When people search for a product online, what they notice other than the price is the discount or rewards that the website is offering. Off-late rewards in the form of loyalty programs or cashback are becoming popular. A critical question that comes up in the discussion of discounts and rewards is what is better?
There is no clear cut answer to the question because it depends on the goal a business is trying to achieve while giving out discounts/rewards. But in the current scenario, cashback is the winner.
Discount vs Cashback
| Discount | Cashback |
| 1. Discounts give instant gratification as it is offered upfront. | 1. Cashback gives a slightly delayed gratification as it is given after purchase. |
| 2. Discount is applied only on the product being purchased. | 2. Cashback can be used for other products. |
| 3. Since the discount is applied on the same product there is no motivation for customers to check out other products. | 3. To use the cashback, customers surf other products, and may purchase something they generally would not have without the added reward. |
| 4. Best for customers looking for one-time purchase | 4. Best for long term customers. |
| 5. Discount helps in finding new customers. | 6. Cashback helps retain customers as it ties them for future purchases. |
| 6. Helps in an immediate increment of sales. | 6. Helps in future sales. |
| 7. High discounts can often give a negative impression. | 7. Cashbacks create a positive impression on the buyer. |
If the goal is to increase sales or get new customers, go for discounts, but if the goal is long-term retention and a loyal customer base, go for cashback.
Advantage of cashback
- Cashback is like money that customer can use for future purchases
- Cashbacks lure the customers to come back to the store to use the rewards they earned
- Cashbacks helps form a loyal customer base
- Cashback Is Cash Forward: Delaying a Discount to Increase Future Spending
- Cashback can be used to simplify refunding returns/cancelled orders
Flits store credit program is the perfect form of cashback that you can give to the customers. Credits on first order or x order number is the ideal way to make the customer come back in the future.
Flits store credit as cashback
Flits gives a store credit program that has a unique module. Merchants can reward their customers at various steps. Best part about Flits store credit is that 1 credit is equal to the currency that the store uses. This means a store that uses dollars as a currency can give 10 credits if they wish to reward their customer with 10 dollars.
Many stores give credits on sign-ups, subscriptions, birthday credits, credits on reviews, credits on orders, etc.
Below is the screenshot of a Shopify Plus store that offers rewards on first and subsequent orders. Read about other methods to use store credits here.
Credit on the first order nudges the customer to purchase again. Merchants can create an endless cycle of purchases by rewarding customers after every purchase or on specific purchases.
Benefits of using Flits store credits as cashback-
- Store credits give a higher value of satisfaction than discounts or points as they are equivalent to the currency.
- Store credits can be used right after the customer receives them or at any later date (unless the store decides to set an expiration date to create a sense of urgency).
- Credits are measurable in the sense that a customer in the U.S. who has 20 credits knows that the value of 20 credits is 20 dollars.
- After first order, credits can help initiate first sale by a new customer, and the credit on the first order can make the new customer a repeat one.
- Merchants can set multiple credits for different order numbers, which is a milestone credit.
- Merchants can also reward customers for buying certain products with product tag credits.
Apart from cashback, point system is also popular, but points system often feels dissatisfactory to the customers. The main issue with points system is the conversion rate. For example: 100 points are equal to 1 Rupee/1 dollar, customer looks at the earned points and when the conversion rate is too low it decreases the satisfaction of using those points. When it comes to credits, customer knows that it will be converted to same amount of currency they use.
There is no doubt that cashbacks are better than discounts, cashbacks achieve multiple goals. If you don’t reward your customers with cashback you are missing out on a chance to make them come back to your store. Cashback will also help get word of mouth referrals and thus leading to more sales.
Also read: How to calculate the value of store credits given to customers
