Discount fraud has become a serious issue for marketers everywhere. In order to shed some light on the matter, SheerID has recently conducted a related survey among 76 US-based companies. Among other things, the survey focused on the economic impact that Christmas promotions have on customer acquisition and customer loyalty.
Alex Papaconstantinou, founder of coupon site Wikigains, says that online discount fraud is when online buyers claim that they qualify for a discount coupon, such as a special coupon for students, but are not actual students. “With so many affiliates such as bloggers and voucher sites, offering exclusive coupons it is almost impossible for marketing managers to monitor if those benefiting from the discounts are truly eligible” says , concluding that monitoring coupons requires sophisticated software that not all small ecommerce businesses can afford.
What did the survey find?
Here are the most important conclusions of the survey:
- 75% of surveyed companies will do outreach in the form of product reviews in various online publications and are willing to sacrifice margins in order to offer exclusive discounts coupons.
- 84% of businesses will offer promotions before the 2017 Holiday Season rolls around.
- Many customer loyalty programs are based around discounts and promotions.
- 64% of surveyed businesses are already offering – or are planning to offer – exclusive promotions to support customers such as military members, students and teachers.
- 63% of companies are offering their promotions throughout the year, and they can be accessed online (68%), in stores (39%) and on mobile (37%).
The conclusions of the survey in relation to discount fraud
Following this survey, we can now confirm some old suspicions about discount fraud in the retail industry:
- Most businesses verify their customers through emails, coupon codes or by checking IDs manually. All of these methods are highly susceptible to fraud. If existing customers want to take advantage of a promotion exclusive to new customers, all they have to do is log in with a fake name and a different email address.
- Most brands that are not offering exclusive deals to specific groups (i.e. students, military members, etc.) have stated that the two main reasons for it were discount fraud and the lack of IT resources to ensure that the coupons go to people that actually qualify for the discounts. Nearly half of these brands confirmed that they would probably start offering exclusive promotions if they could confirm that only qualified customers would receive them.
The survey shows that digital marketers are split in opinion on how discount fraud should be addressed. Some of them think the answer lies in sophisticated verification technology, whereas others claim that discount fraud would not be a problem if companies focused on customer loyalty over customer acquisition. The one thing these methods have in common is that they both offer opportunities for further improvement.
Opportunity #1: Develop customer verification technology
A lot of brands are looking for ways to prevent discount fraud. Right now, businesses are facing a variety of challenges while creating exclusive promotions, and the major one is the inability to confirm the customers’ credentials. This is an opportunity for digital marketing companies to develop a more advanced customer verification technology. This technology could include a virtual ID check that allows customers to get where they need to go as quickly as possible.
Opportunity #2: Take customer loyalty to a higher level
As companies offer exclusive promotions to new customers, their existing customers are forced to cheat in order to level the playing field. In a way, you could say that it’s the companies’ fault if their customers are behaving this way. Should companies try to maintain customer loyalty by providing a level playing field in terms of discount opportunities for all customers?
We know many customers won’t hesitate to take their business elsewhere if they experience poor customer service. “One could argue”, says Alex Papaconstantinou, “that rewarding only certain groups of customers with generous discounts and having other customers buy the same products at full price might be the very definition of poor customer service.”
Alex Papaconstantinou is the founder of numerous internet ventures including Wikigains and Webhostingology, a New York based tech firm.