Cashback vs. NeuCoins: The secret psychology of digital promotions
In India’s booming digital commerce landscape, promotions are the engine of customer acquisition and loyalty. Every day, millions of shoppers are enticed by a dizzying array of offers, from flat discounts to cashback rewards. Have you ever wondered why a ‘₹10 cashback’ from Amazon feels different from ‘₹10 NeuCoins’ from Tata Neu, even though they represent the same value?
An academic study from our institution delves into this exact question, revealing that the way a promotional credit is named, or ‘framing’, is far more powerful than you might think. The above question pertains to the category of price promotion called ‘promotional credit’. Promotional credit is a type of price promotion that you earn after a purchase. The credit is added to your account and can be used on your next purchase from that same retailer. For example, if Amazon has a cashback price promotion, you have to complete the first purchase to earn the cashback or promotional credit, which will be credited to your Amazon account, which you can use on your next Amazon purchase. Our research uncovers a hidden psychological dynamic that determines whether such promotion leads to a quick, one-time purchase or a lasting, loyal customer.
The ₹100 question: Why framing matters
At the heart of our research is a simple, yet profound, idea: not all rupees are created equal in our minds. A generic promotion, such as the cashback you receive from Amazon or Paytm, is perceived as equivalent to real money. It feels flexible and universal. In academic terms, this triggers an ‘abstract mindset’. Your mind thinks about the big picture—the long-term possibilities of that money.
On the other hand, a branded currency, such as Myntra’s MynCash or Tata Neu’s NeuCoins, is psychologically distinct. It has a specific name and is often restricted to a single ecosystem. This framing primes a ‘concrete mindset’, making you focus on the immediate, tangible details of how and where you can use it. You’re not thinking about long-term value; you’re thinking about how to spend those 10 NeuCoins before they expire.
This psychological difference, we found, is the key to designing a successful promotional strategy.
The power of ‘construal fit’: Aligning your promotion with time
Our study, conducted through five meticulously designed experiments, reveals a fascinating principle: the effectiveness of a promotional credit is determined by a ‘construal fit’ between its framing and its redemption window.
Think about it this way:
- Long-term promotions: When a promotion has a long redemption window (say, six months to a year), your mind naturally adopts an abstract, future-orientated mindset. It’s planning for a purchase that is far off. In this scenario, a generic currency like ₹100 cashback is more effective. The abstract nature of the generic currency perfectly aligns with your abstract, long-term thinking. This alignment makes the promotion feel ‘right’ and more valuable, increasing your intention to return and make a purchase later.
- Short-term promotions: When a promotion has a short redemption window (a few days to a few weeks), your mind is in a concrete, urgent mode. It’s focused on the immediate task of using the credit before it expires. This is where a branded currency shines. The concrete nature of ‘Myntra MynCash’ fits this urgent thinking. The framing pushes you to think about the feasibility of redemption—’How can I use this credit now?’ — which makes the promotion highly effective at driving immediate sales.
This finding is a significant departure from the common assumption that branding a promotion universally strengthens customer loyalty. We show that branding is a double-edged sword: it’s incredibly powerful in the right context but can be ineffective when misaligned.
From theory to practice: What this means for Indian marketers
Our research provides a clear, actionable roadmap for Indian retailers, helping them move past guesswork and adopt a more scientifically informed approach to their promotional strategies.
1. Match your framing to your campaign objective
- For short-term sales lifts and habit formation, use branded currency. If you want a customer to buy a new saree on Myntra within the next two weeks, offering ‘₹100 MynCash’ is a highly effective way to create urgency and drive that sale.
- For building long-term loyalty and sustained relationships, use generic currency. A large retailer like Amazon, which wants to keep you engaged over an entire year, will benefit more from a simple ‘₹100 credit’ that fits your abstract, long-term shopping plans.
2. Factor in your product category and frequency
- High-frequency categories like fast fashion, personal care, medicine, and groceries thrive on short decision cycles. Here, a branded currency with a short expiry is a perfect fit for a retailer like Myntra or Tata 1mg, as it encourages quick, top-of-mind purchases.
- Low-frequency, high-involvement categories such as electronics and furniture have longer purchase cycles. In these cases, a generic currency with extended validity works best. It gives the customer the psychological space to plan for their next big purchase without the pressure of a branded credit that feels too restrictive.
3. The nuanced role of brand strength
- For well-established, strong brands, a generic currency can be a powerful tool for long-term promotions. The brand itself already acts as a strong cue for quality and feasibility; the currency doesn’t need to do that work.
- For new or niche brands, a branded currency can serve a dual purpose. For a short-term promotion, it not only drives immediate sales but also acts as a powerful tool for building brand recognition and creating a distinct identity in the customer’s mind.
This research represents a significant step forward in understanding the psychology of promotional credit. It moves marketers beyond a one-size-fits-all approach and provides them with a toolkit to design smarter, more effective promotions. Our institution is proud to contribute to this cutting-edge research, helping Indian retailers and marketers leverage the power of consumer psychology to build stronger brands and more loyal customer relationships in the digital age.
About the faculty
Raghuram R
Raghuram R is an Assistant Professor of Marketing at SPJIMR and has a Ph.D. in Marketing from the Indian Institute of Management Ahmedabad (IIMA). He has completed the Post Graduate Programme in Management for Executives (PGPX) from IIMA and a B.Tech in Chemical Engineering from Anna University.