Why Cashback is Beneficial for Business?

What is Cashback

Why Cashback is Beneficial for Business?

Using cashback along with discounts , loans, promotions and other ways to save, is already in the everyday life of users. But its principle for many is still not understood until the end, so many people consider it a fraud of the buyer. For what and why do they return the money? Maybe this is a scam or a divorce?

What is Cashback

The word “Cashback” is translated from English as “cash return” – this term refers to the return of a part of the cost of goods or services to a customer’s card. Typically, the cashback size is between 1 and 10%. In fact, this is one type of loyalty program, with the only difference being that the buyer does not receive money before or during the purchase, but after.

This program is used in many areas, but most users encounter it when buying in online stores or paying for goods and services with a bank card. The return of money causes many people to be distrustful; they don’t understand why the money should be returned to shops or banks. In fact, it is beneficial to all participants – and financial institutions, and shops, and customers.

Discount and cashback – differences and principle of operation

To get the maximum profit and attract as many buyers as possible, any seller has to invest in advertising. Advertising costs are initially included in the cost of a product or service. And its effectiveness determines the level to which the seller can reduce the cost, and still get high profits. The seller also returns this difference to his customers in the form of a cashback.

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Important! Using cashback allows you to highlight the same product or service among the competitive ones, making them more attractive and desirable for the buyer.

For this reason, it can be called a type of advertising, the purpose of which is to attract the attention of buyers and increase sales .

Discounts work in a similar way – stores inform the audience about the availability of shares and sales. The seller distributes information about discounts, which increases the flow of potential buyers and ensures sales growth. In addition to those goods for which the discount applies, people buy others that fully pay for advertising and the difference in the value of the goods declared as a discount.

Thus, the benefits of both methods of attracting potential buyers may be the same, but psychologically, the buyer is more pleased not only to buy goods cheaper, but to get money back. The bank’s advantage is that, receiving money, he can use it for some time, and then return its interest to the buyer.

Types of Cashback

The following types of refunds are distinguished;

from the bank;
from a special site.

In the first option, you need to get a bank card in the financial institution that provides this service. Special programs are connected to the card, allowing you to make a choice of the sphere of purchases. For example, food, clothing, travel and more. In the first case, restaurants, cafes, shops and other organizations that have concluded an agreement with this institution will return the money, in the second – clothing stores, show rooms and so on.

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Important! It is necessary to pay for the purchase with this card – both personal funds and credit. In the second case, the percentage of return is usually higher.

You can get money back using the offers of special sites – you only need to register there. On the site you can find a list of stores and make purchases directly from them. A feature of the work of such a resource is the conclusion of a special contract with the store. The site advertises certain stores and resources, attracting attention to them, and for this it receives a certain percentage from them. Few people also use affiliate cashback websites to earn money which is mostly designed on custom cashback cms.

For small businesses, it is beneficial to sign a partnership agreement, but you need to be careful about its terms. There are different options for cooperation – the percentage of “money back” for each program and the conditions of each bank and its bonuses differ. Some cashbacks assume a floating percentage – it depends on seasonality, holidays and other conditions. However, not all banks allow you to withdraw these funds in cash – some make it possible to spend them on your next purchase in the store or replenish your mobile phone account. By stimulating non-cash payment, financial institutions, in addition to their interests, help promote small businesses.

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