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Which Is Better? Discount vs Cashback

Which Is Better? Discount vs Cashback

Let’s discuss strategy. You manage a ride hailing business in a community. But sales are not moving really fast and you want to get things back to the acceleration lane. Two options here:

#1: Offer a  5% discount to customers.

#2: Offer cashback of 6% to customers to spend on your services.

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As a business leader, which one do you think is a better strategy over time, considering customer retention, ability to grow, time value of money, and other factors in business. As you know, you need to consider many factors. In engineering, they say “optimize” which means you want to get the best of everything.  You can read here because Uber just made a decision on this.

Ride-hailing company Uber has dropped its 5% discounts on eligible rides for its Uber One subscription service, as it switches to cashback.

Starting from their next billing cycle, subscribed members will now earn 6% Uber Cash on eligible rides that can be used on Uber and Uber Eats.

This move could pose a challenge to Uber ride bookings as discounts have been a major driver of adoption for the service. Since the company launched Uber One in 2021 for $9.99 per month or $99.99 annually, discounts on rides have been a huge adoption driver.

Comment on Feed

Comment 1: Option 2, offering cashback rewards, seems like a better long-term strategy for several reasons. Firstly, it focuses on customer retention and loyalty, which can result in sustained revenue and growth. By giving customers an incentive to use their cashback rewards within your service, you create a virtuous cycle that keeps them engaged with your business.

Secondly, the time value of money is a crucial consideration. With cashback rewards, customers have an immediate benefit they can use to offset future costs, encouraging them to continue using your services. This approach also aligns with the evolving trends in the ride-hailing industry, where companies are increasingly adopting loyalty programs to drive customer engagement.

Remember, optimizing your strategy involves continuously evaluating and adjusting your approach based on customer feedback, market dynamics, and the changing landscape of the ride-hailing industry.

Comment 2: Delayed cash back will definitely be better so that customers will see it as a loyalty program that they can use or cash out every 30days. With discount there is no built in loyalty mechanism and what the business owner needs is a system that guarantees repeat business. Cash back will do that but discount may not

Comment 3: For new customers – offer discounts ; For existing customers – offer cashback… percentages should factor in competition… my take

My Response: That is a deeper level. That mix is superb. It could be what Uber is doing. They begin with discount and then settle at cashback.

Comment 4: I guess I’m late to the party, but yes, I’ll go for the 6% cash back. These days Uber has Uber eats and I think a delivery feature (or maybe that’s just Bolt), so there are ample reasons for repeat patronage especially given the incentive of 6% cash back on the previous transaction. Discounts alone on the other hand don’t offer as much loyalty and believe me, human nature is elusive; at some point they stop sending the discounts if they can not see a significant slash.


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