Cashback rewards are on the rise as more brands turn to instant gratification with cold hard cash at the forefront.
When we think of rewarding consumers, we usually think of loyalty or savings programs where consumers are rewarded for their loyalty over time. Those experiences can feel a bit empty because there is no immediate gratification; it’s as if there is value in them, but you don’t know exactly when it will pay off.
With that said, those rewards programs work. They motivate consumers to achieve a benefit from spending their money with a brand. There’s a psychological pull that a lot of consumers can’t resist.
People respond to promotions and rewards in various ways. According to research by the global consulting firm McKinsey, these reactions have to do with context, habit, friendly influence, incentives, emotions, congruence, salience and other factors. It is an accurate way to engage someone’s emotions, and in turn, win or lose their loyalty.
Neurological research shows that shopping is not only about pleasure, but equally about pain. A battle between these two feelings takes place in the medial prefrontal cortex. Ultimately, our goal is to have our product win the choice battle between pleasure and pain. There are two routes to this: increase the attractiveness of the product, or remove the pain. Giving an instant discount is very effective in reducing pain.
Making customers feel positive about their purchase is crucial to not only the customer experience but also brand loyalty. Research shows that 79% of consumers look for deals in loyalty rewards programs before buying an item.
Add real value
More broadly, the psychology of rewards and the current difficult economic situation should prompt companies to rethink “value” and how to incorporate it into their marketing plans. In previous years, “value” meant that consumers got something meaningful for what they gave to a company. In today’s times, consumer needs have shifted dramatically and “value” should now be met by brands and financial institutions that help customers achieve their budgetary goals in a very tangible way.
Even in the long term brands and financial institutions will have to think in a very different way about how to provide value to customers. Marketers must consider factors such as relieving consumer stress, offering more options for convenience and putting money back in consumers’ wallets when they need it most. And more than any other reward, it’s cashback that provides a strong conclusion to the customer experience. For financial institutions, the challenge is to find ways to add value for their customers in a frictionless way.
Cashback is king
With consumer budget challenges in mind, rewards are on the rise as more brands turn to “surprise and delight” experiences with cold hard cash at the forefront. Financial institutions, neobanks and digital payment platforms are flocking to embed cashback platforms into their user experiences.
Rewards such as cashback also drive sales. For instance, more brands see increased revenue via rewards (36%) compared to discounts (28%). Promotions enable businesses to encourage consumers to buy products while creating engagement that makes them more likely to make repeat purchases in the future. Consumer loyalty can be fleeting, but reward-based promotions offer businesses the opportunity to keep shoppers coming back while also encouraging revenue growth and building brand reputation.
The best way for banks to implement cashback into their offering is to make the customer experience as frictionless as possible. When customers sign up for the cashback program, the payout that follows should be automatic. Once customers experience the ease and delight of automatic cashbacks, the engagement with the bank’s digital channels will only increase.
McKinsey’s study showed that instant gratification, like cashbacks, results in a positive customer experience and more brand loyalty. Rewards are all about psychology, and cashback entails the greatest positivity in shopping and the best outcome for consumers, brands and financial service providers alike.
The psychology of rewards is powerful. Brands have the opportunity to make such rewards even more memorable for customers, when the rewards look more like something they need and can use immediately, like cashback.