When someone says us about cashback offer, we automatically listen to him carefully because all of us are fascinated by cashback offers. Today, we are going to discuss what is cashback and why do companies offer it? Is it beneficial for companies or companies are in loss by running cashback programs? How cashback works for a seller? How a customer is attracted by cashback programs? How cashback offers are beneficial for consumers? How cashback differs from discount and how it is better than discount? Today, we will clear all our doubts regarding cashback and will learn how cashback work and how it is beneficial for both the seller and the consumer. We will see how cashback is a win-win situation for the seller and the consumer. So, let’s start.
What is cashback
“an offer of money as a present that is made by some banks, companies selling cars, etc. in order to persuade customers to do business with them”
“Cashback programs are run to incentivize new customer acquisition or to increase the frequency of transaction among existing customers,” said Shankar Nath Senior vice-president of One97 Communications, the parent company of Paytm.
As the name suggests, cashback is when you get some money back as incentive or reward for your spending. Cashback is commonly used by credit card. When you pay by your credit card, you get cash back based on certain conditions.
For example, if you have a credit card of Bajaj Finance, and they are offering you 10% cashback on buying Refrigerator. When you will buy a refrigerator by this credit card, you will get 10% cashback in your card. This cashback will be credited to your card and you will be able to spend it to buy something else.
Double Your Profit With CASHBACK Programs
To understand it clearly let’s see a situation. In this situation and, we assume that there are two sellers who buy the same product with same cost price and sell the same product in the same market.
Chat
| Ram | Mohan | |
| Cost price/product | ₹80 | ₹80 |
| Selling price/product | ₹120 | ₹110 |
| Total number of selling. | ₹50 | ₹100 |
| Total cost price | ₹4000 | ₹8000 |
| Total selling price. | ₹6000 | ₹11,000 |
| Total profit. | ₹2000 | ₹3000 |
CASHBACK: An Incredibly Easy Method That Works For All
“Cashback promotions bump up mobile recharge orders by 15-20% and can more than double e-commerce sale”.
✓ A win-win situation for seller and consumer.
✓ It drives customer lifetime value
✓ For startups, cashback attract customers.
✓ It reinforces consumption cycle, resulting in more spending.
✓ Positive impression on customers
✓ Customers will be easily convinced to buy a product
✓ Customers will be easily attracted
✓ Due to positive impression, a customer will lead many other customers to your shop.
✓ Due to cashback, there will be marketing of your shop without any effort.
✓ Due to the crowd in your shop, many new customers will attract to you.
Benefits of cashback
(1) Beneficial for both seller and buyer
It is beneficial for customers however it is also beneficial for seller. Basically, it is an incentive for customers. If customers have a purchase in mind as well as they need cash, and you offer them cashback. They are convinced to buy your products instead to go another shop. It will boost your selling and will make a positive impression and relationship with the customer. Thus, in the future, if they will need any product, they will visit your shop.
(2) Boost selling
Cashback will boost your selling. Because of cashback offers, many people will visit your shop. Thus, it will almost double your selling.
(3) Higher profit
Because there is a continuous increase in your selling. As result, it will give you high profit.
(4) Free marketing
Due to cashback offers, there will be always a crowd in your shop. Many new customers will attract to you. These customers will share other people about your shop and offer. Thus, there will be free marketing of your shop.
(5) Attract customers for new startups
In the initial stage of a startup, people don’t believe, and they are not attracted. They used to go to familiar and old shops to fulfill their needs. Cashback will play a vital role to attract those customers to your startups.
(6) Cashback for common people
Most people are not too attached to a particular brand. They buy products of any brand which suits them. They buy those products which are cheap in price and good in productivity. If you giving cashback offers, automatically those people will be attracted to your shop.
Cashback v/s discount
Customers are more attracted with cash back than discounts because it plays with the psychology of customers. Thus, companies get more sell and profit in business
Let’s take an example
If a company gives 50% cashback in a product of ₹300 and puts a cap of 50% cash back up to 150.
Now, a customer buys the product, and he avails a cashback of 150 in his wallet.
But he cannot redeem the cashback. He has to buy another product to redeem the cashback. Now he is buying another product of ₹300 and pays 150 from his pocket. It’s means that to get 150 cashback, a customer spent ₹600. That is 25% of the total amount.
If the same company gives 50% discount, a customer will buy a product of ₹300 in ₹150. That is 50% of the total amount.
Thus, we can say that 25% cashback is equal to 50% discount.
In the same way 100% cashback is nothing but 50% discount. Because if we buy a product of 100 and avail cashback of ₹100. We have to buy another product of ₹100. Now the total selling is of ₹200.
The biggest problem with cashback is this that we are supposed to buy another product to avail it.
Thus, it becomes a chain. You buy a product and gets cashback. Then you have to buy another product to avail the cashback and get more cashback. It becomes a continuous process and results in higher selling.
Conclusion
So, we have discussed cashback and how it attracts customers. How customers are continuous to spend for your product. We have also seen that cashback is more beneficial than discounts. As well as cashback plays a vital role to market your startups and new brands. In simple, it is a win-win situation for both buyer and seller.
