Loyalty and Rewards: When Good Intentions Become Expensive Mistakes

South Africa is currently flooded with loyalty programmes. Banks, retailers, fuel stations, restaurants. Everyone wants to offer points, discounts, or cashback. Loyalty has become the new battlefield for customer retention.

But there’s a problem: loyalty is often tacked on as a marketing gimmick instead of being engineered as part of the product strategy. When that happens, loyalty becomes costly, confusing, and - ironically - disloyal.

This is the uncomfortable truth: 

Loyalty programmes don’t fail because customers don’t care. They fail because businesses don’t calculate.

Loyalty Has a Cost. Even When It Feels Free

Many companies assume loyalty is an add-on. It is often viewed as a token of appreciation. This perk has the potential to magically generate more sales.

In reality, loyalty has to be funded. If the business model doesn’t include margin for rewards, the organisation ends up giving away profit to keep people happy. Eventually someone in finance sees the numbers, and the “loyalty” gets cut, watered down, or redesigned. Customers feel cheated, and trust dissolves.

You cannot buy loyalty. You have to design for it.

The Psychology of Reward Matters

Humans love rewards, but they don’t all respond to them the same way. Some want instant gratification, like cashback at the till. Others want status, early access, upgrades, priority service. Some want long-term value, like savings that compound over time.

A great loyalty programme understands this psychology. A bad one ignores it.

• If the reward feels too hard to earn, customers disengage.

• If rewards are too easy to earn, the brand erodes its margins.

• If the programme is too complicated, customers stop caring.

The customer asks one simple question:

“How much do I have to squeeze to get the juice?”

If the effort outweighs the reward, the programme can fail in multiple ways.

The Dangerous Illusion

Businesses often launch loyalty programmes believing they’ll increase spend. But research shows something uncomfortable: many customers would have made the purchase with or without the points.

So, the company isn’t gaining more revenue, it’s just giving discounts on revenue it already had.

In other words, they aren’t earning loyalty. They’re funding it.

That’s not strategy. That’s charity.

Loyalty Must Be Engineered, Not Added On

Successful programmes are not painted on top of a product, they are architected into the pricing, revenue model, and customer experience.

A sustainable loyalty system:

✅ Is financially modelled ✅ Is easy to understand ✅ Rewards the right behaviour ✅ Builds long-term customer value ✅ Doesn’t damage margins

You can’t treat loyalty like a marketing sticker. You have to treat it like a product.

When Loyalty Works, It’s Powerful

A truly well-designed loyalty model:

✔ Increases customer lifetime value ✔ Reduces churn ✔ Creates switching barriers ✔ Drives repeat purchases ✔ Converts customers into ambassadors

However, rushing loyalty, copying it from others, or launching it without careful consideration can turn it into a liability.

The Future of Loyalty

We are entering a new era where customers are more informed, more demanding, and less patient. They don’t want gimmicks, they want respect. They want transparency. They want value that feels fair.

The brands that win will be the ones that redesign loyalty from the inside out:

• built into the business model,

• aligned to customer psychology,

• simple enough for everyday use,

• and sustainable enough to survive the finance department.

Because loyalty isn’t about points. It’s about ease, cost and experience.

And once you break that experience there’s no reward big enough to buy it back.