Why Cash Back is a Better Incentive

The special sauce of Ansa’s stored value solutions is our “Incentive Engine,” which empowers merchants to create, deploy, and review monetary incentive campaigns made directly into their customers’ wallets.
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A core principle of it’s value is in providing a suite of offerings that allow merchants experiment and tailor to their customer bases, to grow wallet adoption and usage.
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One powerful tool is “Cash Back” where customers are motivated not only to load value, but also spend it, putting the customer experience back where it belongs - in the day-to-day interactions that delight.

How Cash Back Works as an Incentive

• Instead of lowering the price at the time of purchase with discounts, customers receive a percentage of their spending back!
• This delayed benefit creates a sense of value while encouraging future purchases, making it more effective than an immediate discount.
• Cash back programs can be tiered or gamified, rewarding higher spending with greater returns, which boosts average order values and kicks off the flywheel of wallet spend.

Why Cash Back is More Effective Than Discounts

1. Encourages Higher Spending
   
   • Studies show that cash back incentives can increase spending by 20-50% because customers see it as a way to “earn” while they shop.
   • Example: Credit card companies offering 2% cash back often see higher transaction volumes compared to cards without incentives.
2. Boosts Customer Retention
   
   • Unlike discounts that attract bargain hunters, cash back programs reward repeat purchases.
   • A PYMNTS study found that loyalty-driven cash back programs increase repeat customer rates by up to 40%.
3. Protects Profit Margins
   
   • Discounts immediately reduce revenue, while cash back rewards can be structured to require multiple purchases or be issued as store credit (closed loop stored value!), keeping money within the business.
   • Example: Rakuten and Upside (cash back platforms) drive customer engagement without heavily discounting products.
4. Psychological Effect: Perceived Gain Over Loss
   
   • Customers perceive cash back as a reward, while discounts can sometimes signal lower quality or brand devaluation.
   • Research by Behavioral Economist Richard Thaler suggests that people feel happier “earning” money back than saving it upfront.

Businesses Succeeding with Cash Back Models

• Amazon Prime Visa Card: Offers 5% cash back on Amazon purchases, incentivizing more spending and increasing loyalty.
• Target Circle Card: Provides 5% cash back as an ongoing benefit, keeping customers within the Target ecosystem.
• Retailers like Nike & Adidas: Use cash back through apps like Rakuten, creating a win-win where customers earn while the brands maintain their pricing power.
• Kohl’s Cash: Instead of direct discounts, Kohl’s rewards customers with store credit (e.g., $10 for every $50 spent), which must be used within a set timeframe, driving repeat purchases and increasing average transaction values This keeps revenue within Kohl’s while making customers feel like they’re earning rewards.

Key Takeaway

Cash back aligns with the idea that incentives create long-term value, while discounts train customers to expect lower prices. By offering delayed gratification and encouraging repeat purchases, cash back outperforms traditional price cuts in driving both revenue and brand loyalty.
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With Ansa’s Incentive Engine, you can design Cash Back campaigns that reward your best customers into their wallet to kickoff the flywheel of value. Pair this with a lever like reload bonuses and you’ve got a customer experience match made in heaven.

Curious about cash back, reach out to us below.