When people think of rewards programs, they often think of points, such as frequent-flyer miles, or punching in a phone number at a pharmacy or grocery chain. Those experiences can feel a bit empty because there is no instant gratification; it’s as if there were value there but you’re not sure exactly when it will pay off.
With that said, those rewards programs work. They motivate consumers to achieve a benefit from spending their money with a brand. There’s a psychological pull that most consumers do not — and sometimes cannot — resist.
A survey with 19,000 people about their shopping behaviour, revealed that 82% said they prioritize special promotions, discounts or cash back when choosing where they’ll shop. That’s a powerful loyalty stat.
People react to rewards in various ways. According to global consultancy McKinsey’s research, these reactions entail context, habit, friendly influence, incentives, emotions, congruence, salience and other factors. It’s a surefire way to engage someone’s emotions, and in turn, gain or lose their loyalty.
When it comes to spending, neural studies have shown that consumers have unpleasant emotions when contemplating the monetary cost of making purchases. As a matter of impulse, people simply do not want to part ways with the cash they’ve worked hard to earn.Making customers feel positive about their purchase is crucial to not only the customer experience but also brand loyalty. It’s why 79% of consumers look for deals in loyalty rewards programs before buying an item.
More generally, the psychology of rewards and this pandemic should have companies rethinking “value” and how it pertains to their marketing budgets. In previous years, “value” meant consumers attaining something meaningful for what they give to a business. In the current public health crisis, consumer needs have shifted dramatically, and “value” should now play out with brands and financial institutions helping customers achieve their budgetary goals.
Even when things return to normal, brands and financial institutions will need to think much differently about how they provide value to customers. Marketers should consider factors like easing consumer stress, communicating availability, offering more options for convenience and putting money back into consumers’ wallets when they need it most. Appealing to consumer sensibility during Covid-19 has never been so impactful, and, more than any other reward, it’s cash back that ensures a strong finish to the customer experience. For financial institutions, it’s identifying ways to add value that don’t demand their customers to jump through hoops for the benefit.
The New Reward King: Cash
With consumer budget worries in mind, rewards are on the rise as more brands turn to “surprise and delight” experiences with cold hard cash at the forefront. Financial institutions, neobanks and digital payment platforms are flocking to embed engaging cash back rewards into their user experiences. Whether it be attached to a specific card product or generally available to their customers, cash now speaks volumes when it comes to creating value and remaining top of wallet.
For example, financial membership platform MoneyLion knew these things to be true as early as two years ago when it started giving customers $1 cash back each day for opening the financial membership brand’s mobile app. And in February, Level, a challenger bank app, began giving customers 1% cash back on debit card purchases, which its customers have surely been appreciating since then due to pandemic-driven economic anxiety. Such brands understand that their customers not only have always been hard-wired toward cash back and rewards, but they are especially now during these hard economic times.
Rewards such as cash back also drive sales. For instance, more brands see increased revenue via rewards (36%) compared to discounts (28%). More specifically, cashback rewards company, Dosh — in a research partnership with The Center for Generational Kinetics — found that brands that offer millennial and Gen Z consumers at least 5% instant cash back will see even greater sales impact now and in the months ahead.
Cash back’s momentum is clear. And with miles racking up and nowhere to go, consumers are questioning their miles cards. Credit card companies are starting to recognize this reality with 80% of card members redeeming cash back rewards during the pandemic.
What’s Next For Rewards
Even before this pandemic, Dosh survey found that 82% of Americans will shop more frequently with retailers that send cash back notifications. And McKinsey has revealed in a study that immediate gratification, like cash back, results in positive customer experience and creates brand loyalty. Once again, rewards are all about psychology, and cash back entails the greatest positivity in shopping and the best outcome for both consumers, brands and financial services companies alike.
The psychology of rewards is powerful. Brands have the opportunity to make such rewards even more memorable for customers, when the rewards look more like something they need and can use immediately, like cash back.