Cashbacks – What are they and why they’re a smart tool to help you pay less!
When’s the last time you got given cash back for buying a product or service? Even cashback on an already discounted product or service?
If you’re not a subscriber of Shopback or Cashrewards, it’s unlikely you’ve ever been given cash back for your regular shopping. Now this is all changing. ‘Cashback’ providers are becoming a hugely popular way to attract customers and keep them.
Traditionally this has been the realm of points schemes. However it now appears that consumers don’t value points systems very highly, which isn’t particularly surprising given reports that for some rewards schemes you need to be spending as much as $52,000 to redeem a toaster costing $129.
Cashback is the new king (or always has been). Shopback and Cashrewards are cashback businesses that redistribute part of their referral fee to the lead (person) they’re referring to a particular business.
Think of it like this. ‘Business A’ would like to attract more customers. They have a marketing budget of $100 for the day. They then choose to pay that whole $100 to Facebook for access to their audience. ‘Consumer A’ on Facebook sees the Facebook ad, likes the product and pays full price for it. ‘Business A’ gets a customer, Facebook gets $100, ‘Consumer A’ pays full price.
However ‘Business A’ may decide to spend their budget with a new cashback business. They give ‘Cashback business A’ the $100, ‘Cashback business A’ takes a % of this fee for themselves but decides to offer part of the $100 to ‘Consumer A’ (on average 7%). ‘Consumer A’, who is a part of ‘Cashback Business A’s’ audience sees the product they would like, likes the product and pays full price for it BUT gets a % of the $100 to themselves. ‘Business A’ gets a customer, Cashback business A’ gets a fee, ‘Consumer A’ gets cashback and effectively does not pay full price.
Cashback businesses are great marketing tools for businesses as well as great ways for consumers to receive discounts. They also allow businesses to effectively offer discounts without much implementation on their side, giving them an advantage over competitors with bigger budgets for tech upgrades.
What’s becoming even more interesting is the move of some credit card companies moving to cashback models over points. The future of fintech is strong, and we hope to see more proconsumer innovation coming down the line!