It's not been a great few months for the global economy. The virus and the resultant lockdown measures to contain it meant spending plunged to historic lows and economies unsurprisingly shrank.
In the UK, that translated to a 20.4% reduction in GDP in August compared to Q1, sinking the economy into its first recession in 11 years since its recovery from the 2008 crisis.
A recession is defined as two consecutive quarters of economic decline. Considering the global severity of the virus, additional recessions seem inevitable, especially as governments begin to suggest further lockdowns might be necessary to contain a potential second wave.
So, what are you as a business owner supposed to do in the wake of this news? Is there anything that can be done, and to what extent will these efforts produce meaningful results?
Well, as a business researcher and author Max McKeown says, "All failure is failure to adapt, and all success is successful adaptation".
This situation is no different, and a potentially invaluable tool you can utilise to get through the worst of it is the tried and true Cashback Programme.
What are 'Cashback Programmes'?
You have probably taken part in a Cashback schemes before, or at least heard of it.
They come in two forms.
One, as convenience measures for a customer wanting to receive their own cash back from a merchant. And two, as loyalty initiatives where customers can earn as they spend.
The first, "cashback at the till", sees the merchant simply acting as a kind of ATM. When making a purchase, the customer can choose to add an additional sum of money to the card transaction and receive the sum back in the form of cash.
This doesn't build much value to your business, specially when giving cash out during a pandemic is a bad idea.
However, a far more value-producing version of the Cashback Campaigns, and our focus for today's blog post, is the second kind.
A Cashback Campaign is a merchant promotion that allows the customer to earn money back on their purchases.
Upon signing up to the programme, the customer can receive a sum of money directly back to their bank accounts after every purchase at the store running the campaign or other affiliated stores.
The sum is usually calculated as a percentage of the total purchase amount.
For example, a national bus transit company may offer 10% cashback on all ticket purchases. For a £30 ticket, the customer will receive £3 back.
From the customer's perspective, there is a stronger incentive to stick with the company offering the scheme, as with competitors, they will continue to pay full price for their tickets, but with the cashback company, they are essentially receiving a kind of 'discount' every time they purchase.
Merchants can run this kind of closed promotion or join a network of operators participating in one collective programme. In this arrangement, the customer earns cash on purchases from a wide variety of enlisted stores, and it goes to an account where the sum can be spent at any one of the registered stores instead of one place exclusively.
The advantage of this method for the merchant is gaining access to an established network of active users earning multiplied cashback sums. You also benefit from increased visibility, as your store will be advertised within the network as an eligible place to spend the cash received.
And keep in mind that a minor disadvantage of the discount on the cashback offers are more than made up with the positive effects of the network and gained customer loyalty.
Cashback Programmes – Facts and Figures
Cashback campaigns are a well-established business tool that have only become more popular over the years.
A recent report from the Global Cashback Industry research team revealed the following facts:
- The size of the global cashback industry is estimated to be greater than $108 billion
- Cashback promotions generate an average 3.4 times increase in conversion and +46% increase in average order value (AOV)
- Nearly 20% of consumers said they made a purchase or increased the value of a purchase because of a cashback offer
- 'Online performance marketing' (cashback, coupons, price comparison, etc) generates +10% of e-commerce sales
- One leading UK cashback operator facilitated over $1 billion in sales for 4,300+ retailers and merchants
It's clear that cashback is increasingly popular, and for a good reason. But its relevance only gets stronger in times of economic hardship, such as now.
The Appeal of Cashback Campaigns During A Recession
In scanning the mind-bogglingly large marketplace for the very best vendors of a particular good, customers are more empowered than they have ever been.
The internet, and especially mobile technology, has given customers a reason never to go with whatever's immediately available when deciding to spend their hard-earned cash – whether at home or on-the-go.
Ask yourself, how big does a purchase have to be before you personally decide to shop around for a better price, more value, better incentives?
For most of us, even buying something as simple as a coffee we will search for a place where there is a registered loyalty program, so we can earn loyalty stamps, or receive much-needed cashback on purchases.
As disposable income continues to be depressed by the global situation, your customers will do everything they can to maximise the value of each penny they spend.
A Cashback Campaign is a sure-fire way not only to bring customers to your store over your competition, but also to make them stay there. It's simply the most money-conscious decision to make at a time like this.
After all, while spending has undoubtedly reduced, it hasn't and will not stop.
Whether you're a store offering goods essential to everyday living, or one providing customers with products that make their lives more enjoyable, there are always motivated buyers out there.
And suppose they are motivated but restricted by cash constraints. In that case, it's possible that earning cashback will be enough for them to commit and get the things that they've been wishing for from your store.
Remember, all failure is failure to adapt. If your store is struggling at this time, we can think of no better way to creating new and loyal customers than a well-considered Cashback Campaign.
How to Start Your Cashback Campaign
There are certain tips and best practices to running a Cashback Campaign that is guaranteed to ensure its success.
We spoke about this in more detail in this article, but the key takeaways include offering tangible value, running effective promotions for the campaign, and making it simple and easy to access.
A quicker route to a truly effective Cashback Campaign is simply joining the OMG network.
We've been busy developing a platform that enables business owners to create, manage, and promote their cashback campaigns with ease.
We made doing this accessible for businesses of all sizes, from startups to internationally recognisable brands.
To find out more, visit our partners' page, sign up, and a member of our team will get in touch to get you started.