Word-of-Mouth and Referral Marketing Blog

How We Handle Referral Abuse, Misuse and Fraud

referral abuse

Referral programs are one of the best ways to amplify word-of-mouth referrals to your online store. If you’re getting good reviews and positive word-of-mouth, a referral program can take that to the next level.

One of the concerns that people have with referral programs is abuse and fraud.

Recently, for example, Tesla Motors discovered that people were buying keyword-based Google ads to promote their referral codes. This meant that people simply looking to buy a Tesla online might unknowingly click on an ad. This violated Tesla’s “Good Faith” clause – Tesla reserved the right to invalidate referrals that were made through abusive or fraudulent means.

At ReferralCandy, we have several ways of avoiding, reducing, and dealing with abuse.

Discouraging practices that can lend themselves to abuse

We insist that referral rewards be tied to purchases, rather than shares or clicks. That way, if somebody wants to earn a referral reward, their friend will actually have to make a purchase from your store. Otherwise, it would be easy to create fake accounts and get referral rewards simply for sharing link spam.

Second, we have a minimum purchase amount setting – that way, you can avoid a situation where somebody might be getting $20 referral rewards for repeatedly referring friends to make $1 purchases. (This isn’t actually always a bad thing, because sometimes it can be worth paying out referral rewards for the chance to market to a customer. But generally it’s an outcome most retailers prefer to avoid.)

Advocates cannot refer existing customers to your store. ReferralCandy distinguishes between a first time customer and a repeat customer. Only first time customers can be referred. Repeat customers will not be considered referrals. For example, John refers Mary. Our system detects this and John gets the reward. Subsequently, another customer, Tim sends his referral link to Mary and Mary makes a purchase through that referral link. The app detects this, but does not consider this a referral as Mary is already an existing customer.

Advocates cannot refer themselves to your store. If it is detected that the advocate is trying to refer him/herself, ReferralCandy will not award the referral to the advocate. This is determined based on information obtained from the referred friend’s invoice (such as first name, last name and email address).

Dealing with fraud

You can add a referral review period. This allows you to account for any return policy you might have, and also gives you time to invalidate suspicious referrals before rewards are paid out.

You can block advocates from your referral program. Blocked advocates will not receive any further rewards for your referral program.

Generally speaking, you shouldn’t have to worry about fraud when using ReferralCandy. We’ll even alert you if there’s anything that looks like suspicious activity.

Coupon misuse

Here are some steps you can take to minimize misuse of coupon codes:

  1. Setting an expiry date for your discount coupons.
  2. Periodically change the coupon codes that are used in your campaigns.
  3. Ensuring discount coupon amounts are set in a way that you still benefit from every purchase made.
  4. Using the Discount Link option of the Friend Offer to point referred friends to a URL that you host, which:
    Gates a unique single use coupon code that you generate. This is linked to the email address they need to enter to obtain it and can be delivered via email or shown directly on the page.
    Shows all referred friends from a single referral link the same code that you generate. This gives you the ability to deactivate a single code from your platform if fraud is detected.
  5. If your ecommerce platform supports it, limit the use of referral coupons to new customers only*.
    (This is the most effective method but platforms vary by capability so please check with your ecommerce platform provider)

Visakan Veerasamy

Visa is ReferralCandy's former Blog Editor [2013–2018]. He also co-founded Statement.sg, a fashion ecommerce label selling witty t-shirts. He's mildly Internet-famous for his elaborate Twitter threads. He hopes to enjoy a glass of scotch onboard a commercial space flight someday.

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