Why dono major brands practice cashback anymore? Why are cashback systems struggling to win over customers outside the retail sector? Customer experience, loyalty, results: find out how to move beyond the only 90s trend that hasn't come back into fashion.
The definition of the kitty loyalty program is simple. At each checkout, whether at the point of sale or on an e-commerce site, a [.is--yellow-highlight]percentage of the invoiced amount is returned to the customer[.is--yellow-highlight].
This is a transactional loyalty lever: the money (generally 1% to 3%) goes into a kitty, associated with the customer's loyalty card. After 10 years of loyalty, the customer can freely dispose of the sum of 2€42, to be used every other Thursday between 2pm and 6pm!
We're being a little disingenuous, but kitty programs almost always have complicated terms. Even when it comes to earning commissions on e-commerce sites. They're called "cashback", not to be confused with the (highly regulated) practice of withdrawing cash in store with a bank card. In short, cashback programs are just another way of saying thank you to loyal customers.
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This is the most common complaint when we ask customers what they think. The amounts collected are often derisory. Only a few cents are earned, as stores already have low margins to attract more customers...
The cashback percentage is calculated on the basis of a commission that cashback operators negotiate with merchants. Inevitably, by adding intermediaries, the cashback rate falls... Often between 1% and 3% in physical stores. It can rise to 7% or 8% in e-commerce, but at the cost of a customer experience completely degraded by the steps involved.
Why won't you ever see a sign saying "2% discount on three departments in the store"? It's far too small to be attractive! But that's exactly what you get with cagnottage. It's presented in a different way, but loyalty card programs are far from being the most generous. Which explains why they don't win the loyalty of many customers over the long term...
It's not just the amount of money that's a problem. Pay-as-you-go systems are deliberately complex. At the point of sale, you'll need to carry your loyalty card with you at all times. Or remember your loyalty program: not so easy, when the average customer is a member of a total of 16 loyalty programs in the USA.
Often, you'll also be asked for a "decagnotter" code. This code, associated with a cagnotte card, allows you to use your credit at the checkout. But not when you want to! There's often a time limit, or strict time slots, beyond which you can't access your kitty. All this for a few euros in the best of cases: the abandonment rate of loyalty systems is the highest of all loyalty programs.
Behind these criticisms, the real reason why nobody believes in cashback anymore is the following. Cashback systems foster false loyalty, based 100% on economic interest and sacrificing the customer experience.
By their very nature, these loyalty programs have little stickiness: for a better cashback rate, you can switch to the store across the street. By sacrificing their margins for so little, brands are the big losers in the system. And to keep customers in the program, access to the cashback amounts is made more complex, leading to customer fatigue.
If there's one sector that's resisting the disgrace of kitty-punching, it's supermarkets... Why? Probably because cagnottage applies to an incompressible food budget, and customers' options are reduced by geographical proximity.
Kicking in supermarkets also helps push private labels. It is successful with some customers. On the other hand, in e-commerce or convenience stores, it represents a false solution to a real problem: the volatility of customers looking for the best prices. And who know that they won't find them in the kitty...
Of all the major brands that have perfected the art of building loyalty, one thing they all have in common is that they don't all use prize-winning. This is normal: loyalty has long since moved beyond the strictly transactional aspect, towards experiential and emotional loyalty. Basically, cashback is the only thing from the 90s that hasn't come back into fashion.
More recently, loyalty expert Howard Schneider told Forbes : "Smart companies go beyond rewards programs to satisfy and retain their customers. They seek to solve customers' problems, and ensure that every interaction brings them value".
More than a random price advantage, it's a brand's customer experience (and lifestyle) that makes people want to follow it.
We've moved on to experiential loyalty, where a loyalty program generates engagement and emotion through its rewards and usage. An experience is remembered far longer than a few pennies...
Cashback is a false solution to a real challenge for retailers: building customer loyalty has never been so important! Better than cashback, rely on real loyalty programs that generate effective, lasting relationships.
For example, those of the MAPP restaurants, which have signed up over 360 customers in 3 weeks, and are getting over 40 checkins a dayfrom them... How? [.is--yellow-highlight]With a loyalty program focused on the customer experience![.is--yellow-highlight]
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