If you’re concerned about referral fraud, you’re not alone. Running a refer-a-friend campaign is an excellent opportunity to reward your best customers. However, some people do see this as an opportunity to take advantage of your referral incentive.
So, how can you prevent fraud? It is possible but, unfortunately, there will always be a small percentage of people gaming the system as there is with any discount, affiliate, or other marketing programs you can reduce fraudulent behaviors in your referral program
Make sure to pay the closest attention to your fraud reward rates, the percentage of false requests that are rewarded. Fraud percentages are important to monitor because this is the number of people who made false claims and were rewarded. On the other hand, there are fraud attempt rates which are the percent of false claims compared to all claims. The attempt rate tells you how many people are trying to commit fraud but is not the number of fake referrals rewarded. Fraud reward rates are imperative to watch because rewarding fraudulent activities is what hurts your profit margin.
One of the simplest ways to prevent referral marketing fraud is to setup a safeguard to catch and stop fraudulent activities from occurring. You should look at your referral marketing software provider and ensure they have this capability available to you. Talkable provides an end-to-end fraud prevention and quality control engine where you and your dedicated customer success manager can define the rules to catch and prevent fraudulent behaviors.
Check out these nine tips that can help your business reduce referral marketing fraud:
1. Verify that Advocates are Existing Customers
If you only want current customers to earn your incentive offering, then your business needs to verify that they’ve been a buyer. You can run segmented referral campaigns that only show past customers the offer or have Talkable check customer emails by running it through your client’s customer base. Also, we make sure to verify that the referred friend is not an existing customer and is indeed new to your business. Another great way to check that you’re business is gaining a valid referral by capturing cookies.
2. Ensure Rewards are Received Only Once by Tracking Cookies
Tracking cookies enables you to determine if someone from the same device using the same browser at the same location is trying to access your referral for the second or third time. Utilizing cookie tracking is one of the best ways you can stop the same person from redeeming multiple referral rewards.
For example, an advocate visits a campaign page for the very first time, Talkable generates a unique identifier for this person and saves it into the browser as a cookie. Later on, when the friend visits the Friend Claim page and has the same identifier as the advocate, Talkable assumes this is a self-referred advocate.
3. Use Manual Approval as Your Final Check
If you’re determined to put an end to referral marketing fraud, manual approval may be one of the ways to make that dream come true. With Talkable we offer the flexibility with our fraud settings, based on the situations you deem are fraudulent behavior our software can skip, flag, or block requests. Under the manual approval, your team will go through the flagged requests to determine whether they are fraudulent.
This means you’ll need to assign a dedicated team member to approve every single request for your campaign. On the bright side, your team will have the final say if advocates receive their reward or not. By manually approving referrals, you can double and triple check that both the referrer (advocate) and referee (friend) are eligible for the reward.
Although manual approval helps reduce and almost eliminate fraud entirely, the manpower you’re dedicating to this process may not be worth the money you’re saving in reward costs. Whether or not you implement manual approval should be determined by how much you want to ensure the accuracy of incentives delivered and how many requests you’re receiving.
Talkable wants all of our customers to run successful campaigns, which is why we commonly suggest using our fraud prevention parameters and controls instead of manually approving all referrals. With our additional safeguards deployed, we find that they catch the majority of fraud that occurs within a referral program.
4. Pay Attention to IP Addresses
IP addresses are a series of numbers that pinpoint the computer or device connected to a visitor’s network. Just like your home address tells people where you live, an IP address provides information on each device that is connected to computer networks.
By reviewing IP addresses, you can see if the same IP address tries to make repeat purchases. Although multiple attempts from the same address does not necessarily mean you should automatically be concerned, you can setup rules and quality controls with Talkable to flag this behavior. In fact, we would suggest you put that rule in place, but keep in mind someone in the same household can refer a family member, and this could be a reason for this type of behavior.
5. Setup the Right Referral Rules for Your Campaign
If you want to be extremely careful and prevent fraud, you must put certain referral rules into action. For example, with the Talkable platform, you can select our rules to skip, flag, or block specific actions. Here are a few examples of rules you can enact:
Similar Email Match
- If someone uses an email jane.doe@gmail and then jane.doe123@yahoo, this can be flagged or blocked in our system. Since it looks like someone created another email or used a secondary account, Talkable can recognize that, and ask you to look into the situation or mark that this person won’t receive the referral.
Physical Address Match
- The physical address match comes into play when your customers enter in their shipping information. If you have multiple customers using the same home or work address, you can also use this as criteria to flag or block a reward. However, keep in mind apartment buildings, and dorms are listed under the same address so multiple people may be using the same location
6. Limit The Number of Rewards Advocates or Friends Can Receive
Another way you can prevent referral marketing fraud is to limit how many times advocates and/or friends can earn a reward. By capping the number of times, someone can receive incentives this will help prevent fraud. People who are trying to get as many rewards as possible will be stopped at the particular limit you’ve determined.
Now, this can be a bummer for your top advocates who are genuinely promoting your business. What you can do to make everyone happy is segment your top advocates and offer them a specialized, unique campaign just for them. This way you are still rewarding your best referrers and reducing fraud at the same time.
7. Use Coupon Codes for Rewards
A great tip to preventing referral fraud is to make your offer a coupon code. Coupon codes are the easiest to monitor because you can apply even more restrictions with them. Plus, coupon codes are simple to revoke, add expiration dates to, and put limits on for minimum order values that will prevent users from attempting to defraud your program.
8. Delay Reward Emails and Referral Links
It might sound counterintuitive, but delaying sending out your reward emails or referral links can help diminish referral fraud. When there is a wait for people to receive their incentives, those who are trying to game the system are less likely to do so after more time has passed. By delaying their deals, scammers decide that it’s not worth the effort or they don’t want your offer enough to wait for it.
9. Utilize a Referral Software That Detects Fraud
Now, this might sound obvious but using the right referral marketing platform can make a huge difference. Not all referral platforms are created equal when it comes to their fraud prevention rules and quality controls. Talkable can help you employ all of these tips to reduce fraud and many more. To learn about our fraud prevention engine take a look at our referral approval document.
We hope these best practices have fully equipped you to reduce fraud in your referral program. There are many options to choose from, and it’s all about knowing what will work best for your team, your business and most importantly your customers. Leave a comment to let us know which tips you’re using.