Who doesn’t love discounts? Especially, us – Indians, who any day would opt for a better deal price-wise at the time of buying. Hence, the Indian customer can be seen comparing prices between Amazon and Flipkart or for that matter Myntra and Ajio, and even for that matter Zomato and Swiggy. What perhaps makes these deals even more lucrative is cashback. These are provided at times by the brand directly or via through third-party platform. Industry experts term this move of brands using cash-back as a sold bait to sell products. “Cashback increases the probability that consumers will make an additional purchase via the website/apps of the cashback platform. It also increases the size of that purchase or cart size, and fosters repeat purchases,” Anand Ramanathan, partner and consumer, products and retail sector leader, Deloitte India, said.
As per the Growth Market Reports, cashback apps are becoming increasingly popular in online shopping and digitalised payment modes. The global cashback apps market was valued at $3,373.2 million in 2022 and is projected to reach $6,141.0 million by 2031, expanding at a compound annual growth rate (CAGR) of 6.9 % during the forecast period.
Love the way you lie!
We all have been there when an offer claims ‘up to 50% off,’ but when one purchase, the discount availed is just two-three percent. Twisted wordplay and discount offers often seem to go hand in glove . Experts believe that Indians are known for their price sensitivity and find cashback programmes particularly appealing. This appeal and the urgency created by these platforms or brands often lead people to purchase or atleast have a look at the deal offered. Cashing in on this psychological consumer behaviour, brands partner with reward-offering platforms. In India, e-commerce, online shopping app, online payment apps, bank/credit card companies offer cashback rewards programmes that are funded by online retailers. Effectively these online retailers pay ‘rebate’, or a bonus paid back to a customer on a purchase. “Cashback can be paid to the customer in one of two ways. One by the credit card company, using a percentage of the interchange fee the retailer pays to the credit card company or by cashback rewards platforms, which capture the retailer commissions and their customers generate by clicking through and making e-commerce purchases, and then paying back those customers some or all of the retailer’s revenue share,” Ramanathan said.
Interestingly, it is believed that cashback rewards platforms now act as publishers which can showcase retailers’ links and merchandise to online shoppers. But unlike traditional affiliate publishers who keep the commission from retailers as income for themselves, cashback platforms take some or all the affiliate commissions paid by the retailer and reward that back to customers in their consumer-facing cashback rewards programmes.
A dime a dozen?
If discounts and offers can be directly given by e-commerce platforms or the brand on its own, then the question which emerges is the need for cashback apps. “Unlike discounts that only happen once, cashback rewards keep coming with every purchase, making customers feel like they’re getting something extra every time they shop,” Ridhima Kansal, director, Rosemoore, highlighted.
As per the market research platform Statista, based on an online survey carried out among urban Indians from July to August 2023, around 55% of respondents found cashback offers to be the most appealing type of festive deal.“All in all cash back apps can complement low-funnel digital marketing strategies as one the platforms to push sales during peak or offer season, while the other traditional digital marketing strategies continue to focus on acquiring customers where brand loyalty and lifetime value are bigger,” Mayank Vora, co-founder, Logicloop, opined.
It is believed that the immediate and tangible benefit of cashback rewards resonates strongly, offering clear value in a competitive market saturated with choices. Familiarity and trust also play a crucial role in this. Programmes leveraging trusted brands and simple, easy-to-understand structures see higher adoption. Additionally, social proof through features like referrals and sharing capitalises on the influence of peers. “Psychological factors enhance customer engagement. We do a good mix of data-based strategies like framing rewards as ‘loss aversion’ (such as ‘save 10%’) proves more effective than simply highlighting gains. Also, limited-time offers and tiered rewards create a sense of urgency, while gamification elements like points and badges motivate participation. We also run personalisation through tailored rewards based on individual preferences and this fosters a more relevant and rewarding experience,” Swati Bhargava, co-founder, CashKaro and EarnKaro, said.
By hook or by crook!
Typically, the process of brand building includes gaining consumer trust through the delivery of the brand promise. At the same time, there is this struggle to provide hefty discounts to gain as many consumers as possible. Perhaps the question that needs to be answered is how effective is this marketing strategy and to what extent it can keep the consumer hooked. “Businesses leverage partnerships with cashback platforms for valuable consumer insights. While cash-back incentives drive initial conversions, retaining customers beyond the offer poses a challenge, with fluctuating conversion rates as users prioritise short-term gains over long-term brand loyalty,” Vora said.
One of the challenges that reside is to ensure that a customer continues to use cashback and discounting is not the only way. Companies claim that to make most of the profit links and referral rewards on cashback apps, smart strategies have been deployed we’ve come up with smart plans to get our brand noticed and boost sales. “Alongside encouraging customers to refer friends for rewards, we’re also stepping up our game on social media. We’re asking happy customers to share their experiences and referral links on platforms like Facebook and Instagram. This helps us reach more people through word of mouth, which is super influential,” Kansal shared.
Experts believe collaboration and partnership with cashback apps are the core elements that contribute to successful marketing campaigns and aid in achieving the sales objectives of any brand. Through these partnerships, a brand gains access to a broader audience and at the same time, the app becomes more lucrative on the back of incentives.
“Our brand in collaboration with cashback apps can widen its reach beyond immediate users, as well as remotely access the apps’ data analytics to gain insights into consumer behaviour and taste. This realisation enables more specific marketing campaigns, particularly the ones designed for specific products and promotions, which ultimately results in enhanced sales,” Raghunandan Saraf, CEO and founder, Saraf Furniture, said.
Is personalisation the differentiator?
There is no doubt that personalisation is the key differentiator in this cluttered market. Settling only for festive discounts and clearance sales seems like a weak match, as a data-based personalised discount probably is a good match. “We extensively utilise data analytics to monitor programme performance and adjust cashback rates based on real-time profitability needs. This ensures long-term sustainability while maintaining programme competitiveness. Another major pillar is content marketing and community building. We create valuable content and foster a strong user community that promotes brand loyalty and organic programme growth,” Bhargava said.
Last but not least, as most of these apps have what is known as Personal Identifiable Information (PII) – which means protecting user data should now be a priority post the Digital Personal Data Protection Act (DPDP). In terms of digital data protection, CashKaro and EarnKaro claim to comprehensively review all data collection, work with legal experts to ensure appropriate consent and update mechanisms to ensure compliance. As per these companies, internally the access is limited to authorised personnel, and it establishes clear agreements with third-party recipients defining data sharing purposes, scope, security, and the rights of users.
As more and more brands jump onto the cashback bandwagon, one can only hope that consumers remain protected.
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