Cashback Offers – Role and Mechanism

Most of the e-commerce sites, credit card companies and digital payment gateways provide cashback offers to customers based on certain conditions such as volume and timings of transactions. Cashback offer is proven to be one of the best customer retention strategies.

Cashback is a reward offered to a customer for having made a transaction [Purchase or Funds Transfer] with the company. The reward is usually in terms of cash and generally, cashback is an ideal way to promote brands and increase sales volume.

Best Alternative Promotional Technique:

Earlier companies use to spend lot of money on promotional activities in order to increase sales numbers. But the cashback offer technique is more cost-effective as companies just share few percentages of the payment that is received from the customer. Hence, cashback is treated to be best alternative promotional technique.

Cashless Payments:

One of the key reasons why companies offer cashback offers is to promote online payments or digital payments. Third-party companies play a pivotal role in facilitating cashless payments. Infact, few e-commerce sites would provide cashback offers only if the payment is routed through a particular bank payment gateway.

Customer’s revisit:

Another big advantage of cashback offers is that customers will revisit the site or platform. Not just additional purchases, customers will even go for revisiting the site for future purchases. It is quite evident that increased cashback offers will make customers go back to the same site and buy more. 

Hard Reality:

Often times, the seller find difficulty in selling products with not so good quality. So, in such case, he gets into an e-commerce site and help him sell the products for a considerable price. Therefore, sometimes cashback offers are available only on certain products and not on all purchases. This can be observed during festival season, the inventory is full and there is a desire to clear the stock in short time. In order to attract customers, companies do incentivise the customers in the form of cashbacks.

You might wonder how do these e-commerce sites, digital wallets or banks provide cashback. But the secrecy lies in the business model of these companies. For instance, a credit card company that lets a customer make purchases on credit basis, will usually charge commission. Out of the same commission, certain percentage is offered as cashbacks to customers. Infact, the customers end up paying very good amount to these companies in the form of interest, dues and some other fees.

Prof.Yuvaraj Halage
Assistant Professor


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