In challenging times, when the cost of living is rising, and consumers’ spending on non-essential items is dropping, retailers may be feeling the strain. Some may be quick to slash their prices in an attempt to drive their sales. But this strategy is not sustainable.

The good news is there is an alternative: the cashback.

This promotional mechanic provides consumers with a compelling opportunity to save money by claiming their cashback post-purchase. As well as driving sales in this way, it is a strategy that offers many further advantages for the retailer. Below, Opia’s Business Development Manager, Sylvain Mourey, outlines ten of them.

1. An effective response to the demand for lower prices

In a context of high inflation and a crisis in purchasing power, the cashback mechanic is an effective response, beyond traditional discounts, to consumers struggling with these difficulties and thus demanding ever-more lower prices.

2. Enabling strong commercial creativity

Cashback promotions are about much more than offering consumers a saving. They can be tailor-made depending on the product or service, the brand or the category. These promotions can bundle hardware and accessories, include add-ons, such as warranty extensions, insurance or delivery, or offer savings in the form of tax back. With this opportunity for creativity, retailers can deliver more compelling offers to their target market.

3. Creating market differentiation

Offering a creative cashback promotion, integrating one or more of the variables described above, provides the retailer with differentiation in the market. Marketing their own offers, which by nature are exclusive, can produce a competitive edge that enhances the promotion’s success.

4. Better cost-efficiency from targeting the most engaged customer

The cashback mechanic is a much more cost-effective strategy when compared to traditional discounting. It targets the customers most interested in the promotion, with only those most engaged making claims, and avoids the windfall effect resulting from any immediate discounts.

5. Increasing frequency of purchases

A cashback promotion can be designed to encourage the frequency of consumer purchases, for example, by offering reimbursements in the form of a retailer’s gift card.

6. Strengthening brand/retailer relationships

Having this effective tool as part of the retailer’s strategy is beneficial for the brand too. Partnering on a cashback promotion to achieve a mutual goal of driving sales, the retailer can strengthen their relationship with the brand, increasing the chance of the brand investing with them in the future and favouring them when rolling out their own campaigns.

7. Maximising ROI

By selling the product or service at a higher price, retailers can enjoy a better return on investment (ROI), seeing improvements in elements such as turnover, ASP (average selling price), average basket value, mass margin and market share.

8. Elevating brand strategy

By employing a cashback mechanic in place of traditional discounting, retailers can support brands in protecting their commercial strategy and facilitating their channel management. With heavy discounting potentially damaging brand equity, mechanics, such as the cashback, can be used creatively to add value instead. Retailers will then enjoy the knock-on benefits from this approach.

9. Compliance with the Omnibus Directive

The principle of cashback promotions supports compliance with the Omnibus Directive, which has undergone recent changes to protect consumers from artificial pricing practices (e.g. the base price to which a discount is being applied needs to have been available for at least 30 days before). With cashback, the base price remains protected without the retailer’s competitiveness being impacted, even in a super competitive market. The advertising of price reductions after a cashback promotion can then be based on a base price that has been maintained and therefore indicative of a more attractive discount.

10. Encompassing sustainability

With environmental concerns being high on the agenda, cashback promotions can be designed to include an element of sustainability. For example, recycling consumers’ used goods received via a trade-in promotion, or green initiatives, such as tree planting, could be included as incentives, either alongside cashback or as an alternative.

Retailers don’t need to resort to discounting their products or services when faced with challenging times. On the contrary, mechanics, such as the cashback, are proven to drive an equal, if not better, increase in sales while offering many more benefits alongside.

Please visit our sales promotions pages to learn more about Opia’s solutions or get in touch with our team to discuss your unique requirements.