3 Simple Ways to Structure Cash Back Rewards
Earning discounts toward future purchases is one of the most enticing features for any loyalty program. In fact, 64% of customers expect to receive some kind of financial reward in return for their patronage. Many companies decide to go with confusing, and often misleading, points systems. But the best way to show customer appreciation in a loyalty program is through cash back rewards.
A Cash Back Loyalty Program
The idea behind offering cash back rewards is to encourage repeat visits to the store. Because it costs five times more to acquire new customers than it does to retain them, repeat business means lower costs of customer acquisition. Cash back rewards are not an immediate expense. Instead, think of them as a small investment toward future customer loyalty.
Again, the goal of cash back rewards is to increase future purchases, where they will spend, on average, 67% more than new customers. Repeat customers that spend more each time will raise the average per transaction rate, even with a discount of 5% or 10%.
Giving Cash Back Rewards to Customers
The foundation of any successful rewards based programs needs to be easy—for customers to understand how it works and for retailers to implement them. The list below contains three important ways to keep it simple.
1. At the point of sale.
Speed and convenience are two of the most important factors guiding a positive customer experience. Customers want fast service at checkout, even when they are returning something. Retailers need to have a seamless rewards program with their point of sale, so loyal customers can collect and redeem their rewards at the checkout. This will exceed their expectations and make them feel like they got an even better deal when they leave the store.
Offer cash back rewards through text and email.
2. Set up a tiered reward structure.
Customers always want to feel special or that they are getting special treatment. This is especially true for customers with frequent purchases. A great way to achieve this is through a tiered reward structure. One example is to name each level after a precious metal, such as bronze, silver, and gold. With each purchase, they can raise their standing in the tiered system and qualify for higher discounts, or they can get other exclusive offers on select merchandise. A tiered rewards structure offers more benefits to the most loyal of customers and will make them feel special.
3. Less discounting or lowering prices.
Customers also want to feel like they are always getting a better deal through their loyalty program. But, this feeling can quickly go away when sales and discounted merchandise are available to everyone. Plus members will earn fewer points on purchases. What’s the use in being in a loyalty program if everyone gets treated the same? Keep sales to a minimum or create events for program members, so they can continue to feel special.
Customers are always looking for simple ways to save money, but they often have a hard time quantifying the value of “points.” When this happens, they will be left with a bad experience, which is the opposite of what was intended. With a cash back loyalty program, you are providing customers with real value, in a currency that everyone understands. If your store visitors find it easy to collect and redeem rewards, the loyalty plan is working.