedded within the buying process and activated within the natural flow of users' online shopping experience. Another data point from Wildfire's survey indicated that most consumers expect coupons to be applied automatically at checkout during the natural flow of the shopping experience. They also prefer cashback rewards via direct payment, with about half of the consumers choosing it as a credit to their banking account or credit card and about 30% of customers preferring to receive it through a service such as PayPal, Venmo or Cash App.
Cash as reward currency — offered simply
Speaking of coupons, discounts and points, while those shopper incentives might be nice, most consumers prefer cash as their reward currency. In Wildfire's consumer survey, eight out of ten consumers surveyed indicated they prefer rewards in the form of cashback rather than points, miles, or other types of credit.
Many retailers have realized that offering incentives — such as cashback, coupons and shopping rewards — can influence consumer purchase behavior, sales conversion, and even where consumers choose to shop. Over 80% of the consumers we surveyed report they'd be more likely to shop at a store where they could earn a cashback reward on their purchases vs. one that doesn't, and 79% are more likely to complete a purchase when they can earn a reward.
The good news is that many retailers are starting to listen to customers, as indicated by a recent report from Comarch, which shows that almost half of the direct-to-customer retailers currently, or intend to, offer cashback rewards as part of their loyalty program.
How to implement cashback in your loyalty program
What are the takeaways for online businesses seeking to capitalize on the consumer demand for cashback rewards?
The bottom line? Cashback rewards programs drive both top-of-funnel shopper visits and bottom-of-the-funnel sales conversion.
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