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What is cashback?
Cashback is a mechanism for partial refunds for purchases made. This refund can be in the form of money, bonuses, points, or miles, making it attractive for consumers. Cashback systems are actively implemented by banks and commercial companies providing goods and services, as well as through specialized cashback services that help users recover part of their spending.
Benefits of cashback
All participants in the cashback system have their advantages.
- Banks: Financial institutions earn a commission for services provided between sellers and buyers. The more transactions customers make, the more income the bank receives. Cashback becomes a tool for attracting new customers and retaining existing ones.
- Cashback services: These are online platforms that offer users various deals from online stores. They earn through commissions from sellers for advertising and attracting customers.
- Sellers: Businesses use cashback as a marketing tool to attract new customers and increase sales volume. Loyalty programs help reduce customer churn and increase the average sale amount.
- Buyers: For them, cashback is an opportunity to get back part of their expenses, saving on future purchases. Cashback can be used as a discount on subsequent orders.
Types of cashback
There are several main types of cashback, each with its own characteristics:
- Money: Refunds are made in monetary equivalent. The refund amount can range from a fixed rate to multi-tiered systems depending on the volume of purchases.
- Points (bonuses): These funds can be exchanged for goods or services, as well as converted into money. For example, 1 point may equal 1 ruble.
- Miles: Cashback in the form of miles, which can be used to purchase airline tickets, book hotels, and other services, particularly convenient for frequent travelers.
- Goods and services: In some cases, cashback can be expressed in the form of additional goods or services provided at no extra charge.
How to implement a cashback system
Implementing a cashback system is often part of a broader loyalty program. This process includes several stages:
- Defining goals: It is necessary to understand what tasks the system should solve and how relevant it is at this stage of the company's operations.
- Studying the audience: It is important to understand the needs of the target audience and what conditions for refunds will be attractive to them.
- Thinking through the terms: The terms should be clear to both users and employees. Possible benefits should be carefully calculated, and categories for providing additional discounts should be defined.
- Engaging customers: It is essential to actively promote offers through all available channels, including the website, social media, and email newsletters.
- Analyzing effectiveness: Regularly monitor the use of bonuses and analyze how the cashback system affects the company's profits.