What the Indian Customer Wants and Needs: A Look at Cashback and Rewards – Industry News

TO Kohinoor Biswas

In the rapidly developing financial sector technologyUnderstanding the delicate balance between what Indian customers want and what they actually need is critical. This becomes especially clear in the context of cashback and rewards programs, two strategies that are central to how new-age industries like e-commerce and fintech and retailers interact with consumers. While cashback offers instant gratification and appeals to the desire for immediate gratification, the question arises: does it promote long-term loyalty and brand affinity? Let’s look at the psychological underpinnings of cashback incentives and their implications for building strong customer relationships, while weighing them against the potential of well-structured rewards programs.

Understanding wants and needs

The distinction between wants and needs is a fundamental concept in consumer behavior. Wants are often driven by a desire for immediate gratification, while needs correspond to long-term value and satisfaction. In the context of fintech, cashback offers satisfy a need by providing instant financial benefits. However, the key to sustainable growth lies in customer satisfaction that goes beyond immediate monetary gain and solves a larger problem or adds value, thereby building trust and meaningful engagement with the brand.

The appeal of cashback

Cash back programs have become a staple among consumers. marketespecially in the fintech and e-commerce sectors. These programs offer instant financial returns on purchases by tapping into the human desire for instant gratification. The immediate reward of cashback has a positive impact by enhancing the shopping experience and encouraging repeat purchases. According to research by Yotpo, a leading e-commerce service provider marketing platform, 30% of consumers are more likely to make a purchase when a cashback offer is available. This phenomenon is especially pronounced in such a price-sensitive market as Indiawhere consumers actively search for the best deals to maximize their savings.

The appeal of cashback is undeniable: it provides direct, tangible benefits that resonate with consumers. However, while it is effective in driving short-term sales and encouraging initial engagement, it fails to create long-term loyalty. The temporary nature of cashback means that once the immediate benefit is received, the incentive to remain loyal to a particular brand or platform diminishes. Consumers are likely to continue searching for the next best deal, perhaps with a competitor, undermining the brand’s efforts to build a strong relationship.

Cashback limitations and arguments for rewards programs

The main limitation of cashback is its short-term focus. While this may increase the likelihood of a purchase, it does not build a strong emotional connection with the brand or increase brand loyalty. Once the cashback has been redeemed and the dopamine rush has subsided, the customer will have little reason to return unless a similar offer is available. This creates a cycle of dependence on discounts and special offers, where loyalty is driven not by proximity to the brand but by the prospect of savings. money.

The Consumer Behavior Report highlights that simply offering financial incentives is not enough to retain customers. To cultivate long-term loyalty, brands must focus on improving the overall customer experience (CX). Excellent CX promotes emotional connection, which is critical to creating brand affinity. This is where rewards programs, with their emphasis on value creation and engagement, can trump cash back programs.

Rewards programs offer a different approach to customer loyalty, emphasizing long-term loyalty rather than immediate financial gain. These programs typically earn points on purchases that can be redeemed for future discounts, exclusive offers, or other benefits. This model encourages customers to engage more deeply with the brand as they perceive greater value from accumulating points over time.

One of the key benefits of rewards programs is their ability to create a sense of belonging and exclusivity. When customers participate in a rewards program and feel privileged through exclusive offers, they often become more invested in the brand, leading to higher levels of engagement. For example, a well-designed rewards program can offer personalized services or address specific customer concerns, making them feel valued and understood. It can also give customers exclusive access to a great deal or give them the opportunity to interact with brand representatives. This, in turn, strengthens the bond between the customer and the brand, leading to repeat purchases and preventing churn, which in turn provides cost savings and higher lifetime brand value to customers.

Rewards need to up their game to be seen in the same light as cashbacks:

The problem with traditional reward programs is also that most issuers view rewards as a cost, and therefore the redemption experience (the stage at which it actually reaches P&L) has been designed to incentivize lower redemptions.

Even today, practices such as devaluation, restrictions on issuance, redemption and removal of categories from issuance, and changes in reward validity periods are common for most players in the market, which are often carried out without clear communication to customers.

Moreover, from a purely experiential perspective, the experience of redemption includes several stages that contribute to the fallout during the flow of redemption.

All of this creates mistrust in the mind of the consumer and reduces the perceived value of rewards, and ultimately the customer finds solace in short-term cashbacks that seem more transparent and genuine.

To implement a successful rewards program, brands should keep the following things in mind:

1. The value of the rewards at the time of issue must be taken into account at the time of redemption.
2. Value/conversion terms should not change frequently.
3. The experience of redemption must be smooth and fluid and, finally,
4. Provide customers with a variety of repayment options to suit the needs of different customer segments.
5. Created a redemption experience for all denominations, large and small, so customers don’t feel like smaller rewards have no value.

Changing consumer expectations

As the Indian market matures, consumers are increasingly looking for more than just monetary benefits from interacting with brands. They want meaningful experiences, personalized offers, and value-added services that enhance their overall experience. They prefer brands to understand them well and, in turn, plan their work individually. A large number of consumers also don’t want to be associated with a brand that doesn’t have a broader purpose. This shift in consumer expectations requires a re-evaluation of how fintechs, e-commerce and other industries structure their loyalty programs.

Instead of relying solely on cashback, businesses should consider integrating elements that encourage deeper engagement. This could include gamification, where customers are rewarded for completing tasks or participating in brand-related activities. Personalized offers tailored to individual customer preferences can also increase the perceived value of a rewards program. In addition, community-building initiatives, where customers feel part of a larger brand community, can further strengthen brand loyalty by helping to bring together “like-minded customers” in one place who can talk about what they really like.

Balance between instant gratification and long-term loyalty

So while cashbacks do provide immediate gratification and may stimulate short-term sales, they do not foster long-term loyalty among consumers. To foster long-term relationships, fintech brands must move toward creating comprehensive rewards programs that prioritize customer experience and engagement. By understanding customers’ deeper needs and focusing on building meaningful relationships, brands can develop loyalty that goes beyond simple financial incentives. This approach not only ensures sustainable growth in a competitive market, but also creates a customer base that is truly invested in the brand’s success.

About the Author: Kohinoor Biswas, Head – Consumer, Bharat Pe

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