I've actually been messing around with cape mechanics lately. Trying to be innovative with a regular guy like Mario is a challenge, but well worth it. Here's some stuff that others including myself use for cape in neutral.
* Cape stall mixups when approaching/being approached (one of my favs)
* Turning around with it offstage for more accurate Bair hits
* Caping opponent's shield for free damage
* Throwing it out in neutral to throw off opponents (and for the lolz)
Those are probably the most common uses I've seen. Someone correct me if I'm wrong tho.
These next ones are some experimental stuff I've been hypothesizing for a bit. Still in the beginning stages, but when I bust em out in tournament I'll truly see how viable these strats are.
* Extra lift when edge guarding to catch high recoveries
* Using cape right before going off a ledge or platform for fast horizontal movement and extreme air-walking swag! (tight frame window)
* Wave Bounce cape for positioning and making the move safer
Use these at your own leisure. Could be viable, extremely situational, or straight up not good, but it's all part of the process. Hope these helped you get an idea on how to use cape in different ways and scenarios. Who says you can't be innovative with a reflecting move? Just look at Fox!