189 billion US$ worth of revenue in the U.S. was lost due to promotion fraud last year! And the volume of promotion abuse is increasing year by year as well. In a survey conducted by Statista in 2021, 55% of fraud prevention professionals have noted that there was an increase in promotion fraud attempts over the last 12 months. So, the issue of promotion fraud isn’t something that can be taken lightly. Your brand can lose huge sums of your budget and lose an important amount of potential revenue if not careful. Henceforth brands should consider implementing a well architected fraud prevention system into campaign mechanisms. This can significantly impact campaign ROI on its own, before even considering the performance metrics of campaigns.
What is Promotional Fraud?
Promotional fraud is when singular consumers or organised fraud groups attempt to abuse loopholes & vulnerabilities within the campaign mechanism or try to obtain rewards illegally.
Promo abusers may create multiple fake accounts or email accounts, send referral codes to secondary accounts, attempt to crack codes, create fraudulent entries & receipts. There’s a boatload of different methods that they use to obtain rewards from campaigns with different mechanics & goals.
- 3.1 Billion US$ worth of fraudulent loyalty points are spent each year.
How Does Your Brand Suffer From Promotional Fraud?
Significant Monetary Loss
The most obvious answer to how brands are affected by promo abuse is loss of money. Firstly, your brand loses valuable marketing dollars from your limited budget that could’ve been spent on different marketing actions to help meet goals & improve expected returns. When abusers illegally obtain rewards, what’s actually being stolen is your marketing dollars spent. Secondly, there’s a significant loss of potential revenue that could’ve been made. When the abusers illegally obtain rewards, this also prevents them from spending their money on purchasing your brand’s products, or any other consumer purchasing the said products as your supply also ends up getting diminished. Thus resulting in a loss of potential revenue, which also results in your campaign ROI reducing.
- 1.2% of U.S. retail revenue is lost due to promotion fraud each year.
Campaign Performance Calculation
Fraudulent reward claims significantly disrupt the accuracy of your campaign performance measurement. Marketing & sales teams might include fraudulent claims into their performance measurements without knowing that the claims were fraudulent, thus disrupting the accuracy. Thus leading to a decrease in the quality of information.
Degradation of Campaign Integrity
One of the biggest losses your brand can incur from promotion abusers is a non-tangible factor. The loss of faith in the integrity of your marketing actions by your consumers. If your campaigns get subjected to too much promo abuse, consumers will start to lose trust in your brand’s marketing actions & ability to protect fairness & equal opportunity; thus resulting in a decrease in participation volume & potentially a negative influence on brand loyalty. Although a non-tangible factor on the surface, this factor may be the most important negative effect of all due to the long-term effects consumer perception will have on your brand’s market share & overall performance.
How Can Brands Prevent Promotion Fraud?
In a survey conducted in 2021, 73% of U.S. retailers (with revenues over 100 million $) reported that they’re experiencing fraudulent claims with their promotions. This stat shows how vulnerable the retail ecosystem is to promotion fraud attempts. Most brands & retailers don’t have viable solutions to protect their marketing actions from abusers, no matter if their campaigns are offline, online or omni-channel. So, what to do?
Justsnap’s 8 Layered Fraud Prevention System
If you’re not already familiar, at Justsnap we create digital solutions for your campaign management & data collection needs. We usually create digital campaign management platforms for brands based around our receipt processing technology. Our receipt processing technology acts as the sole proof of purchase mechanism, validating the purchases of consumers through their submissions of a photo of their purchase receipt. A very simple mechanism that makes both the consumer & the brand’s life much easier.
Our digital solutions have an 8-layered fraud prevention system built in them to protect your brand from this costly issue. Initially, our extensive regional blacklists of promo abusers comes into play. Our blacklists block known wide-scale promo abusers through IP address & personal info submission. In the next layers, our machine learning based fraud detection algorithms analyses the behaviour, actions, information and sent documents of the consumers to look for any suspicious, inconsistent or malicious seeming activities. In the final layers, further artificially intelligent checkpoints Amazon Fraud Detection & Maxmind Mindfraud make the final checks related to the consumers purchase & behaviour to fully ensure the integrity of your campaign! Thus making for a very sturdy, well-architected and rigid barricade through multiple strong & intelligent layers.
Adopt a layered, sophisticated, bullet-proof fraud prevention mechanism for your digital activations today; so you can save millions of dollars worth of revenue & marketing dollars as well as highly precious work time.