The cashback arms race: Why your loyalty programme is a brand tax

Earlier this year, we saw Dis-Chem’s Better Rewards loyalty programme return a staggering R350m to consumers in its first 100 days. While such figures make for brilliant headlines and satisfy a price-sensitive public, they mask a structural crisis.

When every major player offers near-identical instant gratification models, loyalty is no longer a strategic differentiator. It has become a brand tax. We are subsidising the transaction, not building the relationship.

The commodity trap

In South Africa’s mature loyalty market, 82% of economically active consumers are now members of at least one programme, according to the latest Truth & BrandMapp Loyalty Whitepaper.

On the surface, this is a boon. Below the waterline, it is a crisis of strategic opportunism. The average consumer now juggles 10.3 active programmes. But they aren't loyal to a logo; they are loyal to the most efficient refund on their toilet paper and soap.

According to recent Bain & Company research, while "best value for money" remains the top purchase criterion, "lowest price" is no longer enough to sustain a brand. When loyalty is reduced to a transactional quid pro quo, you are training your customers to wait for a discount rather than building genuine behavioural change.

This is what we at Brave Group call the "commoditisation of the brand". If your only hook is a 5% cashback, your customer will defect the moment a competitor offers 6%.

From transactional rewards to emotional utility

The pivot we must make is from rewards (transactional and short-term) to loyalty (emotional and durable). PwC’s 2026 Consumer Intelligence insights confirm that "trust is the multiplier": handling data responsibly and providing seamless service now influence loyalty as much as the product itself.

The retailers winning today are those weaponising data to solve what I call the "life problem," not just the "wallet problem". Take the Discovery Health model, which has embedded itself so deeply into the lifestyle of its members, through travel, health, and weight management, that switching becomes unthinkable. This is a sustainable loyalty lock-in.

A McKinsey analysis of 2026 loyalty trends suggests that 55% of consumers now rank experiential offers, such as exclusive early access or curated lifestyle perks, as more critical than generic price reductions. For marketers and loyalty programme managers, the big challenge is to move away from blanket discounting and toward predictive utility.

By predictive utility, I mean the strategic use of AI and data to anticipate and solve a customer’s life problems, like predicting when they will run out of chronic medication before they even realise the need themselves. Doing this embeds the brand into their daily routine far more deeply than a simple discount ever could.

The 'segment of one' strategy

The death of the average shopper is here. For years, we relied on broad demographics like ‘suburban mum’ or ‘young professional’. In the Algorithmic Era, this methodology is obsolete.

The new frontier is the ‘segment of one’. By leveraging machine learning, we can treat every individual interaction as a unique data point. If a customer is buying hypertension medication and sports supplements simultaneously, an AI-driven system should recognise that context in real-time. Clicks has already seen a doubling of incremental sales uplift by using AI to tailor offers to this level of specificity.

But let’s be clear: personalisation is the floor, not the ceiling. True loyalty is the preference that survives even when the discounts evaporate. It is the inertia that favours one retailer over another because they have simplified the customer’s life.

The Brave Code: A strategy for 2026

At Brave Group, we advocate for a six-point plan to escape the cashback trap. It begins with prioritising instant gratification to hook the consumer, but it must quickly evolve into hyper-personalisation and the incorporation of social purpose.

Data from NIQ’s 2026 Consumer Outlook reveals that while South Africans are pragmatic and price-sensitive, they are also looking for brands that offer emotional reassurance. This means aligning your programme with causes your customers care about, such as education, rather than making generic sustainability claims.

The bottom line for marketers

The South African loyalty boom is not a comfort; it’s a warning light. Consumers have never carried more digital cards, yet they have never cared less about which logo they swipe.

If your loyalty strategy is essentially a massive, un-targeted refund, you are not building a brand; you are managing a margin collapse. The winners in the post-loyalty economy will be the marketers who treat loyalty as a living relationship, measured by behaviour, trust, and long-term value rather than sign-ups and points alone.

The task is no longer to launch another programme. It is to build a value exchange that feels fair, fast, and human. Stop paying the brand tax and start investing in the loyalty lock-in.