Cashback Is: Definition, Types, Advantages and Disadvantages

We have often heard the term cashback, right? The term cashback is a promo that we often encounter in shopping centers, stores, brands, to marketplaces or online stores.

So, what exactly is a cashback and what do we need to know about this term? So that you are not confused and can take advantage of the existing cashback promos, let's see the article about this one cashback discussion!

Understanding Cashback

Cashback is a form of marketing strategy used by companies or sellers to attract consumers' attention in addition to providing discounts or bonuses.

The advantages or benefits that exist in cashback are benefits that can be felt free of charge by anyone, as long as they are in accordance with the applicable T&C (terms and conditions).

Well, how to get it yourself is quite easy. You need to make a transaction in the form of purchase in a certain amount or a purchase for a certain product. Depends on the terms and conditions provided by the organizer.

So, it can be concluded that cashback is an advantage that can be obtained when customers have finished making purchases at their stores and get profits according to the T&Cs that have been set.

History of Cashback

The appearance of cashback for the first time existed and was used by credit card issuing companies to attract more customers.

As time goes by and the development of technological innovations that are increasingly adequate, cashback is a sales strategy that is widely used by various parties. These include brands with certain products or services, banks, finance companies, to online stores or marketplaces.

Cashback Goals

Cashback is a method used by a company or seller to attract customers which aims to increase sales of the products offered.

On the other hand, cashback also functions as a way to increase brand awareness of a brand so that it can be recognized by the general public more quickly.

Cashback Types

There are many types of cashback out there, from the most common ones we encounter to cashback that apply in certain industries. What types of cashback are there? The types of cashback are as follows.

1. Credit Card Cashback

The first type of cashback is a credit card. This type of cashback is one of the bank's programs or strategies to provide benefits to credit card holders.

The profit obtained is in the form of a refund of a certain amount of money from transactions with a certain nominal value. This means that credit card holders must successfully make transactions or purchases before they can enjoy the existing cashback.

Nominal cashback is a number of benefits that can later be obtained and varies greatly, and can also be influenced by the nominal transaction made. The bigger the nominal, the bigger the cashback you get.

You can use the cashback you get to pay dues, shop, and pay monthly bills. It depends on the policy of each bank.

2. Debit Card Cashback

Debit card cashback is cashback that is obtained for every transaction using a debit card. The way it works is almost similar to credit card cashback.

3. Online Store Cashback

Cashback is a promotional offer that can be applied anywhere without exception for online stores.

Online store cashback is a program or strategy carried out by an online shop or marketplace. The cashback that will be received can be in the form of coupons, shopping coins, or refunds to the consumer's e-wallet.

4. Reward'sCashback

Cashback rewards are cashback given to customers not in the form of cash, but in the form of points which can later be exchanged for certain prizes.

Cashback rewards are often found in convenience stores or other retail stores which makes rewards as an attraction for customers who make large transactions.

5. Motor Vehicle Cashback

This type of cashback is a type of benefit that is obtained for consumers from the leasing company after purchasing a motorcycle unit from the company.

Motor vehicle cashback is generally given in the form of goods such as laptops, tablets, TVs, and other items. This type of cashback is also usually applied in the form of a lottery.

6. Collaboration Cashback

The following cashback is cashback obtained from an agreement between two parties. Where all parties involved are equally voicing their opinions and desires so that collaboration occurs.

7. Cashback Property

Property cashback is a number of benefits provided by the developer or property developer if the consumer makes a purchase on the property being sold. For example, shops, houses, apartments, and so on.

The benefits in the form of cashback are usually in the form of TV, air conditioning, refrigerator, to vehicles such as motorbikes or cars.

8. Domination Cashback

It is different with collaboration cashback where there is an agreement between two parties and both parties are mutually beneficial. For cashback dominance, only one party benefits while the other party does not benefit much.

9. Accommodation Cashback

Accommodation cashback is the profit obtained by the customer with a small amount of profit or in other words, the opposite party gains more profit than the party doing the cashback.

10. Cashback Lose-Lose

Finally, there is a lose-lose cashback where this cashback is intentionally held to stop existing conflicts and new conflicts that may come.

Cashback which is used as a silencer is usually carried out by a party that is plagued with problems or a scandal.

Advantages and Disadvantages of Cashback

Cashback is a system that has advantages and disadvantages. To make it easier for you to know the advantages and disadvantages, especially for those of you who want to apply this sales strategy, let's look at the following description.

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Image Source: pexels/Sam Lion

Advantages of Applying Cashback

There are a number of advantages that the organizers can get if they apply the cashback strategy. The reason is, cashback is a promo that is sought after by many people, especially if the offer is of considerable value.

1. As a Strategy to Attract Customers

As previously mentioned, cashback is one strategy that is often applied to attract customers.

This strategy is quite effective for attracting customers because the benefits offered by this cashback will make people think that they are getting the best offer and that the transactions made are profitable for them.

2. Retaining Old Customers

There are not a few cashback out there that apply to old customers or customers who are already members. Well, from this cashback, of course, old customers or who are already members will always feel that they have been given a lot of benefits. So, they will continue to buy the products you sell.

Cashback is also used as a tactic to retain old customers so that they are not tempted to switch to competitors.

3. Increase Sales

Who doesn't love getting the added benefit of a purchase? Generally, everyone will be interested, especially if the profit is obtained from purchasing an item that they are after or need.

4. Does Not Damage the Market Price

Goods sold in the market have relatively the same or uniform price range. The existing prices are usually set by the government or based on the mutual agreement of the sellers.

By implementing a cashback system, you don't have to worry about damaging the market price or being judged to be unfairly competitive. You can still sell at the market price and benefit from implementing this strategy.

Disadvantages of Applying Cashback

In addition to the advantages, cashback also has some disadvantages that you need to know. The disadvantages of having a cashback promo are as follows.

1. There are Terms and Conditions

The first drawback is common in many cashback promos. The organizer will determine the terms and conditions to be able to get cashback.

For example, the nominal amount of the transaction or the number of items that must be purchased. There are also terms and conditions in the form of an obligation to become a member by making a member card or the like.

2. Time for Cashback

Not a few organizers apply cashback promos which can only be obtained at certain times. In this case, it means that customers who have made new transactions can get cashback benefits in a certain period, it can be several days, weeks, or even months.

For example, buying goods in the marketplace. Generally, customers will get cashback when the goods purchased have arrived or the purchase is declared complete.

3. Amount of Contribution Given

This shortcoming is generally found in the organizers who apply a fee or installment system with a certain deadline to be able to enjoy the cashback offered.

So, if the customer pays the dues more than the specified time, the existing cashback is considered forfeited. Cashback like this can usually be found in credit card cashback or motor vehicle leasing.

4. Flexibility

Cashback flexibility is a drawback in the form of a limit on the cashback obtained by customers. This means that customers only benefit from cashback in the form of certain items or the number of points that can only be exchanged for certain benefits.

Difference between Cashback and Discount

Not a few people think that the term cashback is the same as a discount. In fact, the two terms have distinctly different meanings.

Discounts are given directly when consumers buy products. So, after the customer completes the transaction, they will not get any profit.

While cashback is a benefit that is given after the transaction is completed. In this case, the profit earned on cashback is obtained after the customer has completed a transaction or purchase.

So, we can conclude that the difference between discounts and cashback lies in the timing of the benefits that customers can get.

Sobat BFI, that's the explanation regarding Cashback: Definition, Types, Strengths, and Weaknesses. In conclusion, everyone has the opportunity to get a cashback promo as long as it is in accordance with the terms and conditions provided by the organizer.

Make sure to be observant before buying something or transacting. Choose cashback that really benefits you, not just a promo that can actually make you impulsive. Hopefully, this information can be useful for you.

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