Spiraling inflation is increasing consumer demand for incentives wherever they shop. So, retailers take note: if you want shoppers to buy your wares, reward them for it.
That marketing strategy was the top-shelf tip tallied in a June survey of more than 1,000 U.S. adult consumers broaching shopping rewards programs, including cashback, discounts, and other money-saving tools.
The findings reveal the growing importance of these programs as prices continue to skyrocket. Ninety percent of the respondents said they are more interested in receiving discounts, using coupons, and earning cashback rewards when they shop because of rising prices. The reality for retailers is inflation is drastically impacting consumer shopping behavior and brand affinity.
Not only do consumers expect new levels of rewards for their purchases, but they also want more convenient access to loyalty offers whether they shop in person or online. Easily-accessible shopping rewards are critical to retail brands’ ability to engage and build relationships with consumers across all age groups, from Gen Z to baby boomers.
One of the top surprises in the survey results, according to Jordan Glazier, founder and CEO of financial technology platform firm Wildfire Systems, is the extent to which the availability of cashback rewards affects consumers’ choice of e-commerce merchant.
“The benefits for merchants for offering coupons and cashback can be viewed through the lens of sales conversion with the likelihood that the consumer will make it to the end of the purchase funnel and complete a transaction,” he told the E-Commerce Times.
Cashback Is King of Rewards
Wildfire’s platform powers reward programs and shopping companions. To assess consumer sentiment on shopping rewards, Wildfire commissioned the survey conducted in June by Big Village (formerly Engine Insights) of more than 1,000 U.S. consumers. The results were released last month.
The published report is aptly titled “Online Shopping Rewards Have Gone Mainstream, Offering a Win for Banks, Retailers, and Consumers Alike.”
Among the key feedback uttered by consumers is their view of cashback deals as the number one preferred reward type. Further, shoppers choose retailers based on if they offer rewards.
Glazier saw two critical takeaways from that report:
- Inflation is driving consumer preference for receiving cashback rewards above all others. One in three consumers started using these programs in the past two years.
- A majority (82%) of higher-income households value rewards. Respondents with a household income of more than $100K seek them as well.
“Consumers are especially eager for rewards and discounts, given the current state of the economy and inflation,” Glazier observed.
Shoppers Demand Rewards During Inflationary Times
A combined 80% of respondents ranked the ability to earn some form of cashback as their number one preferred method of receiving rewards. Coupons and discounts also positively influence e-commerce conversion rates.
The survey showed that 85% of Gen Z consumers, 86% of millennials, and 79% of Gen X and baby boomers are more likely to complete a purchase when they have a coupon or discount.
The bottom line for online retailers is to meet shoppers’ expectations of being rewarded for their purchases. Some 81% of all respondents said they are more likely to purchase from an online store that offers some sort of reward or cashback on purchases than one that does not.
A large segment of respondents (79%) prefer to have shopping rewards automatically applied at checkout. A close percentage (69%) of consumers agree that this is the simplest form of accessing rewards. Seven out of 10 consumers prefer cashback deposited directly into a bank account or as a credit on their credit card.
“This new research reveals current consumer attitudes towards shopping in a fairly tough economy,” said Glazier. “The findings highlight the fact that cashback rewards, discounts, and other incentives have crossed the chasm into the mainstream.”
Rewards Expectations Linked to Payment Card Company
Shoppers seem to have raised the rewards burden to financial institutions rather than vendors, suggested Michael Marcus, senior advisor and board member at Boston Consulting Group. Not only are consumers insistent on getting rewards, but they also want them pegged to their payment method.
“Consumers expect these shopping rewards to come from their card issuer. The top two expected sources of cashback and coupons were from consumers’ credit card or debit card issuers,” he told the E-Commerce Times.
Marcus pointed out, “Consumers associate their payment mechanism with their loyalty, which is expressed in rewards. This is a huge opportunity for card issuers to increase their value proposition with additional shopping rewards.”
“Our dollars just do not stretch as far as they used to. Any opportunity to save money with cashback or coupons is a welcome benefit to consumers,” he added.
Not Too Risky Business
Marcus does not see much risk for retailers who offer a rewards program, and the data does not indicate a downside. In fact, the opposite is true, and he sees two main reasons.
First, on the consumer side, merchants that offer shopping rewards in the form of cashback or coupons set themselves apart from those that do not. He suggested that this creates preference, which is very desirable in a competitive environment.
Second, the data revealed that merchants found these programs are very effective marketing solutions. In fact, they drive incremental revenue.
“When a retailer is faced with the decision to spend their marketing dollars on ads versus guaranteed revenue, the answer is clear. Because loyalty programs like cashback and coupons are based on real dollars spent, the scale is greater, and the certainty is absolute,” explained Marcus.
The low friction of cashback and coupons for consumers is very attractive. That makes offering these programs by banks, card issuers, telecoms, and other companies a win/win/win scenario.
“Merchants make more revenue while consumers save money, and the companies that encourage their customers to go shopping get a slice of the value. Over time, the realized effect is loyalty, which drives engagement,” he noted.
Winning Proposition for Retailers
Rewards programs have almost no downside for retailers, according to Marcus. The biggest pros of a reward program are that they increase brand loyalty, merchant affinity, and overall purchase volume.
If there is a con, it is a slight one, he admits. The attractiveness of rewards programs creates consumer demand for rewards.
That entices competing merchants also to offer rewards programs, which levels the playing field.
“Ultimately, if retailers do not have a rewards program, they run the risk of losing share to their competitors,” he concluded.