Cashbacks are great for pushing purchase. But can they really build loyalty?

Rebates have become a commonplace in eCommerce platforms. Last month, Shopback, one of the pioneers in the space of cash back services, sent headlines spiralling as Bloomberg reported its ambition to attain US$150 million in funding to expand its services.

The services, which started up in 2014, currently works with brands such as adidas, lululemon, NTUC FairPrice, Pedro, Pomelo, as well as platforms such as foodpanda, Lazada, Shopee and Traveloka, and is backed by Temasek and as investors such as Softbank and Rakuten. While an early mover in the space of cash back in areas such as food, fashion, travel amongst others, today Shopback faces intense competition as eCommerce giants such as Lazada and Shopee make headway into the space.

In fact, just last month Alibaba-backed Lazada Singapore launched a rebate scheme handing Singapore shoppers 9% cashback on eligible purchases for the rest of the year. The rebate scheme taps on a SG$50 million pool to support Singapore shoppers, via cashback and other platform mechanisms. Meanwhile, SEA-owned Shopee also offers seasonal rebate vouchers with merchant partners and has a slew of cashback services for the month of March alone.

With consumers now becoming more conscious about their disposable incomes, it is understandable why rebates might be an effective way of ensuring loyalty. As early as 2018, a study by Aberdeen Group, found that companies that offer consumers reward-based promotions to drive engagement and purchases are more likely to experience greater marketing promotion success and profitability versus those that offer discount-based promotions. Meanwhile, a 2020 study by payments company Dosh in the US found that 75% of Millennials would be willing to download cashback apps, and 74% of Gen Z will spend more if they can instantly get 5% of their cash back. The service can also inspire loyalty as approximately 70% of Millennials and Gen Z say instant cashback makes them feel good not just about themselves, but also the store that gave them back the cashback.

Clearly, the benefits go far in the world of loyalty. Speaking to MARKETING-INTERACTIVE about the need for rebates, Fern Nannaphat, country general manager, ShopBack Singapore said rebates are major conversion drivers in marketing and rebates drive stronger conversion and give more value to customers. 

In addition to motivating purchase and driving loyalty in the longer term, leveraging on rebates provides marketers the opportunity to engage customers more frequently with campaigns that rewards customers with savings on their shopping. “Delighting customers with the instant gratification and real value of direct cashback is key to ShopBack's success in utilising rebates to as a marketing tool for our merchant partners the past seven years,” said Nannaphat. She added that a good rebate programme ”needs to be delightful and rewarding” at the same time.

Commenting on its latest move into the rebates space, Lazada said that implementing rebates was its way of providing relief to those anticipating the pinch of rising inflation and its impact on the price of everyday goods and services. “Rebates are a timely way for shoppers to accrue rewards, helping to offset their purchases, and save money in the long run,” Lazada’s spokesperson explained.  

Going beyond rebates

While rebates are no doubt appealing to consumers in the midst of purchase, do they actually convert transactional buyers to long term brand advocates? According to Nannaphat, the whole idea of loyalty in the eCommerce space is about understanding a customer's value over a limited time period, instead of the traditional long-term approach.

“It is about how else can we increase engagement with our users, and ensure they use out platform as frequently as possible and in turn increasing the likelihood of becoming a loyal customer,” she explained.  This approach is very much different to taking the longer-term view of determining a customer's complete lifetime value, which often leads to maximising acquisition costs and results in minimal resources for engagement. 

As such, Nannaphat shared two key strategies it adopts to convert transactional shoppers into loyal customers. The first is to increase the frequency of engagement and achieve personalisation at scale. Brands can increase the frequency of engagement with customers by creating multiple touch-points and opportunities to engage an existing user with other relevant ways to be rewarded.

The second is personalisation at scale goes deeper into understanding users’ behaviours and preferences based on their geo-location, past interactions and merchant deals they follow. Brands can then tap on these insights to showcase content that's relevant.  

Building a loyalty programme for the future

Customer loyalty is a key pillar for a brand's eCommerce strategy, with the ability to turn one-time shoppers into lifelong advocates of the brand. According to a Shopee spokesperson, with consumers now spending a larger part of their shopping journey online, another way brands can deepen relationships and connect more meaningfully with their customers online through various ways such as a strong CRM programme. "We have seen the efforts pay off when brands invest into cultivating valuable lifetime customers. We found that shoppers who are brand members on Shopee Mall Brand Memberships tend to spend twice as much, and have better conversion than non-members. They also tend to be repeat shoppers," the spokesperson said.

Meanwhile,  Daniel Hagos, RVP revenue and managing director APJ and GC, Emarsys, added that rebates can be a good way to keep customers engaged, but they shouldn’t be the only loyalty tool in brands' arsenal. He said, "The question should be: if the rebates stop, is there a compelling reason for your target customer to choose you over a competitor of yours? If not, what can you do that isn’t a rebate?"

One way brands can build on loyalty in the eCommerce space is to focus on an incentive that is "high value to the customer, but relatively low cost to the business". With more channels than ever and more opportunities to keep customers engaged, brands should look past offering shoppers with dollar discounts, and focus more on unique experiences. These include limited edition gifts and even celebrating shoppers' styles on its social media platforms. 

While some businesses with longer product lifecycles may focus on overall revenue, Hagos said that customer retention rate is the best metric for brands to see if they have stickiness in their customers. Shoppers' email behaviour, such as opens and clicks, remain a good way of seeing how engaged customers are, he added. 

Photo courtesy: 123RF

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