Benefits of Using CashBack and a Loyalty Program
Ideas / Inspiration, Automations

Benefits of Using CashBack and a Loyalty Program

Bre Fairley
August 29, 2023
Reading Time: 6 minutes

Earlier this year we acquired Fondue, the first CashBack solution for ecommerce. Since then, we’ve heard plenty of questions about employing loyalty programs in tandem with offering CashBack. For example, we’ve been asked, “I already offer ‘cash back’ with my loyalty program, how is CashBack different?” We’ve also heard a common concern that customers will be confused if you add CashBack into the equation (spoiler- they won’t be!). Brands are worried their customers may not understand when to use points and when to use CashBack.

Using CashBack offers and a loyalty program are proven to be effective tools to help you increase long term retention. At Postscript, we’re so bullish on CashBack and its benefits as the coupon alternative that we believe there is no scenario where CashBack shouldn't be a component of your brand’s retention and conversion strategy. The icing on the cake is adding a loyalty program on top of CashBack to continue nurturing newly acquired customers.

It’s important to note that the balance of CashBack and a loyalty program can vary based on your industry, goals, average order value, and more. In this article, we’ll debunk some of the most common misconceptions about using a loyalty program in tandem with CashBack. We’ll also lay out the most important details needed to understand just how CashBack can improve conversions, boost retention, and compound value from your loyalty program.

Debunked: Common misconceptions about CashBack and loyalty programs.

First, let’s dive into some of those common misconceptions we’ve heard, and then we’ll share some expert tips on how to best employ CashBack alongside your loyalty program.

We already offer ‘cash back’ with our loyalty program.  

If this is a sentiment you share, it’s likely that you offer “cash back” to your customers in the form of a gift card to your store or discount code for a set amount. Loyalty programs that offer “cash back” usually allow customers to exchange the points they’ve earned for a gift card to your brand or for a discount. Remember: one of the biggest perks of CashBack is that it protects your bottom line whereas offering steep discounts– even as a loyalty program perk– can cut up to 30% off your top line.

This ‘cash back’ is different from the one-word-capital-C-capital-B, CashBack. Ultimately the consumer doesn’t have the ability to choose CashBack in the form of a gift card to your brand OR as actual cash in the form of a PrepaidVisa that they can use anywhere.

Having the ability to choose your CashBack produces one of three scenarios for the brand:

  • The customer chooses a gift card back to the brand. Approximately 20% of customers choose a gift card back to the brand. Many brands reward repeat purchasers with an option to exchange earned loyalty points for a gift card back to the brand. This perk is especially effective for repeat customers who are further in their customer journey. Offering a gift card option via CashBack is effective for capturing leads and converting them into first time buyers. Doubling down on loyalty program gift cards and CashBack can help you improve the experience across the customer lifecycle–from lead to loyalist–while putting money back into your ecosystem.

  • The customer chooses a PrepaidVisa. Approximately 30% of customers choose this option. This is the only exposure to your brand’s bottomline as opposed to offering steep discounts in exchange for earned loyalty points.

  • The customer does nothing with their CashBack offer. Approximately 50% of customers do nothing with their CashBack and simply pay full price, allowing you to save on the cost of customer acquisition or retention where you may have paid in the form of loyalty points.

Offering CashBack and loyalty points will confuse customers.

When interviewing Obvi earlier this year about their experience implementing CashBack, this was a concern even they shared.

However, as Obvi tested out CashBack, they saw that it complimented their rewards program nicely. Ash Melwani, Co-founder and CMO of Obvi, said, “If you look at it from a customer experience, they have their points and they are getting more points by using CashBack.” Melwani went on to explain that if a customer applies a 20% off coupon on a $100 product, they’ll pay $80 for the product and receive points on an $80 purchase. When customers purchase the product at the listed $100, they are receiving $100 worth of points (Obvi case study).

Obvi also uses their SMS program as a source of receiving direct feedback from their customers. For example, sometimes they’ll ask their subscriber base what new flavors they’d like to see next. Given this culture and community of feedback, Obvi has been open to hearing from their customers about their experience with CashBack. “They’ll let us know if something is confusing and we haven’t heard anything yet,” Melwani said.

Acquire more subscribers, faster.

Whew. Now that we’ve cleared that up - let’s dive into how you can use CashBack to gain more subscribers that you can convert into brand loyalists.

This is one of the things CashBack does best. The Obvi team originally offered 15% off with coupons so they decided to test a 20% CashBack offer. After A/B testing the two offers, the Obvi team saw a 10% lift in opt-in rate on their popup and a 25% increase in conversion rate after implementing CashBack. Not only did the opt in rate increase by 10%, but Obvi also acquired customers that were willing to pay full price upfront.

In other words, CashBack will set you up to acquire high-quality customers. This is the ideal customer to nurture and retain with a loyalty program– all while delivering even more value to your customers with both CashBack and loyalty points (more on that later 😉).

Topicals loyalty program SMS example

⭐ PRO TIP: Consider building a post purchase automation flow that lets new customers know that they've earned a certain amount of loyalty points if they sign up for your loyalty program. This offers even more value to your customers, encourages them to join your loyalty program, and incentivizes them to apply their perks on their next order - turning them into repeat purchasers.

Using CashBack to boost your conversion rate.

It’s difficult to discuss how CashBack affects acquisition rate without mentioning its effects to a correlating metric– conversion rates. 

Leather goods store, Popov Leather, experienced an 80% revenue increase after implementing CashBack. “Because some customers opt for store credit or choose not to redeem at all, the overall discounting percentage ends up running around 9% (not 20%). CashBack allows us to discount more aggressively, but at the same time more profitably,” said Ryan Popoff, Founder & CEO (Popov Leather case study).

Offering CashBack with the option of a PrepaidVisa is a great incentive for first-time buyers who are not sure if they will become loyal fans of your brand - and thus not sure yet if they want to earn points through your loyalty program. And the data backs it up. We know that CashBack boosts welcome series revenue by over 37% and increases contribution margin up to 5%. Birthdate Co. even reported a 296% lift in conversions on their welcome series flow (Birthdate Co. case study).

CashBack allows you to convert your subscribers into customers, while setting the foundation to convert one-time buyers into raving fans with a loyalty program.

Leveraging both CashBack and a loyalty program to nurture into your loyalty program.

Story time! A lead wanders to your site and sees an offer for CashBack. They purchase an item at full price (high-quality customer, secured). 

They opt in to the gift card option back to your brand as 20% of customers offered the CashBack incentive do.

They make their next purchase using the gift card they opted into with CashBack. BTW, 75% of customers who use a gift card purchase a product that costs more than the gift card amount.

The lead has been converted into a two-time purchaser. As many brands in the ecommerce space know, once a buyer purchases for a second time, the chances of them purchasing a third or fourth are dramatically higher, making them an excellent candidate for your loyalty program.

By providing value at various parts of the customer journey, you can nurture a shopper from being a first time buyer into a repeat purchaser– maximizing customer LTV. CashBack is highly effective for securing those first and second time purchases from customers. Once you’ve got customers back for their second purchase, you’ve got an opportunity to double down on getting them into your loyalty program to grow lifelong customers.

⭐ PRO TIP: Consider employing a post purchase automation flow. In your first message, invite them to your loyalty club and showcase the potential points they’ve earned if they sign up for your loyalty program. You may even consider taking advantage of Postscript’s incoming MMS functionality and requesting user-generated content (UGC) from your recent purchasers. If they text you back UGC for more loyalty points, you have the opportunity to collect UGC that can be repurposed and you’ve converted a repeat customer into a loyalty program member. A few days later, while their new purchase is still top of mind, consider sending a reminder of earned loyalty points if they sign up to grow lifelong customers. 

Groove Life UGC SMS Example

We're convinced that CashBack should always play a role in your brand's retention and conversion strategy. However, if you know Postscript, you know we’d never recommend a one-size-fits-all strategy. 

Keep in mind that the dance between CashBack and a loyalty program will look differently from brand to brand, depending on brand goals (for example, leaning into loyalty program initiatives if your goal is to gain more brand loyalists), average order value, industry, and even the time of year. One thing we know for certain– employing both your loyalty program and CashBack in tandem is a power move.

Bre Fairley
Bre Fairley
Product Marketing Manager
Bre comes from a world of technical support and customer education that's led her to technical writing, customer marketing, and product marketing. When she's AFK, you can find Bre backpacking in the Rockies or throwing her club and kicking the ball off the tee in a friendly game of golf.