Dealing with fraud can be a nightmare for anyone running an online business. Especially if you run a referral program, rewarding visitors for doings things like writing reviews or referring friends.
Though referral programs give business owners an excellent opportunity to expose their brand to a wider audience, there are always going to be those that try to take advantage of those rewards.
That’s why today we are going to look at what referral fraud is, and examine the best ways you can prevent referral program fraud.
What is Referral Fraud?
Referral fraud is when someone seeks to gain rewards you are offering through your referral program in unauthorized ways.
Here are some common examples:
- Creating fake accounts and then “referring” themselves
- Using computer bots to cheat the system
- Capitalizing on a first-time customer only reward despite being an existing customer
- Signing up for an account to receive a reward, and then immediately cancelling
- Sharing referral links on unapproved coupon or discount sites
As you can see, there are many ways a person can take advantage of your referral program rewards, and harm your bottom line in the process.
That’s why taking a proactive approach, and being aware of the scams people might try to commit, are the keys to avoiding, reducing, and dealing with referral program fraud.
Preventing Referral Program Fraud
1. Balance the Reward Offer
No one is going to participate in a referral program that offers low payouts. On the other hand, offering too much for a referral is going to attract scammers.
The key is to find the perfect referral reward balance. Make sure your existing customers are excited to put the effort into referring people, while factoring in that you may be a victim of fraud at some point.
So long as real referrers see the value in their efforts, and the chance of inevitable referral fraud doesn’t break you bottom line, you are good to go.
2. Implement Cookies
However, this method makes you vulnerable to fraud, which is why it is important to control the different types of cookies on your website.
By using this referral fraud best practice, you prevent people from trying to redeem multiple referrals that happen at the same time, on the same computer, within the same cookie session.
3. Monitor IP Addresses
Those trying to crack your referral program system are likely going to try doing so from the same computer. Sure, two attempts from the same IP address may not automatically signal referral program fraud. However, multiple attempts from the same IP address should be cause for concern.
It is recommended you flag IP addresses that attempt to make several referrals from the same IP address as suspicious. One great way of doing this is to enlist the help of a ClickCease, a click-fraud detection service, designed to help you automatically block fraudulent IP addresses with 24-hour click-fraud monitoring.
To add to that, ClickCease integrates with your Google AdWords and Bing Ad campaigns, detecting and stopping any referral fraud that goes undetected by your advertising systems. Plus, Clickcease’s built-in algorithms have the ability to separate real live customers from fraudulent bots, hiding ads immediately once a fraudulent click is detected, and gives you the option to personalize your detection system so potential customers are the only ones to see your ads.
4. Offer Points, Not Cash
One great way to discourage scammers from cashing in on your referral program is to force users to redeem their referrals in points. Any points accumulated based on approved referrals are then used to make in-store purchases.
Bebe is a great example of this:
Though the immediate value is still present to legitimate referrers, this method deters people from setting up accounts, cashing in (literally), and cancelling.
Instead, they are forced to use the points for in-store products, which does not typically sit well with those interested in scamming the system.
5. Use a Trustworthy Referral System
The best way to prevent, reduce, and deal with referral program fraud is to use a trusted referral program such as ReferralCandy. Companies such as ReferralCandy take a hard stance against fraud and do everything in their power to protect their customers.
Here are some of the ways a referral program service or tool can help:
- Prevent existing customers from being referred to your store
- Prohibit self-referrals
- Implement a referral review period to outlive any cancellation policies
- Set expiration dates on all coupons
- Utilize a powerful email notification system
- Define different terms and conditions per campaign
- Manually review and approve all referrals
For example, look at how Marin Software handles their referral program. Though they offer an extremely high referral reward, they have strict terms and conditions in place to help prevent fraud.
Using a powerful referral system, you will find that referral program fraud is rarely an issue.
In the end, fighting referral program fraud does not have to be challenging if you take a proactive approach to preventing it. And, while you can’t eliminate all fraud, there are several things you can do to help prevent it.
So, take the time to set up a solid referral program, with fraud prevention strategies in place. This will help discourage people from trying to take advantage of you, yet still allow authentic referrals to come to your store.