Phil Rubin

BrainTrust Query: Cash Back Popularity on the Rise, But Is There a Better Way?

March 11, 2010

FROM RETAILWIRE:
Cash is king. During the past two years, this age old encouragement from our fathers has been driven home with punctuation. In the loyalty and rewards game, cash is king in a different way. Will cash back rewards continue to become more and more popular with consumers, or is it just a temporary reaction to this recession?      [more...]

This is a great question Bill and indicative of a conundrum that many brands face when developing reward-oriented loyalty programs.

Cash back is a great concept for certain categories like credit cards, as it was really cemented with Discover Card. Yet as Bill illustrates, cash alone doesn't drive additional transactions and likewise doesn't necessarily provide any leverage to the program sponsor. Leverage is a fundamental driver of loyalty profit for rewards programs as it is essentially what extends the difference between incremental sales and the associated cost of those sales.

If you view loyalty as a brand-oriented behavior encompassing an emotional element, then a straight and (largely) one-dimensional value proposition like cash back is not going to win for most businesses. It's very easily replicated and while transparent, it's also limited in its value. Most importantly, cash is generic and brand-neutral at best, unless an approach like Tesco's is used.

Finally, most any single-dimension rewards structure is limiting and underscores the importance of other loyalty elements such as soft benefits, data-driven/relevant communications and a brand-focused strategy. Ideally, a brand's loyalty strategy and its program (assuming there is a programmatic component) should be as unique to that business as the brand itself. Cash doesn't support that.