Why Millennials Love Referrals and Cashbacks: The Psychology Behind the Reward system

Millennials’ attraction to the reward system

The millennial generation is the largest adult population currently. Needless to say, they greatly impact the various aspects that govern and rule the functioning of the world. Millennials are also known to have the largest economic impact, with an overall spending power of more than 200 billion dollars.  

The millennial dreams are high – this means that they are starting at work, reaching financial milestones, looking for suitable investment opportunities, buying cars, houses, etc. Most of these ventures would require significant assistance from banks and other institutions. Read about the global trends in millennials and their investing here.

A study conducted by Morgan Stanley suggested that the millennial generation could potentially become the largest borrowers over the next ten years.

This is one of the main reasons financial institutions have begun to keep this powerful generation in mind while developing systems to enhance and uplift their growth. Research and findings have shown that the reward system in the form of referrals and cashbacks is a great motivator for millennial investing, banking, and other financial transactions. Using strategies that revolve around this concept would, therefore, help attract and retain millennial customers is the key. 

Some of the ways wherein financial institutions cater to the needs of this population using the reward system are:

1. Sign-up bonus offers – An alluring factor to join any program would be any incentives they offer. Most companies have now deployed incentives and sign-up offers for their new customers. Along with opening an account, the new signees also receive certain bonuses like gift cards, account credits, credit or debit cards, cash rewards, etc. 

One of the common examples are streaming apps like Amazon Prime, which are recognized globally with a signup bonus offer of a 30-day free trial. These are impactful, immediate, and tangible benefits that can lure the millennial generation toward a particular institute, depending on what they are being offered.

2. Cashbacks – One of the most advantageous techniques based on the reward system would be cashback. Finance institutes provide cashback opportunities to their millennial customers that allow them to receive this benefit upon fulfilling certain criteria like investments, transactions, referrals, etc. 

Rakuten Europe, for example, decided to make shopping an entertaining experience in Spain, Germany, and the UK by offering cashback rewards to their customers. Millennials like this feature as it helps customize their shopping experience by using cashback rewards. 

3. Referrals – The desire for social sharing is strong among the millennial trends, and financial institutes can now benefit from it. Leveraging the vast array of social networks is possible by initiating referrals for new and old customers from this era. Referring any family, friend, or potential customer to an institution could probably result in incentives like cash rewards, account-related benefits, etc. 

The Uber referral program, which is active in 785 cities across the world, involving almost 15 million rides every day, is one of the most popular reward systems. Free rides from referrals help millennials feel a sense of accomplishment and build customer loyalty.

4. Educational and Learning Programs – If there is one thing that speaks regarding the enthusiasm of the millennial population, that would be learning. The world of finance is expanding into NFTs and cryptocurrencies, along with the wide aspects of mutual funds, insurance, loans, etc. These concepts, and the many more that exist, are of huge importance to this population. Institutes that provide learning programs or educational benefits with resources to grow their knowledge would also encourage millennial attraction on multiple fronts.

A simple example could be globally recognized educational platforms like Coursera and Udemy that offer certification and discounts to their customers upon the completion of a course. Appealing to the higher sense of achievement in millennials, these reward systems play a role in getting more registrations.

Why does the reward system work? 

The instant gratification and concrete benefits that are observed with this system are one of the primary reasons why it works. The millennial generation is self-indulgent and realize the importance of receiving that gratification. The streamlined incorporation of rewards within the financial systems of the world is beneficial for the following reasons:

• Digital – The millennial generation has grown up in the era of technology and digitization. With the advent of newer banking systems, with tech being at the forefront, it has become easier for millennials to remain active in the process. Rewards that include elements of gamification like advancing in levels, earning badges, etc., that bring out the desire for competition and more engagement

• Achievements – The appreciation towards a sense of achievement, recognition, and accomplishment is a driving factor for many in this generation. When financial companies appeal to this sense of achievement, it becomes a driving force that both parties can benefit from. Reward systems tap into this desire to be recognized, increasing the sense of motivation and continuous participation.

• Personalization – Any time a bank or company takes a personalized effort towards attracting and maintaining a customer, it has proven to be effective. Reward systems that have customized offers, discounts, referrals, recommendations, and benefits that suit individual preferences give better results. 

• Sustainability – The millennial culture  aligns to overall sustainability and the environmental impact of their choices. Companies that offer incentives to align with these overall values can reach out to the set audience that has the desire to make a positive impact and change in the world. 

—–continued

The millennial generation is smart and knowledgeable. They need tangible results to ensure that the steps that they are taking will lead them in the right direction of growth. Therefore, financial institutions must choose their strategies carefully, ensuring thorough research regarding the mindset of the population they want to cater to. 

The flexibility to pick from different options, give timely results, incorporate feedback, etc., helps attract millennials to a company. The rewards system can be customized and tailor-made to retain old customers while attracting new ones. Millennial loyalty will go a long way in protecting and securing the future of a financial institution which is why one should give a thought in designing reward programs. 

One should also be wise in engineering a reward system where customers are not just updated with brownie points on a brand loyalty card but can get a tangible benefit.