Retailers have long used customer loyalty programs as a tactic to encourage return shoppers and avoid losing money on sales promotions. Now, they’re beginning to shift focus away from traditional punch cards and point systems in favor of giving consumers cash back that they can use anywhere.
Cash-back programs, which typically operate by giving consumers back a percentage of the money they spend with each purchase, provide a straightforward, easy-to-follow process that is alluring to consumers. In turn, they continue to shop with a particular retailer. Retailers including Nordstrom and Sephora operate on a points system that grants one point to every dollar spent. Retailers with automatic cash-back programs, on the other hand, give shoppers an percentage of their purchase in the form of a check or credit applied to their account.
Spring became one of the first multi-brand e-commerce companies to enact a cash-back program when it debuted its SpringBack loyalty program in January. Every purchase leads to 4 percent cash back, which can be claimed and credited to a Spring user’s bank account sixty days after the original purchase. As part of the program, Spring has also struck deals with select partners among its 2,000 featured brands to offer double cash-back, including Diane Von Furstenberg, Bobbi Brown, Stuart Weitzman and Kenneth Cole.
“We know our customer, and they like to do more than just shop,” said Katherine Prime, chief customer officer at Spring. “While obviously we want them to come to Spring and start all their shopping experiences there, we also want to be able to reward them with value they can use throughout the rest of their lives on things we know they love, like experiences and travel.”
The model is similar to that of companies like The Modalist, a fashion aggregation site that gives a percentage of affiliate sales to users if they make a purchase from a brand featured on the site. Commission is different based on the brand and is typically provided in the form of PayPal value or an e-check.
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“Cash-back loyalty programs have an allure that standard loyalty programs often can’t match,” said Lindsay Sakraida, director of content marketing at DealNews. “While you still have to spend in order to get the benefit, consumers often view cash-back in a [more] positive light; whereas most loyalty programs include a freebie of some sort with limitations, cash is cash, and it can motivate spending more effectively.”
Prime said Spring used customer feedback to develop the program, with a particular focus on moving away from seasonal promotions and deals that pop up during particular timeframes. Since rolling out the program in January, Prime said Spring has reported growing numbers of return shoppers, with 60 percent of consumers being repeat visitors since the cash-back program started.
“Our core customer is the urban millennial woman. In speaking with her, she indicated she wanted a transparent and straightforward loyalty program, and to not have to deal with another loyalty program that tracks points,” she said.
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Sakraida said she anticipates Spring will be successful in attracting more consumers to the site with the help of the loyalty program, and that similar sites may soon follow suit.
“There are so many ways to buy things online now, and retailers have found that it’s difficult to always compete on price. Someone can always offer a better deal, and sending out too many coupons can set unreasonable and unsustainable expectations for customers about what they should pay for your wares,” she said. “Cash-back programs reward customers for choosing [retailers], regardless of what they’re buying, and it’s more cost-effective to dip into profits to give cash-back rewards than to offer massive discounts all the time.”
