Of course, an effective and easy way to attract new customers for a young venture or product is to offer special deals in the form of coupon codes. With the help of promoters and referrers, success can be guaranteed. But giving away promo codes has its own downside: when uncontrolled, chances are, someone will certainly find a loophole to abuse the promotion.
Promo abuse occurs when an individual – customer, vendor or a partner agency takes advantage of a promotion, unduly benefiting from a coupon multiple times, or perhaps, using them to earn money and other items or valuable services. Though quick boost in sales transaction is a good thing (especially if you're running short of matching a monthly target), the coupled abuse of promotion might eventually take its toll on your profit margin and decrease the trust of investors.
Forms of coupon fraud.
Based on actual business experiences, "creative" individuals have devised several ways to misuse and abuse promo coupons. For voucher codes distributed online with the intent of attracting new customers only, abusers have learned several workarounds. There are even numerous websites, blogs, and videos dedicated to teaching users how to work the system. Naturally, it's not a big deal if one of your users will take advantage of the code several times by creating 2 or 3 accounts with different email addresses. The real problem starts when company employees, affiliates or partners are the ones involved in the coupon profiteering. I will cover more fraudsters tactics in future articles, but here are a few examples of the most common types of coupon abuse:
– Referral payouts: refer-a-friend program is a great incentive to create fake accounts or post the referral code on social media. In the second case you at least increase your database, however, such practice increases your Customer Acquisition Cost (CAC); those users could sign up directly on your site.
– Cart abandonment voucher: customers already noticed, that each time they abandon the basket before finalizing the purchase, you send a retargeting campaign with a discount. Such a coupon incentivise to finish the purchase, but also to do it again when buying next time.
– Affiliate frauds: to increase their margin, affiliate networks, and agencies register each order as a new customer, using the voucher. Customer pays a full price, agency get's the discount value.
– Reselling own inventory: it's common in various marketplaces that sellers buy their own inventory using discounts, and .. put it back on sale. They earn a discount value, decreased by your margin. You earn, hmm, a fake KPIs.
– Generating fake orders: some vendors go even further, especially when they are the ones responsible for the logistics; They simply generate a fake order. Common in food delivery and car sharing services, a service provider – restaurant or the driver creates a discounted order, which in fact does not have to be delivered. Again, they earn a discount value decreased by your margin.
What can you do to prevent it? …