Wallid Strategic Report: Cost-Effectiveness of Cashbacks vs. Discounts in E-commerce

In today's competitive e-commerce landscape, customer incentives such as discounts and cashbacks play a vital role in increasing conversions and enhancing customer loyalty. While both strategies have proven effective, understanding their cost-effectiveness is crucial for merchants aiming to optimize profit margins, reduce cart abandonment, and increase customer lifetime value.

This report explores the strengths, trade-offs, and key statistical insights behind discounts and cashbacks, offering a clear recommendation for when and how each should be deployed.

1. Definitions and Timing

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2. Conversion Rate Impact

Key Stats:

- Average global e-commerce conversion rate: 2.5%-3.65%

- Discounts can increase conversion rates by up to 10% during campaigns like Black Friday.

- Cashbacks lead to:

- 3.4x higher conversion rates for brands using them

- 46% higher average order value (AOV)

Insights:

- Discounts remove price friction, making them powerful for first-time conversions and urgency-driven campaigns.

- Cashbacks, while slightly less immediate, are highly effective for high-value baskets and can lead to more profitable conversions due to increased basket size.

3. Cost Control & Perceived Value

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Insights:

- Cashbacks offer better margin protection and psychological appeal, often costing less while feeling more valuable.

- Example: U.S. shoppers spent $13.3 billion on Cyber Monday 2024, with high-ticket items benefiting most from 30%-39% discounts. However, cashback campaigns during the same season were shown to drive higher repeat spending and lower returns.

4. Loyalty and Retention

Stats:

- 22% increase in return customers through cashback programs.

- Cashback users spend 18% more on average.

- 46% of cashback shoppers say it impacts their brand choice.

Insights:

- Discounts create a "deal-seeking" behavior but don't foster brand loyalty.

- Cashbacks create a sense of investment in the brand ("I have credit to use") , increasing repeat visits and customer lifetime value.

5. Profit Margin Considerations

- Discounts: Immediate hit to gross profit. Example: 20% discount on $100 sale = $80 revenue.

- Cashbacks: Treated as marketing costs. Delayed and sometimes unclaimed, improving profitability.

6. Best Use Case Scenarios

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Final Recommendation: Use Both Strategically

- Use discounts sparingly to spark conversion or address cart abandonment.

- Deploy cashbacks for loyalty, increasing customer LTV and future revenue at lower net cost.

- Implement smart checkout incentives using tools like personalised Wallid's cashback engine, enabling merchants to fund offers without costly card fees or complex setups.

About Wallid.co

Wallid.co is a fintech platform that empowers e-commerce businesses to offer AI-personalised, instant, cost-effective account-to-account checkouts, dynamic discounting, and automated cashback - all without card processing fees. With Wallid, incentives become a strategic growth tool, not just a cost center.

Website: www.wallid.co [http://www.wallid.co/]
Media Contact
Company Name: Wallid.co Ltd
Contact Person: Ilya Mikin
Email: Send Email [http://www.universalpressrelease.com/?pr=wallid-strategic-report-costeffectiveness-of-cashbacks-vs-discounts-in-ecommerce]
Country: United Kingdom
Website: https://wallid.co

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This release was published on openPR.