Cash is fungible and generic; it has no “trophy value” like a branded loyalty currency. Over time, consumers don’t even notice it.
Loyalty, Loyalty, Loyalty.
Just like Kendrick Lamar said it a few years ago it can’t be more relevant now. Loyalty is everything. Creating the right connections and engaging in the best way is not a one way street nor an easy one. In a world that moves at extremely rapid pace it’s hard to keep up, and that is the big challenge rewards and loyalty programs face today.
In this quick but straight forward article you will find the main differences between real, engaged connections and a generalized theme. A solution to the question: cashback or reward points?
Loyalty programs are the ultimate way to connect with customers. It’s a marketing approach to make your existing customer your repeat customers. Some interesting facts to start out:
A) Customers who enrolled with your loyalty programs produce 12 to 18% more revenue than non-member customers.
B) As a new study shows, highly engaged customer tend to buy 90% more and spend 67% more on each transaction.
C) According to Bain, increasing customer retention by just 5% boosts profits by 25 to 95%.
From an excellent UX/UI customer experience thru an online/offline relationship. Loyalty programs are the way to communicate directly with customers. This is the way banks, retails, or any brand with a loyalty program influence a customer’s life.
According to a study by Harvard Business Review, Acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one.
Your existing customers spend 67% more than any new customer.
59% of customers say they are ready to buy new product or service from a brand familiar to them
Cashback programs are the easy way out. No need to create a relationship with customers and no need to keep the ongoing and evolving challenge to stay connected with customers all day-every day. It it’s proven that it works, that is why still today with the high personalization demand in the world some big programs still count on it. But, this is flat an approach and a generalization of customers, something that will remain the same overtime without any growth or evolution. In some way it’s like adding a band-aid to a big cut…
However, we at Muscle believe cashback is not the key. Why? Because real-life experience, shows cashback rewards especially when automatically accumulating in an account, are not very motivational to consumers.
Cash is fungible and generic; it has no “trophy value” like a branded loyalty currency. Over time, consumers don’t even notice it.
From a brand’s perspective, cashback rebates do not assure that customers will spend the cash they receive with the brand or a partner. Once cash is returned, the consumer can spend it anywhere else, which cuts off the cycle of profit for the brand in question.
This is not all to say that cashback rewards are ineffective. cashback loyalty programs can benefit consumers during these pandemic-riddled times. However, it takes more than cash from brands to build trust and loyalty with their customers.
Loyalty programs today should be extremely personalized. Different for every customer. Everyone is different and programs should address that uniqueness and empower customers to redeem their points the way they like. From a trip to Argentina, to a Halloween custom or even a new TV, differentiation and personalization is the key.
Of course this may sound extremely tricky and challenging but the world today demands it and most important your customers’ demand it.
Brands should provide unique, customized experiences for their customers. Empowering their customers to take control of their data, and compensate them well for sharing it. Brands that reward their customers from more than just buying stuff; for community engagement, shared reviews and opinions, and other non-transactional features.
Lastly, the brands who have a “customer first” mindset, the ones who treat their customers with respect and create mutually beneficial partnerships. These are the brands who will truly be loyalty-king.
