Cashback promotions are one of the most recognised promotional mechanisms out there – ask any high-street shopper or business procurement department what a promotion means to them and there’s a high chance they will mention cashback.

By simply offering the consumer the chance to claim a pre-determined amount of money after purchasing the promotional product, this mechanism ensures brands don’t have to discount their products; thereby ensuring they are not undervaluing their proposition, whilst still providing a financial incentive to their buyers.

As with all mechanics, cashback promotions still have their pro’s and con’s. Read on to understand how cashback can work hard for you, and whether they’re suitable for your brand and promotion.

 

Pro’s…

  • Cashback promotions are relatively low cost to deploy, requiring only print & design costs to be either incorporated into your packaging or made into a leaflet to be handed out at a point of purchase. Of course, this can be supported by more marketing where relevant, such as printed, TV or web adverts, posters, POS stands and more.
  • Consumers claiming cashback are required to provide data in order for the claim to be processed. This is a great opportunity to ask a few more questions that will give you the insight you need to continually improve your proposition.
  • Cashback promotions are understood and accessible to all audience types, from young children to mature adults, and the mechanism can be applied to almost all markets.
  • Unlike a flat discount on the product, which may risk devaluing its reputation and results in reduced basket spend, a cashback promotion increases sales volume whilst protecting your profit margins due to non-redemptions.
  • Setting time limits on the cashback period will increase urgency and give consumers a reason to buy now!
  • The cashback mechanism is the safest mechanism if you’re worried about brand reputation impact – unlike other mechanisms where you may join forces with outside brands to provide prizes, this mechanism is all about you so there is no risk of consumers not valuing their prize.

 

Cons…

  • This mechanism is extremely popular, so may not stand out from the crowd as much as other mechanisms. However, this can be counteracted by offering a well-proportioned cashback
  • Cashback values need to be set carefully to ensure that even after the cashback value is deducted from the sale value, revenue is still guaranteed for each purchase. This shouldn’t be too hard for most brands however, as of course profit margins are normally closely tracked.
  • This is one of the harder mechanisms to calculate redemption rates for, due to fast our changing economic climate… however, it is not impossible. Make sure you work with a sales promotion agency, who can use their vast database of industry knowledge to provide you with up-to-date and realistic promotional information.
  • Ensure the value is reasonable – for example, if your product is worth £18 then 25p off won’t cut it! However, £15 may be open to fraudulent use as it covers most of the purchase cost. Ensure your coupon value is proportionate to the product and competitive position.

 

Case Studies

 

BOSE

To increase sale volumes, Bose offered cashback for all consumers who traded in their old sound system for a Bose CineMate 1SR valued at €/£1,400.

After the CineMate 1SR was purchased, buyers were encouraged to fill in an online form via a dedicated 5-language microsite, then trade their old system in at a dedicated retailer, after which they would receive a BACS transfer of €/£139 – almost 10% of the products face value!

Mando sourced the trade-in partner network, ensured the EU WEE Directive for electrical waste was met, and covered the risk on the the value of cashbacks via a fixed fee arrangement.