The concept of cashback is not new – it has long been recognised as a loyalty programme designed to attract and retain customers. However, its potential extends far beyond loyalty. Today, it is a tool that boosts and enhances consumers’ perception of savings, which in turn can empower purchasing behaviours.
For businesses, cashback models provide a strategic advantage by enabling the collection of valuable data insights that help refine offerings. Hence, while cashback model may be seen as a resource for larger companies, for many small to mid-sized businesses, implementing a cashback strategy may just be what is required to cut through the noise in competitive space – especially one like travel.
Cashback in travel
Despite the downturn during COVID-19, travel has proved itself to be a busy and competitive industry, facilitated by the internet and various mobile platforms. Given the high value of travel purchases – ranging from flights and accommodation to niche items like premium travel insurance – many travellers, particularly those on a budget, are increasingly looking for ways to maximise their spending.
On top of current loyalty programmes, cards schemes and existing miles, cashback is now one of the more popular strategies for consumers. Even smaller travel players are now tapping on this trend by offering their users points, credits or cash through third-party platforms and infrastructure.
Encouraging repeat purchases
Cashback schemes were originally designed to encourage repeat purchases by providing customers with a tangible reward after each transaction. When customers see that they can always receive more post-purchase, they will feel inclined to return to the same platform for future hotel bookings or trips. In turn, this generates a cycle of loyalty that benefits the traveller and the travel business.
Moreover, cashback platforms can help travel businesses reach previously untapped markets. By collaborating with third-party cashback providers, companies can expand their reach into new regions, such as China or Europe, unlocking new revenue streams. Other small and medium sized players also gain access to digitally-savvy, high value users who are able to spend more than $1,000 in a single transaction, allowing them to earn and sustain the loyalties of this group.
Beyond monetary incentives
Beyond building loyalty among travellers, cashback brings more to the table for smaller travel players looking to stand out from the crowd. With the rise of AI tools and technologies, travel companies looking to grow, and scale can consider tapping into AI to optimise the cashback process – or working with an AI-powered cashback platform to do so. When cashback applications are approved quickly and seamlessly, savings from bookings or purchases may feel more tangible to travellers who no longer have to spend time and effort tracking their cashback rewards, but instead can feel immediate satisfaction.
It is also with this perception that savings can be accumulated, which can inspire travellers to spend more on attractions previously out of their budgets. For tourism businesses, this will translate into an overall higher Average Booking Value after travellers spend more after factoring the discount offered.
Some businesses may worry that cashback schemes could erode their profit margins. However, an effective cashback offer is typically structured within an existing margin, serving as a marketing expense rather than direct cost. At the same time, the use of AI may very well bring down costs of the cashback strategy with increased efficiency and impact.
Futureproofing with AI integration
Integrating AI into cashback strategies offers long-term benefits beyond typical use cases like chatbots. Travel businesses can leverage AI to gain deeper insights into customer preferences, improve safety, and expedite approval times – all of which are key factors that customers value and look for in a trusted business – thereby future-proofing the business from future-headwinds.
Cashback is no longer just an incentive or loyalty tool. It has evolved into a powerful strategy that can help businesses promote their services, reach new markets, and gain deeper insights into customer preferences and habits.
While the cashback model may not be new, it remains a highly relevant and underutilised strategy in the travel industry. Sometimes, all it takes is a fresh perspective to recognise its potential and importance.